January 2024 – Knowing the Numbers in Commercial Real Estate

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

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