Office Insight-Q1 2015-Phoenix
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Bifurcated market The overall Phoenix office market currently stands 22.2 percent vacant, significantly lower than its recessionary high of 27.1 percent vacant back in 2010, but has a long was to go before it reaches its previous low of 11.2 percent in 2006. As the Valley becomes a much more active market, the divide between the West Valley and East Valley continues to grow. Tenants are choosing to locate along the Loop 101 corridor spanning from Chandler and Tempe in the south to Scottsdale in the North. This activity has brought vacancy in the east below 20 percent as opposed to the west side of Phoenix that continues to struggle with a 27.9 percent vacancy rate. Total vacancy – Q1 2015 Source: JLL Research Active development pipeline Four submarkets boast vacancy rates below 15 percent in Phoenix: Tempe (10.5 percent), South Scottsdale (11.7 percent), South Tempe/Ahwatukee (14.4 percent), and Downtown (14.9 percent). Landlords are capitalizing on the strong demand and limited supply within these submarkets and developers are working to alleviate some of that imbalance by building new projects. The current level of construction in early 2015 has not been seen since the peak in 2008. Accelerating rents, steady demand, and positive economic indicators in Phoenix are reigniting confidence in developers. Office developers returning in force Source: JLL Research Financial services driving Phoenix forward Phoenix has experienced a much more diverse recovery since 2008, steadily adding a healthy balance of jobs in contrast to previous market cycles when the Valley would be flooded with construction employment. One specific industry that has been driving the local economy is the banking and finance sector, which has been the fastest growing industry in the Valley. The general metropolitan area lost over 300,000 jobs in the recession and has yet to exceed that number in early 2015, but financial services exceeded its employment peak back in 2013. The sector’s positive employment gains are translating into greater absorption of office space in some of the Valley’s premier submarkets. Financial Services in Phoenix Source: JLL Research 22.2% Total vacancy 279,629 Q1 2015 net absorption (s.f.) 4.1% 12-month rent growth 3,661,725 Total under construction (s.f.) 67.3% Total preleased Office Insight Phoenix | Q1 2015 West Phoenix, 27.9% East Phoenix, 19.6% New development returning to pre-recessionary levels $0 $1 $2 $3 $4 $5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1 Millions Deliveries Under Construction Percent of overall market occupied by industry 24.9%
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Transcript of Office Insight-Q1 2015-Phoenix
Bifurcated market
The overall Phoenix office market currently stands 22.2 percent vacant, significantly lower than its recessionary high of 27.1 percent vacant back in 2010, but has a long was to go before it reaches its previous low of 11.2 percent in 2006. As the Valley becomes a much more active market, the divide between the West Valley and East Valley continues to grow. Tenants are choosing to locate along the Loop 101 corridor spanning from Chandler and Tempe in the south to Scottsdale in the North. This activity has brought vacancy in the east below 20 percent as opposed to the west side of Phoenix that continues to struggle with a 27.9 percent vacancy rate.
Total vacancy – Q1 2015
Source: JLL Research
Active development pipeline
Four submarkets boast vacancy rates below 15 percent in Phoenix: Tempe (10.5 percent), South Scottsdale (11.7 percent), South Tempe/Ahwatukee (14.4 percent), and Downtown (14.9 percent). Landlords are capitalizing on the strong demand and limited supply within these submarkets and developers are working to alleviate some of that imbalance by building new projects. The current level of construction in early 2015 has not been seen since the peak in 2008. Accelerating rents, steady demand, and positive economic indicators in Phoenix are reigniting confidence in developers.
Office developers returning in force
Source: JLL Research
Financial services driving Phoenix forward
Phoenix has experienced a much more diverse recovery since 2008, steadily adding a healthy balance of jobs in contrast to previous market cycles when the Valley would be flooded with construction employment. One specific industry that has been driving the local economy is the banking and finance sector, which has been the fastest growing industry in the Valley. The general metropolitan area lost over 300,000 jobs in the recession and has yet to exceed that number in early 2015, but financial services exceeded its employment peak back in 2013. The sector’s positive employment gains are translating into greater absorption of office space in some of the Valley’s premier submarkets.
Financial Services in Phoenix
Source: JLL Research
22.2%Total vacancy
279,629Q1 2015 net absorption (s.f.)
4.1%12-month rent growth
3,661,725Total under construction (s.f.)
67.3% Total preleased
Office Insight
Phoenix | Q1 2015
West Phoenix, 27.9%
East Phoenix, 19.6%
New development returning to pre-recessionary levels
$0
$1
$2
$3
$4
$5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1
Millions
Deliveries
Under Construction
Percent of overall market occupied by industry
24.9%
Current conditions – market and submarket Historical leasing activity
Source: JLL Research Source: JLL Research
Total net absorption (s.f.)
Source: JLL Research
Total vacancy rate
Source: JLL Research
Direct average asking rent ($ p.s.f.)
Source: JLL Research
3,036,611
600,192
-575,937-945,825
161,637420,058
1,717,074
974,378
2,261,354
279,629
-2,000,000
-1,000,000
0
1,000,000
2,000,000
3,000,000
4,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 2015
$25.06
$26.82 $26.34
$23.83
$21.72 $20.84
$20.25 $20.76$21.60 $21.80
$15.00
$17.00
$19.00
$21.00
$23.00
$25.00
$27.00
$29.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 2015
12.3%
16.1%
22.3%
25.6%27.1% 27.1%
25.3%24.3%
22.3% 22.2%
10.0%
15.0%
20.0%
25.0%
30.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 2015
PhoenixLandlord le
verage
Tenant leverage
Peaking market
Falling market
Bottoming market
Rising market
Suburbs
CBD
8,819,9678,056,973
8,571,780
7,045,005
1,075,128
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
2011 2012 2013 2014 Q1 2015
©2015 Jones Lang LaSalle IP, Inc. All rights reserved. For more information, contact: Matt Kolano | +1 602 282 6283 | [email protected] Cox | +1 602 282 6264 | [email protected]
