Two East Valley Cities Dominate in Office Leases, Construction

Article originally posted on Phoenix Business Journal on April 16, 2019

During the first quarter of the year, Valley tenants absorbed more than 1 million square feet of office space, a high the metro area has not seen since the Great Recession.

According to JLL’s first-quarter office insight report, tenants signed new leases totaling 900,000 square feet during the first three months of the year, with 78 additional tenants seeking more than 4.6 million square feet of space in the market.

“The continued positive absorption numbers and growth in metro Phoenix is obviously very exciting. We are optimistic that more job creation in all types of industries will continue here and are optimistic for a continued strong 2019,” JLL Senior Managing Director Pat Williams said in a statement.

According to the Savills first-quarter report, nearly 90 percent of the major lease transactions were for companies new to the market. Voya Financial represented the largest lease of the period for more than 151,000 square feet in Chandler.

Despite the largest lease transaction heading to Chandler, Tempe was the recipient of 59 percent of the market’s large leases during the quarter.

More than 2 million square feet of office space was under construction in the Valley at the end of the first quarter, with a clear skew toward the East Valley, according to the JLL report. Nearly 1 million square feet is under construction in Tempe and another 500,000 under construction in Chandler.

The Alameda, a Tempe office complex fully leased to three Fortune 500 tenants, was the largest office sale of the quarter. It was sold to a New York investor for $71.5 million.

Average asking rents in the Valley increased to $26.99 per square foot at the end of Q1, according to Savills. Tempe had the highest asking rent: $34.35 per square foot.

Vacancy remained level during the quarter, ending at 18.9 percent, according to JLL.

The Alameda, a 236,000-square-foot office campus in Tempe, recently underwent a $15 million renovation.