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| Mark Gustin |
PHOENIX, AZ, July 22, 2020 – The
Phoenix office market has experienced its first
quarter of occupancy loss in eight years, according to the newly released Q2 2020 Office Insight Report from the Phoenix office of JLL.
However, the market continues to maintain positive
long-term viability thanks to a diverse workforce, affordability and continued
population growth.
According to the JLL report, the Phoenix market received
450,000 square feet of new sublease space during the second quarter, bringing
the total amount of available sublease space in the Valley to more than 1
million square feet.
“About three-quarters of these move-outs were planned
pre-COVID and are not reflective of the pandemic,” said JLL Managing Director
and office specialist Mark Gustin.
“But it does
indicate a shift that we will need to work through. Fortunately we are in a
strong position to do that. We’ve entered this downturn in a much different
position than the last recession, with fundamentals stronger than they have
ever been.”
Across the second quarter, metro Phoenix experienced
320,000 square feet of new company move-ins.
The addition of sublease space
brings overall office vacancy to 16.7 percent – as compared to 16.3 percent at
the start of the year.
Rents have remained steady at an average $28.16
per-square-foot.
The greatest impact of the sublease shift can be found in
Class A properties, with nearly 315,000 square feet of space becoming available
during the second quarter.
“A good portion of the sublease space that has become
available is located in newer product with existing furniture, fixtures and
equipment in place. This will be appealing to tenants as they can react quickly
to near-term market fluctuations,” said Gustin.
“It also puts
Phoenix in a good position to attract more companies from out of state –
particularly from markets like California, Chicago and New York, where serious
regulatory and affordability challenges will remain even after this pandemic
ends.
"This is where Phoenix can shine with long-term,
viable solutions and is part of why we continue to see commercial real estate
interest from both foreign and domestic entities.”
The JLL report points to an expectation for more sublease
space to come to market over the next few quarters.
Phoenix’s strong
fundamentals could help cushion that blow, however, allowing Phoenix to rebound
faster and potentially become one of the nation’s most attractive metros.
To access JLL research for Phoenix and across the U.S.,
visit the company’s research page at https://www.us.jll.com/en/trends-and-insights#research.
Fundamentals Forecast
YTD net absorption 685,906 s.f. ▼
Under construction 1,594,733 s.f. ▼ Total vacancy 16.7% ▲ Sublease vacancy
1,037,271 s.f. ▲ Direct asking rent $28.16 p.s.f. ▶ Sublease asking rent $26.91
p.s.f. ▶ Concessions Rising ▲
CONTACT:
Stacey Hershauer
focusAZ
P 480.600.0195
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