Phoenix Office Market
The market incurred an additional 477,367 SF of net occupancy losses this quarter. This is the eighth consecutive quarter of negative absorption. Under-construction levels are only 13.3% of what they were at the start of the pandemic. Hybrid work models and escalating vacancy are deterring developers from breaking ground. Total vacancy (26.1%) is up 280 basis points from the same time last year. A fully vacant and available project totaling 133,356 SF delivered this quarter with an additional 334,022 SF of new product currently underway. Sublease space entering the market has slowed down, with the transition from sublease availability to direct escalating. More direct transitions are expected since many of the larger sublet offerings come to term 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