{"id":1004738398,"date":"2024-12-04T00:33:47","date_gmt":"2024-12-04T08:33:47","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004738398"},"modified":"2024-12-30T07:21:18","modified_gmt":"2024-12-30T15:21:18","slug":"phoenix-office-markets-small-wins-add-up","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/phoenix-office-markets-small-wins-add-up\/","title":{"rendered":"Phoenix Office Market’s Small Wins Add Up"},"content":{"rendered":"\n

<\/p>\n\n\n

\n
\"Exterior<\/a>
The 132,972-square-foot office building at 1295 W. Rio Salado Parkway in Tempe, Ariz. recently came online. Image courtesy of CommercialEdge<\/em><\/figcaption><\/figure><\/div>\n\n\n

On par with ongoing national trends, the Phoenix office sector’s construction activity slowed this year, with developers breaking ground on only nine projects, according to CommercialEdge data. The metro’s under-construction pipeline was one of the smallest among major U.S. metros as of the end of October.<\/p>\n\n\n\n

However, the Valley of the Sun remained one of the top 10 best-performing markets for investment in the office sector. Meanwhile, coworking space in Phoenix was on par with the national figure, while conversion of office space into residential is a growing option to deal with the sector’s woes.<\/p>\n\n\n\n

Development activity trails peer markets<\/h2>\n\n\n\n

As of October, Phoenix had 555,850 square feet of office space under construction, accounting for 0.4 percent of existing stock\u2014below the national figure of 0.9 percent. When factoring in projects in the prospective and planning stages, the rate reached 1.9 percent of existing stock\u2014still below the national rate of 3.2 percent.<\/p>\n\n\n\n

The metro is still struggling with office supply<\/a> and had one of the smallest pipelines among high-volume secondary markets. Austin led, with 3.5 million square feet underway, followed by San Diego (3.1 million square feet), Dallas (3 million square feet), Nashville (2.1 million square feet) and the Bay Area (1.8 million square feet). Markets with smaller pipelines were Detroit (524,000 square feet) and the Twin Cities (435,666 square feet).<\/p>\n\n\n\n

The largest project currently under construction remains SunCap Property Group\u2019s Gilbert Spectrum\u2019s Building 3<\/a>, a 119,222-square-foot office building that broke ground in July 2023. Its completion date was pushed to the end of the year.<\/p>\n\n\n

\n
\"Rendering<\/a>
Rendering of Gilbert Spectrum Building 3, a 119,222-square-foot office property currently underway in Gilbert, Ariz. Image courtesy of SunCap Property Group<\/em><\/figcaption><\/figure><\/div>\n\n\n

Another notable office development is HonorHealth Medical Campus at Peoria, a 100,000-square-foot health-care facility. Developed by Anchor Health Properties, HonorHealth and SMIL, the project topped out<\/a> in April this year is expected to come online in early 2025.<\/p>\n\n\n\n

Construction starts totaled 561,845 square feet across nine properties year-to-date through October, while developers delivered 646,629 square feet in 10 properties. <\/p>\n\n\n\n

One project that came online in 2024 is Levine Investments\u2019 office campus at 8240 S. River Parkway in Tempe, Ariz., totaling 135,000 square feet. The property is part of Arizona State University\u2019s Research Park.<\/p>\n\n\n\n

Office-to-residential conversion an option for Phoenix<\/h2>\n\n\n\n

While the office landscape struggles with rising vacancy rates and owners are offloading properties, office-to-residential conversions pose an increasingly attractive option. A new tool developed by CommercialEdge, the Conversion Feasibility Index<\/a>, evaluates and lists the potential of office properties for residential makeovers, based on building features and property-level scores.<\/p>\n\n\n\n

There are currently 41 office properties in metro Phoenix with a score between 75 and 100, placing them as Tier I and II candidates for future residential redevelopment. Of the total, 35 are in Phoenix, while the Mesa and Scottsdale submarkets each have three candidates.<\/p>\n\n\n\n

Transaction activity increased year-over-year<\/h2>\n\n\n\n

Year-to-date through October, Phoenix office properties traded for a total of $1 billion, comprising 7.2 million square feet across 82 assets. The deal volume increased by 18.5 percent on a year-over-year basis. The metro ranked eighth among the best-performing markets, with Manhattan leading with $3.3 billion. Across Sun Belt markets, the Bay Area came first with $2.1 billion and was followed by Dallas ($1.1 billion), while Phoenix outperformed Austin ($881 million).<\/p>\n\n\n

\n
\"Exterior<\/a>
The Class A 24th at Camelback II changed hands in late October in one of the metro’s largest office sales. Image courtesy of CommercialEdge<\/em><\/figcaption><\/figure><\/div>\n\n\n

One of the biggest transactions closed in the metro was the $97.9 million sale of 24th at Camelback II<\/a>, a 302,209-square-foot Class A building. Hines sold the 11-story property at the end of October to Wide Open Excursions, in one of the largest office deals since 2022.<\/p>\n\n\n\n

The second largest office transaction was the sale of 24th at Camelback I, an asset with the same square footage. The 2000-completed building changed hands from New York Real Estate Investors to Columbus Properties in a $86.1 million deal.<\/p>\n\n\n\n

The average sale price for office properties in Phoenix was $164 per square foot\u2014below the national figure of $177 per square foot. Among similar markets, deals were pricier in the Valley when compared to Dallas ($130 per square foot) and Houston ($104 per square foot).<\/p>\n\n\n\n

Phoenix office vacancy rate below the national figure<\/h2>\n\n\n
\n
\"Exterior<\/a>
Hayden Ferry Lakeside II is part of a 43-acre, mixed-use campus totaling 1.6 million square feet in Tempe, Ariz. Image courtesy of CommercialEdge<\/em><\/figcaption><\/figure><\/div>\n\n\n

As of October, Phoenix\u2019s office vacancy rate reached 18.4 percent, down 60 basis points over a 12-month period and below the national rate of 19.4 percent. The index was one of the lowest among similar markets, such as Austin (27.7 percent), the Bay Area (26.4 percent), Houston (24.3 percent) and Dallas (23 percent).<\/p>\n\n\n\n

Earlier this year, a fund managed by Cousins Properties inked a 26,042-square-foot lease<\/a> at Hayden Ferry Lakeside II, a 318,240-square-foot office building in Tempe, Ariz. The in-home care provider previously occupied 25,000 square feet at the LEED Gold-certified property, under a sublease agreement.<\/p>\n\n\n\n

An expansion in the coworking sector<\/h2>\n\n\n\n

As of October, coworking spaces in Phoenix totaled 2.8 million square feet, more than in the Bay Area (2.6 million square feet) and Austin (1.7 million square feet). Manhattan led all rankings with 11.2 million square feet. The share of flex office space as percentage of total leasable office space reached 1.9 percent, on par with the national figure, but higher than Austin’s (1.7 percent) and the Bay Area’s (1.2 percent).<\/p>\n\n\n\n

Providers with the largest footprints in the metro remained unchanged\u2014Regus led with 567,688 square feet, followed by Expansive (207,095 square feet), Industrious (201,712 square feet), Spaces (171,460 square feet) and Bellagio Executive Plaza (140,393 square feet).<\/p>\n","protected":false},"excerpt":{"rendered":"

Find out how the area is faring this year, according to CommercialEdge.<\/p>\n","protected":false},"author":2991,"featured_media":1004738439,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37750,22251,21783,52420,21742,21747,1601,15],"tags":[51047,50674],"class_list":["post-1004738398","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-research-center-development","category-in-focus","category-investment","category-market-updates","category-latest","category-office","category-phoenix","category-west","tag-marketupdate","tag-commercialedge"],"acf":[],"yoast_head":"\nPhoenix Office Market's Small Wins Add Up - Commercial Property Executive<\/title>\n<meta name=\"description\" content=\"The Phoenix office sector has showed some positive signs in 2024, according to a CommercialEdge market update.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/phoenix-office-markets-small-wins-add-up\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Phoenix Office Market's Small Wins Add Up\" \/>\n<meta property=\"og:description\" content=\"The Phoenix office sector has showed some positive signs in 2024, according to a CommercialEdge market update.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/phoenix-office-markets-small-wins-add-up\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2024-12-04T08:33:47+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-12-30T15:21:18+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2024\/11\/24th-at-Camelback-II-e1732526208436.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"640\" \/>\n\t<meta property=\"og:image:height\" content=\"480\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Simona Tudose\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/phoenix-office-markets-small-wins-add-up\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/phoenix-office-markets-small-wins-add-up\/\",\"name\":\"Phoenix Office Market's Small Wins Add Up - 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