Phoenix’s Airport office submarket is quickly filling with new and expanding tenants, pushing vacancy rates down 9.3 percent year-over-year and inching rental rates up, according to data from JLL’s Q4 Phoenix Office Market Report.
According to JLL, overall vacancy in the Airport submarket in 2018 fell from 32.7 percent to 23.4 percent. During the same time period, submarket rents climbed from $19.63 to $21.95 per-square-foot.
“The Airport submarket is a very attractive alternative for tenants to consider when locating their operations,” said JLL Managing Director Mark Gustin. “It has a central location that is close to the amenities of downtown Tempe and Phoenix, and is crisscrossed by three major freeways that connect tenants to a large base of prospective employees – over 2.6 million people within a 30-minute commute.”
In 2018, this helped to attract major new tenant commitments to the Airport submarket, the largest of which include:
• McKesson Drug Company, subleasing 177,639 square feet at 2900 S. Sunland Dr., at the I-10 and US 60 in Tempe.
• Lennar Homes, leasing 91,452 square feet at 1665 W. Alameda Dr., also along the I-10 just north of the US 60 in Tempe.
• EPIQ, leasing 51,323 square feet at 3255 E. Elwood St., at the I-10 and University Drive, south of the Airport.
• Ancora Education, leasing 43,013 square feet at 8181 S. 48th St., just west of I-10 and south of Baseline Road.
• Aspen University, leasing 38,014 square feet at 4615 E. Elwood St. also at the I-10 and University Drive.
Gustin says the increased lease activity has helped to transform a number of Airport-area office developments. This includes Quattro, a four-building, 264,994-square-foot office project that was recently rebranded within the Cotton Center business park. Since securing the Quattro leasing assignment about 16 months ago, JLL has completed 188,584 square feet of leases at the project, including a 42,433-square-foot expansion and renewal by Freeport McMoran and a full-building, 57,108-square-foot lease by Konica Minolta.
“Metro Phoenix is on a 22-quarter run of net positive office space absorption, so in some ways the Airport submarket reflects what’s happening on a macro scale across the Valley,” said Gustin. “Based on the numbers, it is just much more pronounced in the Airport area.”
According to JLL, Phoenix’s positive net absorption streak is expected to extend into the first half of 2019 and feasibly further, with more than 1.4 million square feet of signed leases ready to occupy in 2019 and activity an interest in the local office market continuing on an upward trend.
To access JLL research for Phoenix and across the U.S., visit the company’s research page at https://www.us.jll.com/en/trends-and-insights#research.