Phoenix office market report

There are currently 13 different office projects under construction across the greater Phoenix region, totaling 1,243,548 sf of rentable space. The Grove, a two-building class A office project located in the highly desirable Camelback Corridor, is set to deliver in Q4 and will add just over 250,000 sf of premium office space to the market.

Phoenix also saw its first notable office delivery of 2022 in Q3, as The Beam on Farmer at 433 S Farmer Ave in Tempe, AZ was delivered in September. The Beam on Farmer is a five-story class A office building that includes 183,526 sf of rentable building area.

Net absorption totaled -963,252 sf in Q3, as Tempe and Sky Harbor experienced a significant rise in total vacant space. The Camelback Corridor, Midtown, Downtown, and Central Phoenix submarkets were the four submarkets that recorded a net gain in absorption in Q3.

Average asking rents increased for the third consecutive quarter, rising from $29.70 psf in Q2 to $29.98 psf in Q3. Tempe, Scottsdale Airpark, and the Camelback Corridor saw the highest average rents, with all three submarkets recording an average rental rate above $35 psf.

The amount of total available office space rose by roughly 1.2 msf in Q3, reaching 27,260,377 sf at the end of Q3. Available sublease space totaled 6,395,785 sf, while available direct space totaled 20,864,592 sf.

The total vacancy rate rose to 23.0%, a result of the nearly 1 msf of negative net absorption recorded in Q3.

Total investment sales came in at just over $500M in Q3, with the largest transaction coming from the $66.35M sale of the Camelback Collective building at 2801 E Camelback. The average transaction price for office buildings was $218.51 psf in Q3.