Colliers International is reporting that after a fairly steady first half of the year, the Greater Phoenix office market strengthened in the third quarter. Tenants moved into a net of more than 950,000-square-feet in the past three months, topping the total for the first half of the year and marking the strongest single quarter of net absorption in Greater Phoenix in two years. This renewed tenant demand is forecast to continue in the coming months, particularly as heavily pre-leased buildings come online.
This tenant demand for space is also supporting rent growth in the market. Rents have been on the rise for more than two years, and the pace of growth is accelerating as market conditions tighten. Rents are also receiving a boost from the delivery of new, expensive space in many high-demand submarkets. Two of the properties currently under construction feature some of the highest asking rents in all of Greater Phoenix, reaching $40 per square foot in a few instances.
One indicator of the strengthening in the local office market is the improvement being recorded in a greater number of submarkets.
Tenant demand in the Greater Phoenix office market spiked during the third quarter, with net absorption reaching nearly 960,000-square-feet. This topped the total for the entire first half of 2015.
The surge in net absorption fueled a vacancy decline in the third quarter, following only modest improvement in the first half. Vacancy ended the third quarter at 17.6 percent, 100 basis points lower than one year ago.
Development of new office buildings is on the rise, with approximately 2.5 million square feet expected to come online in 2015. The new construction includes a mix of spec and build-to-suit projects.
Asking rents continue to trend higher, advancing 1.6 percent in the third quarter. Over the past 12 months, average asking rents have gained 4.2 percent, and average Class A asking rents have spiked 7.1 percent since the third quarter 2014.
Sales of office buildings slowed minimally in the third quarter, but year-to-date activity is ahead of the 2014 pace. The median price in transactions to this point in 2015 is $134 per square foot, 19 percent higher than one year ago.
For full report click here: Greater Phoenix Office Report_3Q 2015_-3