Phoenix Market Update: Slight Improvement in Office Vacancy

Phoenix’s office vacancy slightly improved in July, according to CommercialEdge data. The average rate dropped to 17.7 percent, a 30-basis-point decrease when compared to June and a 70-basis-point drop year-over-year. However, the value continued to remain higher than the national rate of 15.5 percent.

The metro’s decrease in vacancy is significant especially since no new construction was added to its inventory in July. When compared to similar secondary markets, The Valley maintained the same middle-ground position between Atlanta (19.9 percent vacancy rate) and Charlotte (15.2 percent).

Of the metro’s submarkets with at least 4 million square feet of inventory, several manifested little to no changes in office occupancy month-over-month, such as Phoenix–Center City (10 basis-point increase), Phoenix–Deer Valley (2 basis-point decrease) and Phoenix–Central Corridor (9 basis-point increase), while Chandler’s occupancy rate held steady at 10.4 percent. However, two medium-sized submarkets showed strong improvement: Gilbert’s vacancy rate jumped from 22.0 to 17.0 percent, while Peoria’s moved from 13.3 to 10.6 percent.

At the same time, office occupancy in Phoenix’s central business district took a serious hit, as Chase started to relocate the majority of employees to its new corporate campus in Tempe. By the end of August, the bank would have vacated nearly 724,000 square feet of space in Chase Tower, Arizona’s tallest building, ending a downtown presence that had lasted for nearly 28 years.

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