The Phoenix office sector took a strong turn to finish the fourth quarter in solid fashion. The year started off slow, but picked up momentum as the year progressed and accelerated the pace into the final months, according to a Lee & Associates report.
Most all major indicators were positive for the quarter and for the year including, vacancy, absorption, asking rental rates, construction and deliveries to inventory.
“The improving economy, lower unemployment and a growing population have contributed to the momentum driving the Phoenix office market,” said Matt DePinto, Lee & Associates senior research analyst.
Overall vacancy has dropped to 19.5 percent, a decrease of 70-basis points from the third quarter and the lowest vacancy rate in over seven years.
Quarterly absorption settled at 1,876,435 square-feet and is the highest net absorption since the first quarter 2006. Absorption for 2015 came in at 3,358,813 square-feet. The fourth quarter’s strong performance represents nearly 56 percent of the yearly total.
Building completions this quarter totaled 1,474,553 square-feet and 3,560,159 square-feet.
In Tempe, several large projects such as the 375,000 square-feet Marina Heights, Building D (which is part of the much larger State Farm campus) was finished as well as its neighbor on Rio Salado Parkway, Hayden Ferry Lakeside III, which delivered 264,235 SF to inventory.
Also of note was the Scottsdale Quarter, Phase III which added 169,189 SF to the Scottsdale Airpark submarket.
Collectively, rental rates continued to increase modestly, settling at a combined total of $22.92 per square-feet (full-service). The Airport Area, Scottsdale Airpark and Scottsdale South sub-markets saw the most increases, while the Glendale and Tempe submarkets declined slightly.
In the largest lease transaction for the quarter, AAA leased 206,155 square-feet at 5353 W. Bell Rd.
In the largest lease transaction for the quarter, AAA leased 206,155 square-feet at 5353 W. Bell Rd., Glendale, while second place was for 116,982 square-feet at Centrica (a former big box retail location-turned back offi ce space) 1550 W. Southern Ave., Mesa. It was leased by Santander Consumer USA.
The largest sale transaction for the quarter was LBA Realty’s purchase of 4 high-rise buildings totaling 906,376 SF at Camelback Esplanade for $244,857,628 or $270.15 per square-foot.
