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 fourth quarter of 2024 was 3.5 MSF versus 10.7 MSF in construction deliveries as numerous speculative buildings delivered partially vacant. Unleased speculative construction deliveries pushed the market’s total vacancy rate to 13.4%, the highest rate since 2011. Sublet availability increased a modest 3.9% from last quarter to reach 6.5 MSF as new listings exceeded sublease leasing activity. Under-construction activity decreased for the sixth consecutive quarter; 17.2 MSF is presently underway. The average asking rent dropped by 8.7% year-over-year as the market continues to readjust to the influx of new construction and sublease space coming online.
Download Phoenix Industrial Market Report 4Q24