The more than 2.7 million square feet of office space now under construction in metro Phoenix is the most seen since 2015. But, according to the Q2 2018 Phoenix Office Insight report from the Phoenix office of JLL, it still may not be enough to meet an estimated 4.6 million square feet of demand that is in play by companies ranging from business and financial services to high-tech and healthcare.
“The healthy mix of industries active in Phoenix is a good sign for the market’s continued success,” said JLL Senior Vice President Brett Abramson. “Gone are the days where there are hubs of certain industries all locating in one submarket. What we’re seeing now is simply a heavy dose of demand, coming from varied industry interest in most submarkets.”
According to JLL, nearly 100 companies are now in the market – looking for 20,000 square feet or greater of Phoenix office product. Of those, 24 percent are business services companies, 21 percent are healthcare, 14 percent are high-tech and 10 percent are financial services.
Together, they represent 4.6 million square feet of demand. This is above and beyond the 2.7 million square feet of office space that is currently under construction – which itself is already 30 percent pre-leased.
If there is one geographical leader on the construction front, Abramson says it would be the Southeast Valley, which represents 77 percent of active office construction – 36 percent in Chandler, 29 percent in Tempe and 12 percent in South Tempe.
“An even better sign for Phoenix than the construction is the increase in our average size requirements,” said Abramson, noting that larger and larger companies are looking to relocate and expand in the Valley. “We have grown from an average requirement of 5,000 square feet to average requirements in the 10,000 to 20,000 square foot range in the core submarkets.”
According to JLL’s Q2 report, vacancy is still hovering near record lows and rents have increased 6 percent year to date.
To access JLL’s Q2 Phoenix Office Insight report or other local and national JLL research reports, visit the JLL Phoenix research page at www.jll.com/phoenix/en-us/research.