The Greater Phoenix office market has experienced significant growth, with the highest net absorption in two and a half years and a decrease in vacancy, according to a recent report by Colliers. This positive trend can be attributed to a decrease in construction activity, resulting in the lowest level of new office inventory in over a decade.
During the last three months of 2024, net absorption was primarily driven by owner-user acquisitions. Notable acquisitions included U-Haul, Cardon Ventures, and D.R. Horton, totaling more than 600,000 square feet. The fourth quarter alone saw a positive net absorption of 358,118 square feet, bringing the total net absorption for the year to -928,923 square feet.
Furthermore, the office leasing activity in Phoenix gained momentum, with over 500,000 square feet of new direct leases signed during the fourth quarter. This marks a significant increase of 33.4 percent compared to the same period in 2023.
While the direct market vacancy rate decreased for the first time in a year and a half, falling to 15.3 percent, it still rose by 40 basis points year-over-year. The total space available also increased by 10 basis points year-over-year, reaching a vacancy rate of 19.5 percent by the end of 2024.
Overall, the Greater Phoenix office market is showing promising signs of growth and stability. With the decrease in construction activity and the increase in leasing activity, the market is poised for continued success in the coming years.
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The exponential growth in occupancy rates for commercial spaces in Phoenix is absolutely astounding! It’s great to see the city’s thriving economy attracting more businesses. I wonder how this surge will impact the local job market and overall infrastructure development in the long run.