CoStar: Phoenix Office, Hospitality on Rebound While Industrial Breaks More Records

Article originally posted on Phoenix Business Journal on July 21, 2021

Office tenants in the Phoenix market committed to leasing about 2 million square feet of space in the second quarter of 2021, a 65% increase from the same period last year, showing signs that the office market could be bouncing back from the depths of the pandemic, according to CoStar research.

In CoStar’s second quarter webinar, director of market analytics Jessica Morin said the market has seen seven office leases of more than 50,000 square feet in the first half of the year.

However, despite the increase in leasing, there has still been a 1.4-million-square-foot increase in sublease space available since the end of 2020. Morin said she expects to see the increased pace of additional sublease space level off in subsequent quarters, but said the trend of “right-sizing” office space will likely continue as companies evaluate space needs. The University of Phoenix put one of its buildings up for sublease earlier this year, and both Allstate and Voya in Chandler have placed some of their space up for sublease.

Across the market, Tempe and Chandler still lead for office space under construction, with 470,000 square feet and 379,000 square feet under construction, respectively. The continued construction of speculative office space, notably the Beam on Farmer office building in Tempe and the Grove in Phoenix shows developers still have confidence their buildings will find tenants, she said.

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