Office Market
Phoenix witnessed a surge of 42,000 SF of new vacant office space entering the market, amplifying the challenges posed by sluggish demand and widespread economic uncertainty. The cumulative unoccupied space has escalated by almost 50% since late 2019, propelling the metro-wide vacancy rate from 11.0% in 19Q4 to its current 16.0%, mirroring levels recorded back in 2015.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 195M | 16% | $29.44 | -197K | 1M |
| 4 & 5 STAR | 70M | 24.6% | $34.92 | -64K | 938K |
| 3 STAR | 86M | 13.4% | $27.79 | -87K | 150K |
| 1 & 2 STAR | 40M | 6.7% | $23.23 | -46K | 0 |
Industrial Market
The Phoenix industrial scene undergoes a transformation as robust leasing encounters a tidal wave of new construction. Developers wrapped up an unprecedented 8.9 million SF, surpassing the second-strongest quarter of gross deliveries by several million SF. This influx propelled the current vacancy rate to 8.4%, wiping out a significant portion of the occupancy gains achieved during the pandemic era.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 447M | 8.3% | $13.39 | -2.5M | 45M |
| LOGISTICS | 321M | 9.7% | $12.90 | -1.6M | 39M |
| SPECIALIZED | 92M | 3.5% | $13.37 | -387K | 5M |
| FLEX | 34M | 8.8% | $18.46 | -485K | 659K |
Multi-Family Market
The Phoenix multi-family market grapples with an ongoing imbalance between supply and demand. Despite a potential leasing rebound this year, it couldn’t offset the record-breaking influx of new constructions, resulting in a surge in the Phoenix vacancy rate. Intensified competition from these new properties has sustained negative rent growth since last year’s end, leading operators to lower rental rates and heighten concessions to entice and retain tenants. Projections indicate a continued lukewarm landscape in the near future as the market copes with its most substantial supply pipeline in four decades.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT UNITS |
|---|---|---|---|---|---|
| TOTAL: | 380K | 10.8% | $1,550 | 60 | 34K |
| 4 & 5 STAR | 179K | 11.5% | $1,777 | 40 | 23K |
| 3 STAR | 142K | 10.7% | $1,394 | 22 | 10K |
| 1 & 2 STAR | 60K | 8.6% | $1,136 | -2 | 828 |
Retail Market
After yet another quarter of consistent progress, the Phoenix retail domain showcases some of its most stringent market conditions in recent history as the year nears its end. A blend of strong population growth, thriving consumption patterns, minimal store closures, and restricted new supply has concocted an ideal scenario for sustained exceptional performance.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 242M | 4.5% | $24.54 | 105K | 2.6M |
| POWER CENTER | 32M | 3.8% | $27.06 | 3K | 51K |
| NEIGHBORHOOD CENTER | 92M | 5.7% | $23.92 | -31K | 205K |
| GENERAL RETAIL | 85M | 2.7% | $23.70 | -65K | 2M |
