Phoenix Office Construction Downshifts

1 min read

The Phoenix office market slowed down in development activity, while some leasing improvement was still visible.

The Phoenix office market witnessed both highs and lows in the first quarter of 2022, according to CommercialEdge. Office construction slowed down across the metro in Q1, as only 1 million square feet of office space was underway as of March, an amount representing 0.8 percent of stock; the national pipeline had reached 2.2 percent. In the same period, completions accounted for some 877,000 square feet.

New developments were also scarce, with 413,000 square feet being added to the pipeline. The largest project to debut was the expansion of Carvana’s corporate campus in Tempe. The two developments coming online at the intersection of Rio Salado Parkway and Priest Drive will add more than 241,000 square feet to the online car retailer’s local footprint.

Small improvement in leasing activity

The Valley had a relatively smooth ride in the first quarter of 2022 in terms of office leases. The metro’s vacancy rate was at 14.9 percent in January; while February brought a 60-basis-point vacancy increase, to 15.5 percent, the month of March saw a bounce-back, with vacancy decreasing to 15.1 percent. The situation was also better than the one recorded in March 2021, when vacancy had reached 18.5 percent.

One of the quarter’s leasing deals closed at I.D.E.A. Tempe, a 1 million-square-foot biotechnology campus developed by The Boyer Co. Medical technology company Becton, Dickinson and Co. has signed a 165-month, 32,917-square-foot lease expansion at the property, bringing its local footprint to nearly 153,000 square feet.

The metro’s asking rent remained at $28.01 per square foot throughout January and February. However, in March, the full-service equivalent rate dropped to $26.73 per square foot, moving further away from the national rate of $38.65 per square foot.

CommercialEdge covers 8M+ property records in the United States. View the latest CommercialEdge national monthly office report here.

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