Q2 2020 Office Market
The office market was closely watched as national news reported the unfortunate furlough and layoff decisions of large tenants in the market. Overall, the Greater Phoenix office market experienced a healthy second quarter.
- Net absorption remained positive for the 33rd consecutive quarter with 205,372 square feet of net absorption
- Vacancy settled at 13.1% after increasing 30 bps over the quarter, but matching the same position over-the-year
- Sublease space in Phoenix increased 82% over-the-quarter and 54%over-the-year.
- 3.2 million square feet are under construction, with two new buildings breaking ground this quarter in Scottsdale
- Approximately 56% of inventory currently under construction is pre-leased
- Rental rates held strong and pushed higher, advancing 1.10% over-the-quarter and 6.2% year-over-year to its current average of $25.71 PSF
- Number of investment deals was half of first quarter, but sales volume increased 6.25% over the quarter
Outlook: The outlook for the Greater Phoenix office market remains optimistic. As consumer confidence returns, one thing has stayed constant, the need to stay safe. Until a vaccine is developed or the spread of the virus can be slowed, employees who are able to work from home will continue to do so. New health system certifications will surface as an office building standard to attract tenants and ensure safety.
The increased amount of sublease space available has affected both vacancy and absorption. This space is expected to experience rapid absorption because it is located in highly sought-after submarkets and offers quality tenant improvements already built out.
In the midst of the COVID-19 outbreak, information and data is emerging at a quick and uneven rate. The information contained herein has been obtained from sources deemed reliable at the time the report was written. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.