Like the national office market, the Metro Phoenix Office Market is rebounding at a gradual pace. Last week Craig sent out a good update on the national office market from The Wall Street Journal. (Click here for his narrative in case you missed it) Today I’m sending you an update on the progress we’re seeing in Phoenix. The WSJ article mentions that office markets across the U.S. are highly dependent on the strength of local economies. Similarly, Phoenix’s Office Market strength is improving but varies widely between local submarkets. Tempe and South Scottsdale are leading the way with the lowest vacancy rates (9.9% and 10.4%, respectively) while areas like Midtown and some of the outlying submarkets suffer from vacancies in the high 20’s. Overall, absorption continues its positive streak across the entire market but it has been too weak to push rents up across the entire market.
To put things into perspective, here is how Phoenix’s office vacancy rate compares to a few key cities across the country:
San Francisco 6.9%
New York 7.8%
Los Angeles 11.2%
Dallas/Ft Worth 14.2%
(National figures reported by CoStar)
Below is the link to our 2nd quarter report and my top three takeaways:
1. Metro Phoenix Office Vacancy still is above 20%. Unless a tenant requires a trophy location or in the South Scottsdale/Tempe area, there are competitive deals to be made.
2. There is 4.6 million SF under construction. The majority of that construction is build-to-suit product for State Farm, Wells Fargo, Isagenix and ATS. But, there is 1.9 million SF of spec construction underway and it is leasing up successfully.
3. After a good but not great 2014 (2.4 million SF of net absorption), the first half of 2015 has been, well disappointing. We have absorbed 452,000 SF. We remain hopeful that we can have a strong second half.
If you have a question on your lease, want to find out how much your building is worth, or just want to talk about the market, please give me a call.
P.S. We were proud to have represented Piedmont Office Realty Trust in expanding their tenant, GM Financial, into a total of 153,000 SF in the beautiful Chandler Forum located at 1975 S. Price Road in Chandler.
For the whole postcard and a larger view, click here.
For the entire report, click here.