• The Phoenix office market closed 2017 with a strong quarter. Substantial activity in the tech and healthcare industries coupled with improving economic fundamentals drove demand for office space.

  • The Phoenix office market’s net absorption totaled 1,020,484 sq. ft. during Q4 2017, marking the fourth-highest level of quarterly net absorption in the past decade. This brought year-to-date net absorption to 2.8 million sq. ft.

  • The overall vacancy rate for metropolitan Phoenix ended Q4 2017 at 16.4%. This is 40 basis points (bps) lower than the previous quarter and a 100-bps decrease year-over-year.

  • The fourth quarter marked the 30th consecutive quarter of positive net absorption.

  • Vacancy continued to trend downward, especially in the most popular submarkets (Tempe and South Scottsdale).

  • The average asking lease rate for the Phoenix office market was $25.49 per sq. ft. full service gross (FSG-annual) at the end of Q4 2017, representing a 4.9% annual increase. At quarter-end, the Class A average asking rate was $34.30 per sq. ft. Over the same period, the Class B and Class C average asking rate was $25.17 per sq. ft. and $18.65 per sq. ft., respectively.

  • At the end of Q4 2017, approximately 1.8 million sq. ft. of office space was under construction— 44% of which is pre-leased. Though developers remain focused on BTS, the outlook for speculative projects is positive due to the scarcity of large blocks of Class A space in the market.

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