JLL is reporting the Phoenix office market as still going strong to start 2016. With more than 2.2-million-square-feet of office space (including 439,530-square-feet of speculative space) currently under construction in Greater Phoenix. An impressive 80 percent of that space is pre-leased.
Almost 82 percent of space under construction (1.8-million-square-feet) is represented in three projects: Marina Heights, Arizona Department of Economic Security (build-to-suit in Chandler) and Skysong 4.
A healthy 423,748-square-feet of office space was absorbed in Phoenix during Q1, a 48.5 percent increase from one year prior.
Overall vacancy is expected to decline in 2016 as office-using employers continue to expand and relocate to the Valley.
But the dynamics of spec development may be shifting. Speculative office development is declining as developers assess the market, taking note of how long the over 1.0-million-square-feet of vacant space delivered in 2015 stays on the market before kicking off new projects.
JLL Managing Director, Karsten Peterson says about Q1 office market trends from the landlord’s perspective, “This recovery has seen a much greater percentage of build-to-suits than previous Phoenix market rebounds,” said JLL Managing Director Karsten Peterson. “We are hearing loud and clear that corporate America wants buildings that meet the needs of today’s tenants – creative space with flexible floorplates, open ceilings and high parking ratios. Expansions and relocations equally supported our speculative development pipeline, but that side of the market may begin to slow as capital becomes harder to secure.”
To read the full report with graphs click here JLLOffice Insight-Q1 2016-Phoenix_Final