Phoenix Office Market
Office occupancy in the fourth quarter of 2023 contracted by 515,666 SF. Overall net absorption losses for the year totaled 1.7 million SF. Absorption losses are expected to slow but continue into 2024. Under-construction activity has trended down sharply since 2020. Hybrid work models and rising sublet availability are deterring developers from breaking ground. Vacancy and asking rents both increased year-over-year. Total vacancy grew to 23.3%, with under 500,000 SF of new product coming online during 2023. Sublease space entering the market has slowed down, with the transition from sublease availability to direct escalating. More direct transitions are expected since most of today’s sublet offerings come to term in 2024 and 2025.
Phoenix Industrial Market
Net absorption in 2023 was 19.3 MSF versus 34.8 MSF in construction deliveries as numerous speculative buildings delivered partially vacant. 12.3 MSF in new construction delivered this quarter alone and 85.0% was vacant. Although this pushed the greater market’s total vacancy from 6.6% to 8.3%, vacancy will decrease somewhat since a portion of the new supply is leased, with tenants slated to take occupancy in the coming quarters. Under-construction activity decreased for the fourth consecutive quarter. 35.2 MSF is presently underway and 31.5% has pre-leased to date. Annual asking rent growth slowed to 6.0%, a welcome change for tenants after 2022’s unprecedented 40.2% jump.Download Phoenix Industrial Market Report 4Q23 Download Phoenix Retail Market Report 1Q23