Phoenix Leads the Nation in Employment Growth, Fueling Demand for Office Space

Article originally posted on CoStar on July 16, 2019

Phoenix is one of the top markets in the country for office demand, thanks to the highest level of employment growth in the country.

Net absorption exceeded 3.1 million square feet over the past 12 months ending in June, placing the metro area eighth among all U.S. markets for office demand. Office absorption was led by metro areas with substantial employment gains over the past year, including Seattle, New York and Dallas. Demand in Phoenix notably outpaced Denver, Houston and Los Angeles over the period.

Healthy job gains in the metro area are stimulating demand for office space. The metro area’s ability to achieve continued job growth is buoyed by steady net migration that is expanding the labor pool while a low rate of unemployment in other markets hinders more substantial gains. In May, Phoenix led the nation in job growth – on a percentage basis – as employment expanded 3.2% annually or by 66,500 jobs. The total includes 12,800 professional and business services positions – a typical office-using sector.

Today, Phoenix office-using employment is 77,600 jobs above its pre-recession peak. Steady gains have led to five consecutive years of more than 3 million square feet of net absorption. This year, net absorption is on track to reach 3.2 million square feet, outpacing the 10-year average of 2.3 million square feet. The healthy demand and supply balance will support favorable fundamentals in the metro area, giving owners leverage to achieve continued rent growth this year.