Construction-related companies lead charge of mid-sized users
Although Phoenix has recovered all of the jobs lost during the recession, the construction employment sector is still more than 80,000 jobs away from its previous peak. Construction-related companies represented a significant portion of mid-sized activity in the market, but unlike previous cycles, economic recovery is not dependent on the success of single-family construction. An impressive 7,200 construction jobs have been added since the first quarter of 2015, and as multifamily and commercial construction continue to grow in the Phoenix metro area, new employment growth in the construction sector is expected to translate into healthy absorption gains.
Balanced recovery in the Southeast Valley with small user activity
During previous economic cycles in the Phoenix market, recoveries were marked by large, institutional users taking advantage of declining rental rates to lease large blocks of space. Now that the worst of the recession is well behind us, the Southeast Valley has seen a much more balanced recovery including large, mid-sized, and small, local users. Over 1.0 million square feet of leases were signed in the first quarter, and with only a few renewals over 100,000 square feet,leasing activity in the first quarter was largely comprised of small deals under 5,000 square feet.
Southwest Valley landlords optimistic that large users will land in 2016
After averaging nearly 675,000 square feet of net absorption per quarter in 2015,the Southwest Valley saw a healthy bump in the first quarter of 2016, recording over 830,000 square feet of net absorption. Institutional users have always looked to the Southwest Valley for big box space that meets regional distribution needs, and there are currently over 13 million square feet of tenants in the market currently evaluating, touring or negotiating for space in the submarket. With plenty of existing large blocks of pace still available in addition to ample land for development, landlords are confident that the dominoes will begin to fall.
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