Office Momentum Carries Over from Late-2013 to First Quarter
Colliers International released its 1Q office market research. Highlights are below. A full report is at the end of the story.
· Net absorption in the Greater Phoenix institutional office market totaled approximately 697KSF in the first quarter. This marked the third consecutive quarter where net absorption topped 500KSF.
· Net absorption was strongest in the Class B segment, where tenants moved into a net of more than 400,000 square feet. With the amount of available Class-A space down 30 percent from the peak and development limited, tenants looking for large blocks of space are finding Class B buildings the primary option.
· Vacancy ended the first quarter at 18.9 percent, down from 19.5 percent at year-end 2013. Vacancy in the Class A segment of the market is 18.4 percent while Class B vacancy is 19.4 percent. While the Class B vacancy rate is improving, most submarkets still have a Class-B vacancy rate above 15 percent.
· Asking rents in the institutional-grade office market have increased in each of the past four quarters, rising 5.7 percent to $21.90 per square foot.
· Investment activity slowed somewhat after a fairly active fourth quarter, but velocity is up considerably compared to one year ago. Tightening vacancy, rising rents and accelerating hiring is fueling investment activity, despite ongoing challenges still present in the market.