NAI Phoenix Midyear Office Report ends on Positive Note

NAI Horizon’s in-depth look at the Phoenix Metro midyear office sector report ended the second quarter of 2015 on a positive note, rounding out a stable first half of the year. Net absorption saw an uptick this quarter, along with rental rates that continue to increase. With unemployment in the Valley continuing to head in the right direction, down to 4.5% in May 2015 compared to 5.8% in May 2014, the office market has been positively affected as desks are once again being filled. Total nonfarm employment in the Phoenix Metro is up 3% from May 2014 to May 2015, and total nonfarm employment in Arizona is back to the pre-recession levels seen in 2007.

The vacancy rate for the Phoenix Metro market ended Q2 at 18.3%, remaining relatively even for the last three quarters. The flattening in vacancy can mainly be attributed to the increase in new office space deliveries; in the past 6 quarters, over 2.5 million SF have been delivered to the Phoenix market, compared to the previous 6 quarters when just 413,000 SF was delivered. While tenant demand still remains strong, it has yet to outpace the quickly growing new deliveries in prime submarkets such as Tempe and Chandler.

Sales volume dropped slightly in Q2 compared to Q1, but continues to increase over the last 5 years. For the first half of 2015, $1.29 billion was sold in the Phoenix office market, compared to the first half of 2014 when the total came in at $722 million. Leasing activity increased from Q1 to Q2, with 665 deals totaling 2.58 million SF being transacted.

For full Office report click here: 2Q_2015_NAI OfficeReport