Phoenix posts banner year in office market according to Colliers International

Demand in 2018 outpaced new construction

Phoenix, January 30, 2019 – Greater Phoenix had a banner 2018 in the office market sector, according to a report released by Colliers International in Arizona. A strong economy brought nearly 80,000 new jobs, which spurred demand for office space that outpaced new construction.

The estimated 79,700 net new jobs mark a 3.9 percent increase over 2017, making 2018 the strongest job growth for the metro in more than a decade. More than 24,000 of these jobs were white-collar positions that fuel demand for office space. The growth has positioned Greater Phoenix in fourth position of the top 36 major employment markets in the country, up from fifth in 2017.

Net absorption of office space increased 106 percent in 2018, totaling an impressive 3.53 million square feet. Fourth quarter brought a decline in net absorption that appears to have stemmed from limited supply of large spaces in desirable submarkets. Completion of new projects during 2019 should alleviate this problem.

Despite the fourth quarter dip in net absorption, move-ins far outpaced new construction. This brought vacancy of office space down to 13.9 percent, 200 basis points below year-end 2017.  Declines in vacancy were experienced in all classes of office space.

Tempe ended the year with the lowest vacancy rate at 6 percent, followed by Deer Valley Airport with 10.7 percent. The top five strongest submarkets in terms of vacancy include the 44th Street Corridor, Scottsdale Central and Scottsdale South. Vacancy is expected to edge higher in 2019, as speculative development projects come online, adding new inventory to the market. Colliers International forecasts the office market will finish 2019 with approximately 14.5 percent vacancy.

The largest leases signed during 2018 were for buildings in the Airport area, Tempe, Chandler and Northwest Phoenix. One of the most notable was WeWork’s lease for 54,000 square feet at Camelback Esplanade at 2425 E. Camelback Road in Phoenix.

The decline in vacancy has pressured rental rates upward, though at a more modest pace than in previous years. Asking rents at the end of 2018 averaged $24.81 per square foot, which is a 2.6 percent increase from year-end 2017. Rate increases have moderated in the Class A sector, while Class B and C rent escalations have been stronger. Asking rental rates are expected to continue rising in 2019, though at very moderate levels. 

Deliveries of new buildings were modest during fourth quarter with approximately 355,000 square feet coming online. During 2018 the market added slightly more than 1.2 million square feet of new office space. Recent deliveries have been minimal, but the pipeline of new projects is filling. Currently an estimated 3.4 million square feet are under construction, compared to a year ago when we had just 1.7 million square feet underway.

Investment sales volume declined a minimal 5 percent year-over-year during 2018. A total of $2.47 billion of office space traded hands last year. While the total value of assets sold dropped, the number of transactions completed was higher during 2018. Transaction numbers rose 25 percent to 184 during 2018. The median price per square foot rose 17 percent to $176 per square foot, with cap rates averaging 6.9 percent. Interest rate increases have not significantly impacted cap rates.

The Greater Phoenix office market is expected to remain strong throughout 2019. During last year, approximately a dozen companies announced plans to add workers in the marketplace.  IT consulting company Infosys plans to more than double its Arizona workforce, adding 1,000 white-collar jobs during the next five years. Other companies with big announcements included Nationwide Insurance’s North Scottsdale regional campus and Deloitte’s new Gilbert operations center, all of which will bring thousands of new jobs over the next few years.

About Colliers International Group Inc.
Colliers International Group Inc. (NASDAQ: CIGI) (TSX: CIGI) is a top tier global real estate services and investment management company operating in 69 countries with a workforce of more than 13,000 professionals. Colliers is the fastest-growing publicly listed global real estate services and investment management company, with 2017 corporate revenues of $2.3 billion ($2.7 billion including affiliates). With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide, and through its investment management services platform, has more than $25 billion of assets under management from the world’s most respected institutional real estate investors.

Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services firm. Colliers is ranked the number one property manager in the world by Commercial Property Executive for two years in a row.

Colliers is led by an experienced leadership team with significant equity ownership and a proven record of delivering more than 20% annualized returns for shareholders, over more than 20 years.

For the latest news from Colliers, visit or follow us on Twitter: @Colliers and LinkedIn.

Colliers International in Arizona has served clients locally and globally for more than 35 years.

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Thomas Brophy

Research Director


As the research director for Colliers International in Arizona, I manage the research department entrusted with all market data and analysis activities. I am committed to providing cutting-edge research services, integrating innovative approaches to data streaming, and improving how the organization synthesizes and scales research data. My creative outlook significantly enhances research services for clients and brokers.

In addition to publishing quarterly statistical reports for each property discipline, I maintain a database of economic indicators to provide forecasts, and analyze and interpret real estate trends. I produce customized research reports on behalf of brokers and clients, prepare market presentations and develop ad hoc research projects in support of business development.

Collaborating with other service lines and professionals, our research team provides the data necessary to support clients and brokers. Data compilation includes ownership, zoning, land use, property sales and demographics. I actively participate in broker meetings and regional and national research calls to present market research and trends analysis. Our research team develops reliable statistical information for vacancy, rental rates, lease and sale comparables, cap rates, absorption, and construction and renovation trends across property lines, including office, industrial, multifamily retail, healthcare, hotels and land.

My extensive experience includes collecting, analyzing and preparing market and economic data and research, as well as expertise in corporate communications, investor relations, strategic planning, brand management and public speaking. Prior to joining Colliers, I was director of research for ABI Multifamily, where I developed market reports and research data used in marketing materials for ABI offices in Phoenix, Tucson, Sacramento and San Diego. I oversaw all data collection and reporting, wrote monthly market insight articles, and developed market podcasts.

As director of research and partner for Neighborhood Ventures (a multifamily investment firm), I collected, analyzed and wrote market data reports for use in investor presentations, offering materials and corporate communications. As principal with EPU Investments, I directed business and research operations for a multi-divisional investment company involved in single- and multifamily development and land services, including farming and water rights assessments and acquisitions.

Serving as an affordable housing specialist at Hendricks & Partners (now Berkadia), I provided assistance, research and guidance in creating the affordable housing division, and assisted brokers and clients in the acquisition and disposition of assets across the U.S.

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