Phoenix Office Market Report

1st Quarter 2022

Posted In — Market Research | Market Report


LEASING ACTIVITY HAS STEADILY INCREASED over the past year since bottoming out at the start of the Covid-19 pandemic and continues to trend higher at near pre-pandemic levels. Although leasing volume posted at 2.3M SF in Q1, sublease availability peaked to an all-time historic high.

AS THE INFLUX OF NEW RESIDENTS to Phoenix continues at a breakneck pace, companies are taking advantage in the growth of the employment pool. Amazon recently announced to create over 500 jobs in the region, including not only positions for warehouse opportunities but also software engineers and business analysts.

SALES VOLUME ended Q1 at 3.29M SF which is on par, if not higher, than previous quarters even before the pandemic, reflecting a rise in confidence in the market again. Phoenix has gained increased attention from national investors; the top transaction for Q1 being the Esplanade in Camelback which sold for an estimated $385M SF to East Coast investors, Monarch Alternative Capital, LP and Tourmaline Capital Partners.


THE PHOENIX LOCAL ECONOMY remains among the best-performing markets for job growth. The Milken Institute’s 2022 Best-Performing Cities list, which ranks cities on a variety of metrics including job creation and wage growth, recently ranked the Phoenix metro 4th in the nation. This is up three spots from 2021 and up from 12th in the nation in 2020.

ACCORDING TO the Arizona Office of Economic Opportunity, Phoenix metro’s unemployment rate in February decreased 360 basis points YOY to a low 3.1%. This is compared to the state’s rate of 3.6% and national rate of 3.8%.


THE AMOUNT OF SUBLET availability is still a concern and leasing activity over the next few quarters will need to outperform last year’s levels to stabilize the vacancy rates in the market. With the help of Phoenix’s robust job and population growth, the office sector will recover in the long run.

WHILE MOST of the 1.6M SF currently under construction is due to complete this year, the development pipeline is at its lowest levels in over 10 years. This will help keep vacancies from increasing notably in the near future.


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