As the commercial real estate market in Metro Phoenix continues to climb slowly and steadily, the industrial market is projected to hit all-time absorption records by the end of 2017 while the office market is expected to surpass 2.0 million square feet for the fourth year in a row, according to our recently published Q3 Insight reports.
The office market
In the office market, Phoenix is approaching the longest expansion on record, 18 straight quarters. From Q3 2013 to Q3 2017, more than 10.8 million square feet of office space has been absorbed in Phoenix. This is 9.0 percent higher than the market’s previous 9.9 million-square-foot absorption high point recorded between Q3 2003 and Q3 2007.
According to the report, 175,000 square feet of positive net office absorption was achieved during Q3, and approximately 350,000 additional square feet of absorption is projected for Q4. Barring any major move-outs, Phoenix should exceed 2.0 million square feet of total office space absorption by year end. This would be the fourth year in a row that the local market hits this benchmark.
The industrial market
In the industrial market, more than 6.1 million square feet of positive net absorption was achieved as of Q3, making 2017 the fourth consecutive year of at least 6.0 million square feet of space absorbed. Another 1.1 million square feet of pre-leased space is expected to deliver by the end of the year. Combined with any new deals that emerge during Q4 2017, this brings the year-end forecast for total absorption very close to the market’s all-time high of 7.9 million square feet, which was achieved in 2005.
According to JLL research, a main contributor to our market’s ongoing success is a much more diverse recovery during this economic growth cycle. Unlike past cycles when the Valley was heavily reliant on construction activity, our economy today is built on a healthy balance of employment sectors. Over the last decade, large employment gains in the Education & Health Services, Financial Activities and Leisure & Hospitality sectors have resulted in a shift in the Metro Phoenix economy, with an increase of 158,900 jobs.
Source: JLL Research
About the author
Kiana Cox is a senior research analyst in the JLL Phoenix office who works closely with brokerage and support professionals throughout the western region, as well as colleagues throughout the global JLL organization, to provide best-in-class research that differentiates JLL.