Phoenix Market Update: Occupancy on the Upswing

The Greater Phoenix office market closed 2021 strongly, with an 15.3 percent vacancy rate in December, according to CommercialEdge. Although vacancy ticked up 60 basis points from the previous month, the year-end rate reflects a 310 basis-point improvement from January 2021.

Among comparable secondary markets, the Valley occupied middle ground: The metro surpassed Atlanta (21.5 percent vacancy) and trailed Charlotte (14.6 percent). Phoenix’s vacancy was also similar to the 15.5 percent national rate, which edged up 130 basis points  year-over-year.

Asking rents rose again across the metro in December even as the national average decreased slightly. The full-service equivalent listing was $30.01 per square foot, up 7.1 percent month-over-month and 9.5 percent year-over-year. By comparison, the national rate declined 41 basis points in November to $38.44 per square foot.

A Good Year

After vacancy topped out at 18.7 percent in April, the Valley showed steady improvement for much of the year. The market had its best performance in November, when vacancy reached 14.7 percent.

Some of the metro’s largest office leases of 2021 featured prominent names in e-commerce, law and banking. Amazon grew its Tempe footprint by signing a 100,000-square-foot lease at Quadrum Tempe and a 63,350-square-foot lease expansion at 100 Mill.

Downtown Phoenix recorded one of the year’s largest leases in May, when RED Development added Snell & Wilmer to CityScape’s roster in a 115,000-square-foot deal. Western Alliance, Arizona’s largest locally headquartered bank, signed two downtown leases totaling 92,000 square feet at CityScape and Block 23.

Downtown office occupancy took a hit in September, when Chase Bank completed its relocation to Discovery Business Campus in Tempe. The bank vacated 724,000 square feet at Chase Tower, Arizona’s tallest building.

CommercialEdge covers 8M+ property records in the United States. View the latest CommercialEdge national monthly office report here.