The Phoenix office market has always been attractive to businesses of all sizes. The Valley is widely recognized as an excellent market for start-ups and small businesses, while also providing ample opportunities to large office users.
As a leader in the country with regard to rebounding economies, the fact is that people like Metro Phoenix, and they want to live and work here.
That said, from 4Q 2011 through the beginning of 2012, larger tenants in the market were making moves, but smaller tenant activity was dormant. The activity during this time period centered around 20,000 SF to 100,000 SF office spaces, and the market saw a number of relocations and expansions by large users.
Beginning in the latter part of 2Q 2012, however, small tenant activity began to pick up substantially. Today, there are numerous transactions closing in the Camelback Corridor and midtown areas, including mom-and-pop businesses, small CPA firms, web designers, etc.
In the past month, Voit Real Estate Services has helped three different small businesses move from executive suites into more permanent office leases. In each case, these moves were part of the expansion plans for each company, but each business leader was waiting for the right time to make the move.
Many smaller tenants have come to realize that now is the time for these moves. The market is ripe for activity, especially because tenants in the current market have the opportunity to make strategic decisions which can, in many cases, reduce operating costs.
Tenants throughout the Phoenix market are now taking advantage of the opportunity to upgrade the type of building in which they work for equal or lesser price, or are expanding into similar buildings and reducing their rent base.
In addition, there has been a great deal of movement in incubator space, which is reflective of the increase in start-up businesses that are now emerging in Phoenix. This market has been widely recognized as a hub for startups, and the office market is confirming that from a real estate standpoint.
The catalyst for this activity is an overall improvement in the outlook for the Phoenix market. Phoenix, along with Texas, led the nation with regard to growth in population and jobs over the past 10 to 15 years. As a result, the market became saturated in the mid to late 2000s and prices began to increase.
Today, Phoenix is once again an affordable market which still boasts a large, educated population of workers. With real estate costs low and access to talent high, many businesses are now reinstating their expansion plans and taking advantage of the opportunity to lock in competitive lease rates before they increase.
Troy Nelson is a Vice President in Voit Real Estate Services’ Phoenix office. He can be reached at (602) 513-5117 or TNelson@voitco.com.
Scott Nelson is a Vice President in Voit Real Estate Services’ Phoenix office. He can be reached at (602) 513-5107 or SNelson@voitco.com.