The Metro Phoenix office market gladly said goodbye to 2024, its worst year on record for net absorption. Reaching a total of -2.1 million SF, office tenants gave back more space in 2024 than even the worst year (2009) following the Great Financial Crisis: -1.3 million SF. {Click to Tweet } This means that companies are not done right sizing to their new hybrid office models. It also means the return to office (RTO) has a long way to go before the market stabilizes. Note that before pandemic, net absorption averaged 1.6 million SF per year over a 20-year period.
While the overall tone of office use remains negative, the health of office buildings varies significantly based on the quality of the project, amenities and geography. Depending on what and where your requirements are, and how nice it needs to be, the inventory may actually be quite limited… Shocking.
Below is a link to our Lee & Associates Arizona Fourth Quarter 2024 Office Report, and as usual, here are my top three takeaways:
— Camelback and North Scottsdale Submarkets Performed Well: The two submarkets that had the highest concentration of owners renovating their buildings, fared the best in 2024. These two areas also boast the a high density of financial & professional services.
— New Development Has Paused: With only 37,000 SF of product under construction, new supply is at a standstill. No one wants to finance new office buildings either.
— Sublease Inventory Dropped Noticeably: After peaking at nearly 7 million SF in Q3 2023, inventory dropped below 6 million SF for the first time in nine quarters. This drop is due to both spaces actually being sublet, as well as leases expiring; becoming direct vacancy.
The Coppola-Cheney Group is working on over 150 transactions right now. If you want to understand the market better and make better decisions, give me a call.
Office Market
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Construction Office Market
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