Phoenix Market Update: Vacancy Heads Down Again

The Phoenix office market continued to walk the path to recovery in September, according to CommercialEdge data. Although still higher than the national rate of 14.9 percent, the average vacancy rate decreased to 16.0 percent, marking a 120-basis-point drop month-over-month and a 150-basis-point improvement year-over-year.

The drop in office vacancies is significant especially since the month of September brought 300,000 square feet of new construction to the metro’s inventory, with the completion of two Allred Park Place buildings in Chandler, Ariz. The comparison to similar secondary markets brought no change in ranking: same as the past few months, the Valley fared better than Atlanta (19.9 percent vacancy rate) and worse than Charlotte (14.6 percent).

When taking into consideration the metro’s submarkets with inventories larger than 4 million square feet, the most important change in office vacancy month-over-month was recorded in Gilbert; the submarket’s vacancy rate dropped from 16.7 to 13 percent, marking a 370-basis-point boost. Phoenix’s Central Business District also performed well in terms of office leases, reducing vacancies from 21.2 to 19.7 percent.

Mesa, with nearly 7 million square feet of office space in stock, saw little improvement in vacancy, a mere 40-basis-point boost when compared to August. However, in September the submarket witnessed one of its largest transactions in the last three years, as Maricopa County leased nearly 42,000 square feet at the 106,209 square-foot Mesa Corporate Center.

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