Phoenix Office Market
Office occupancy in the second quarter of 2024 contracted by 134,4561 SF. Absorption losses are expected to slow but continue for the rest of the year. Construction activity has fallen sharply since 2020. Hybrid work models and elevated vacancy are deterring developers from breaking ground. A mere 393,578 SF of industrial product is currently under construction. Vacancy jumped to 25.0% in the second quarter as tenants continued to shed space. Asking rent growth has slowed amid an overabundance of lingering market listings. Sublease space entering the market has slowed down, with the transition from sublease availability to direct escalating. More direct-transitions are expected since many of the larger sublet offerings come to term in 2024 and 2025.
Phoenix Industrial Market
Net absorption in the second quarter of 2024 was 7.8 MSF versus 11.3 MSF in construction deliveries as numerous speculative buildings delivered partially vacant. Unleased speculative construction deliveries, coupled with record levels of sublet vacant space, pushed the market’s total vacancy rate to 10.5%. Under-construction activity decreased for the fourth consecutive quarter, while 37.7 MSF is presently underway. Available sublease space totals 4.1 MSF, up 85.8% from year-end 2023. The average asking rent dropped by 14.6% from year-end as the market readjusts to the influx of new construction and sublease space coming online.
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