Office Investment Cools in Phoenix

Phoenix office investments totaled nearly 2.9 million square feet in the second quarter of 2022, according to CommercialEdge, with some 1.4 million changing hands in June. The quarterly total shows less investment activity than the one recorded in the first three months of the year, when transactions had totaled nearly 3.3 million square feet. On a year-over-year basis, the traded square footage was 48 percent higher than the one of 2021’s second quarter, when more than 1.9 million square feet had changed hands.

The Valley’s deals year-to-date added up to more than $1.4 billion as of June, at an average price of $292 per square foot, 6.8 percent higher than the national $272 per square foot. The figures show solid improvement over the year, as sales had totaled $550 million at an average $208 per square foot in the first half of 2021. On a quarter-over-quarter basis, sale prices fell by 13.9 percent; transactions had closed at $339 per square foot in March.

Second quarter’s notable deals

The quarter’s office investments included Class A and B properties, the latter making up 63.6 percent of the sales mix. Also, 72.7 percent of deals closed in suburban submarkets. Investors acquired mainly traditional office space, with only 408,000 square feet pertaining to medical office purchases.

5310 E. High St.

The quarter’s largest transaction involving office space was the $172 million sale of High Street, a mixed-use development in Phoenix comprising six office buildings totaling more than 460,000 square feet, as well as residential and retail space. Rood Investments acquired the asset from a joint venture between ScanlanKemperBard Cos. and Herbert Management Corp. in June. The sale included both the 19.3-acre site of High Street’s completed Phase I and a 4.9-acre swath of land where Phase II will take shape.

However, the sale of the siziest single-building office property closed in May. New York City-based Time Equities Inc. entered the Phoenix market with the purchase of Paradise Village Office Park, a five-story, 268,598-square-foot building. Sterling Equities and Lincoln Property Co. sold the Class B asset for $43 million, with the assistance of CBRE.

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