Small Office Resilience – a Local Study from C&W

PHOENIX, AZ (December 6, 2024) — Cushman & Wakefield has published some new “Instant Insights” on the Phoenix Metro office market.  This study examines the recent trends in small office buildings and compares vacancy and net absorption against larger office buildings in the market. Below are some of the highlights found in this study:

Over the last four years, small office products between 20,000 and 50,000 square feet (sf) have outperformed larger products greater than 50,000 sf.

  •  There are 393 buildings in the 20,000-50,000 sf size range, accounting for 40% of all office buildings in metro Phoenix. In square footage terms, this equals nearly 12 million square feet (msf), or about 14% of the total inventory.
  • Vacancy rates in the 20,000-50,000 sf size range have dropped below 2019 averages, while office buildings larger than 50,000 sf have trended higher.
  • Despite aggregate negative net absorption across all building sizes over the trailing 12 months ending September 30th, 2024, the office product at 20,000-50,000 sf recorded 19,439 sf of negative absorption, well below the absorption rates in larger office products.

WHAT THIS MEANS FOR CRE:

  • Flexibility is key for occupiers of small office space. These tenants tend to prefer short- to medium-term lease options, which allows them to adapt relatively quickly to changing office market conditions.
  •  Small office users are also likely to support hybrid or rotational work options for their employees, and these tenants must maximize their smaller footprint without sacrificing productivity.
  • To stay competitive, landlords must attract office users with a smaller footprint. While total building space typically cannot be changed, segmenting large floor plates into smaller, more collaborative spaces, as well as updating interiors with fresh finishes and tech-enabled infrastructure can appeal to tenants looking to reduce move-in costs and time

The full report with complete insights can be found here: https://www.cushmanwakefield.com/en/united-states/insights/instant-insight-small-office-resilience