When you move your office space in Phoenix, you aren't just moving in a hot climate – you're entering a hot market. Class A space is moving especially quickly, with twice the absorption as Classes B and C. Leading industries are real estate, financial services, retail, health care, and manufacturing.

About Phoenix

Phoenix, amazingly, started out as a single farm. Within a year, it had attracted enough people to reach township status, and a month after that, it gained its first office: the local Post Office. A telegraph office came along in the 1870s. While there wasn't much need for offices back then, the township had a definite call for saloons. There were 16 of these establishments, along with a few dance halls, all for a town of just 2,500 people. This population level was enough for it to advance to city status, which it attained in 1881.

Since then, Phoenix has seen massive growth and change. It got its first skyscraper way back in 1920, moved from cotton growing into manufacturing, and now, is home to many financial and real estate firms. Science, tech, and retail companies also love the hot, dry environment, with Honeywell Aerospace, PetSmart, PayPal, and American Express all among the many that either call Phoenix home or that have major branches there.

The Phoenix Workforce

Education is a high priority in the Phoenix area, and initiatives to enhance it start as early as grade school. Upon graduation from public school, residents find a number of private options for their higher educational needs. These range from the University of Phoenix to Arizona State University's Phoenix Campus. Numerous other options are also available.

All of this education leads to a workforce that is excellently prepared to handle tech, finance, real estate, and other such employment. Many companies move here to tap into this talent, and areas that have plenty of college students and graduates command high rents due to this factor.

Getting Around

The Phoenix Greater Metropolitan Area makes travel easy, and this is another driver for the area's desirability. A light rail system runs between Phoenix, Mesa, and Tempe. Buses connect the two nearby airports to Phoenix and Flagstaff, and the city has a local bus system as well. Despite this, walkability is the biggest draw when it comes to transportation, and as you'll see in the Submarkets section, some areas command higher rents specifically because of this factor.

When traveling by car, residents and visitors are pleasantly surprised to find that the road system is extensive enough to avoid congestion despite the large size of the city. These roads are mostly funded by a half-cent addition to the local sales tax rather than with federal money, though there are some federal highways present as well.

Phoenix is also the 15th-most bicycle-friendly city out of 50 with populations over 100,000, according to a rating done by Bicycling Magazine. All in all, the area is very good for people who want to be able to get around, whether they do so by their own physical power or by using any type of motorized transport.

Overview of the Phoenix Office Space Market

In recent years, rents in the Greater Phoenix Area have been rising quickly, but recently, this trend cooled slightly. Even so, landlords are still much more likely to offer free rent deals to new tenants rather than agreeing to a long-term rent discounts. This is despite almost 2,000,000 square feet of space being brought into the Phoenix market in 2017.

Spotlight on Select Submarkets

CBD vs. Suburban - As in other places, you can find a wide variety of leasing environments depending on which submarket you choose. According to a CRESA report, the Central Business District is hot, with leasing rates averaging $28.22 for Class A space, and $22.37 for Class B. Vacancies are rising for the former and falling for the latter.

In the suburban Phoenix areas, rates average $29.98 for Class A space and $22.75 for Class B. Here, vacancy rates are only slightly up – by 0.5% - for the Class A space, and down by 0.5 percent for the Class B option. However, vacancies are lower overall in the suburban markets than they are for the Central Business District, CRESA says.

Tempe – This suburb is leading the area in net absorption thanks to tenants like Freedom Financial moving into build-to-suit space. The move took 150,000 square feet out of circulation.

Scottsdale Airpark, Metrocenter, and South Scottsdale – These areas posted between 85,000 and 89,000 square feet of absorption, giving them strong showings in the last quarter. A CBRE report mentions the arrival of General Dynamics as a driver of Metrocenter's absorption, while Scottsdale Airpark's absorption was driven by a variety of smaller leases being signed. In South Scottsdale, Oracle, Mass Mutual, and Stream Logistics were among the notable arrivals.

South Airport – Eagle Home Mortgage and "a large e-commerce user" grabbed up 92,000 square feet and almost 54,000 square feet, respectively, in The Alameda.

Camelback Corridor – CBRE mentions this submarket, along with those of Tempe and South Scottsdale, as having the highest average rental rates in the area. These prices are being fueled by a combination of access to talent and walkable amenities.

Chandler – New construction is the highlight of this area. The Rivulon, with 60,000 square feet, and The Stearman, with 65,000 square feet, are the latest notable developments. The HUB, with 292,000 square feet, also completed renovations and is open for leasing.

Predictions

The CBRE predicts that the economic outlook will remain positive for the rest of 2018 thanks to low levels of new supply and good employment figures. Both population and employment are expected to grow at about 2 percent for the remainder of the year. With the exception of the Chandler submarket, supply-and-demand ratios are expected to remain healthy. Chandler is predicted to end up with a slight oversupply of space, which could dampen rising rent costs in that area or even push them down a bit.

Get Help Finding Your Perfect Phoenix Office Space

We are experts at helping new arrivals navigate the leasing market. Our experts are active in over 550 areas, and we work with top commercial real estate firms as well as boutiques to find the best offerings and deals. If you're coming to Phoenix, be sure to talk to us. We'll be glad to help make your move as simple and stress-free as possible.