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8/02/18
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The more than 2.7 msf of office space now under construction in metro Phoenix is the most seen since 2015. But, according to the Q2 2018 Phoenix Office Insight report from the Phoenix office of JLL, it still may not be enough to meet an estimated 4.6 msf of demand that is in play by companies ranging from business and financial services to high-tech and healthcare.
“The healthy mix of industries active in Phoenix is a good sign for the market’s continued success,” said JLL Senior Vice President Brett Abramson. “Gone are the days where there are hubs of certain industries all locating in one submarket. What we’re seeing now is simply a heavy dose of demand, coming from varied industry interest in most submarkets.”
According to JLL, nearly 100 companies are now in the market – looking for 20k sf or greater of Phoenix office product. Of those, 24% are business services companies, 21% are healthcare, 14% are high-tech and 10% are financial services.
Together, they represent 4.6 msf of demand. This is above and beyond the 2.7 msf of office space that is currently under construction – which itself is already 30% pre-leased.
If there is one geographical leader on the construction front, Abramson says it would be the Southeast Valley, which represents 77% of active office construction – 36% in Chandler, 29% in Tempe and 12% in South Tempe.
“An even better sign for Phoenix than the construction is the increase in our average size requirements,” said Abramson, noting that larger and larger companies are looking to relocate and expand in the Valley. “We have grown from an average requirement of 5k sf to average requirements in the 10k sf to 20k sf range in the core submarkets.”
According to JLL’s Q2 report, vacancy is still hovering near record lows and rents have increased 6% year to date.
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