Phoenix Office Market
Net absorption was negative for the ninth consecutive quarter, with 35,244 SF in losses. A contraction, but not a sharp one compared to recent quarters. Net absorption for 2024 totaled -1.8 MSF, much lower than 2023’s -2.8 MSF. Hybrid work trends (less space needed) and rising vacancy have deterred new construction, with no starts recorded in the second half of 2024. Total vacancy climbed to 26.5%, a 200-basis-point increase year-over-year. Sublease space additions slowed, but transitions from sublease to direct availability are accelerating. More transitions are expected as major sublet terms expire in 2024 and 2025.
Phoenix Industrial Market
Net absorption in the third quarter of 2024 was 2.5 MSF versus 10.4 MSF in construction deliveries as numerous speculative buildings delivered partially vacant. Unleased speculative construction deliveries, coupled with record levels of sublet vacant space, pushed the market’s total vacancy rate to 12.3%. Sublet availability leapt by 57.8% from last quarter to reach 6.2 MSF, a new high. New listings from Home Depot (1.3 MSF) and Logistics Plus (543 KSF) are factors. Under-construction activity decreased for the fifth consecutive quarter; 25.7 MSF is presently underway. The average asking rent dropped by 5.2% from year-end as the market readjusts to the influx of new construction and sublease space coming online.
Download Phoenix Industrial Market Report 3Q24