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2/05/19
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This report was provided to us by the Phoenix office of JLL
Phoenix’s Airport office submarket is quickly filling with new and expanding tenants, pushing vacancy rates down 9.3% year-over-year and inching rental rates up, according to data from JLL’s Q4 Phoenix Office Market Report.
According to JLL, overall vacancy in the Airport submarket in 2018 fell from 32.7% to 23.4%. During the same time period, submarket rents climbed from $19.63/sf to $21.95/sf.
“The Airport submarket is a very attractive alternative for tenants to consider when locating their operations,” said JLL Managing Director Mark Gustin. “It has a central location that is close to the amenities of downtown Tempe and Phoenix, and is crisscrossed by three major freeways that connect tenants to a large base of prospective employees – over 2.6 million people within a 30-minute commute.”
In 2018, this helped to attract major new tenant commitments to the Airport submarket, the largest of which include:
• McKesson Drug Company, subleasing 177.6k sf at 2900 S. Sunland Dr, at the I-10 and US 60 in Tempe.
• Lennar Homes, leasing 91.5k sf at 1665 W. Alameda Dr, also along the I-10 just north of the US 60 in Tempe.
• EPIQ, leasing 51.3k sf at 3255 E. Elwood St, at the I-10 and University Drive, south of the Airport.
• Ancora Education, leasing 43k sf at 8181 S. 48th St, just west of I-10 and south of Baseline Road.
• Aspen University, leasing 38k sf at 4615 E. Elwood St, also at the I-10 and University Drive.
Gustin says the increased lease activity has helped to transform a number of Airport-area office developments. This includes Quattro, a four-building, 265k sf office project that was recently rebranded within the Cotton Center business park. Since securing the Quattro leasing assignment about 16 months ago, JLL has completed 188.6k sf of leases at the project, including a 42.4k sf expansion and renewal by Freeport McMoran and a full-building, 57.1k sf lease by Konica Minolta.
“Metro Phoenix is on a 22-quarter run of net positive office space absorption, so in some ways the Airport submarket reflects what’s happening on a macro scale across the Valley,” said Gustin. “Based on the numbers, it is just much more pronounced in the Airport area.”
According to JLL, Phoenix’s positive net absorption streak is expected to extend into the first half of 2019 and feasibly further, with more than 1.4 msf of signed leases ready to occupy in 2019 and activity an interest in the local office market continuing on an upward trend.
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