The Phoenix office market has achieved 24 straight quarters – or six straight years – of positive net office space absorption, according to the JLL Q2 Phoenix Office Insight report. At the same time, vacancy has decreased by 11 basis points, marking its lowest level in almost 12 years.
According to JLL, the Phoenix office market ended the second quarter with 2.17 million square feet of year-to-date net office space absorption, a rate that exceeds the last peak in the market, which occurred in 2016. The overall vacancy rate sits at 17.8 percent and average asking rents have reached $27.18 per-square-foot, a notable 22 percent increase year-over-year.
There is currently 1.9 million square feet of active new office construction underway. This adds to 546,000 square feet of new space delivered during the second quarter, including two Allred buildings totaling 270,000 square feet within the Price Road Corridor in Chandler and the 123,020-square-foot Chaparral III building on Pima Road in Scottsdale.
According to projections, however, this still falls short of meeting the demands of prospective tenants who collectively are looking for 3.2 million square feet of space and already have signed 1 million square feet in leases that are expected to occupy by year end.
“The Phoenix office market continues to have unprecedented leasing activity, making it one of the top in the nation for positive net absorption,” said JLL Senior Vice President Chris Latvaaho. “The demand for space continues to outpace our existing supply and includes a growing list of premier, out-of-state companies who have planted a corporate flag here in the Valley.”
Companies establishing a new Valley location this year alone include Benchmark Electronics from Texas and Bridgepoint Education from California.
Demand among organizations like these keep REITS, institutional investors, private and foreign capital interested and active in the metro Phoenix market, particularly within the Camelback Corridor, Downtown/Midtown and Southeast Valley submarkets. Together, this activity represented more than $271 million in transactions during the second quarter, a 36 percent increase over the first quarter.
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.