Phoenix Office Market Surges in 2019 as Major Leases, Sales Lead the Way

Article originally posted on Phoenix Business Journal on March 2, 2020

The Phoenix office market finished 2019 on a high note, with a decrease in the region’s overall vacancy rate and increases in net absorption, construction and rents, according to research from Colliers International.

In 2019, 3.4 million square feet of new office product came online in the market, and much of that product or buildings still under construction was claimed by tenants before it was even completed.

Food delivery app DoorDash leased the entire building at the Grand 2, part of the Grand at Papago Park Center, and Open Door leased more than 100,000 square feet in the Watermark, where coworking giant WeWork had already leased two floors.

“Block 23 delivered at 55% leased, so we never had the whole building hit inventory,” said Phillip Hernandez, research manager at Colliers International.

The market’s vacancy rate dropped to 12.7% at the end of the fourth quarter, and a million square feet of office space was absorbed during the quarter. In the 12-month period that ended in November 2019, 56,500 new jobs were added in the market.

Southwest Phoenix, which had a 6.5% vacancy rate, had the tightest overall vacancy for a submarket, overtaking Tempe, which had consistently had the lowest vacancy in the Valley. Tempe had a 7.5% vacancy rate at the end of the year.

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An artist's rendering shows the Grand 2, the second office building under construction at the Grand at Papago park.