Phoenix workplace development continued on a sluggish word within the first half of 2024, with builders commencing new workplace tasks solely throughout 9 properties, in line with CommercialEdge information. Even when pipeline fundamentals have been low, Phoenix maintained its place as one of many nation’s leaders when it comes to workplace funding, its gross sales quantity inserting it among the many high three best-performing metros within the Solar Belt area and among the many high 5 on a nationwide stage.
In June, Phoenix had 689,611 sq. ft of workplace house underneath development throughout 13 properties, representing 0.4 % of the present stock—under the nationwide common of 1.4 %. Following final yr’s drop in development exercise, the metro’s pipeline remained the smallest throughout Solar Belt metros, with Dallas main with 6.5 million sq. ft, adopted by Austin (4.6 million sq. ft) and San Diego (3.8 million sq. ft).
Phoenix workplace development exercise nonetheless sluggish
Important workplace improvement tasks in Phoenix that have been underway embrace Gilbert Spectrum’s Constructing 3, a 119,222-square-foot Class A constructing anticipated to come back on-line by the tip of August this yr. The undertaking is a part of SunCap Property Group’s enlargement plan of Gilbert Spectrum campus, a improvement that can embrace 850,000 sq. ft of workplace, tech and flex industrial house.
One Scottsdale Medical can be underneath development, with supply scheduled for September this yr. Developed by Ryan Cos., the 101,136-square-foot medical workplace undertaking is a part of a 120-acre mixed-use campus dubbed One Scottsdale, that can embrace as much as 2.9 million sq. ft of workplace, retail, residential and hospitality house in Scottsdale, Ariz.
Building begins within the first half of 2024 totaled 479,161 sq. ft throughout 9 properties, whereas builders delivered seven workplace tasks, totaling 478,494 sq. ft of house.
Amongst important workplace properties that debuted within the metro year-to-date via June is Levine Investments’ 135,000-square-foot workplace and R&D constructing at 8240 S. River Parkway in Tempe, Ariz. The Class A constructing acquired a $44 million development mortgage and is a part of ASU Analysis Park—a enterprise, analysis and leisure campus operated by Arizona State College.
Second-best-performing Solar Belt metro
12 months-to-date via June, Phoenix’s transaction quantity reached $590 million, with 3.7 million sq. ft of workplace house altering arms throughout 44 properties, at common sale value of $165 per sq. foot. Phoenix’s workplace funding quantity was the second-largest amongst Solar Belt metros, after the Bay Space ($823 million) and adopted by Chicago ($542 million), Miami ($379 million) and Los Angeles ($273 million). On a nationwide stage, Phoenix ranked fourth, whereas Washington, D.C. led with $1.5 billion.
One of many priciest workplace offers recorded within the first six months of the yr is Columbus Properties’ $86.1 million acquisition of twenty fourth at Camelback I, a 302,209-square-foot constructing that modified arms in April. The eight-story Class A asset was bought by New York Life Actual Property Buyers.
One other important transaction was the $56.2 million sale of The Beam of Farmer, a 184,163-square-foot property in Tempe, Ariz. Cross Ocean Companions picked up the five-story Class A asset in Might, from vendor Mortenson.
Amongst peer markets, costs within the Valley have been larger than in Chicago ($91 per sq. foot), Philadelphia ($93 per sq. foot), Charlotte ($128 per sq. foot) and Dallas ($123 per sq. foot), however decrease than in Austin, the place workplace properties traded at a median sale value of $435 per sq. foot.
Phoenix workplace market posts regular emptiness
As of June, the metro’s workplace emptiness clocked in at 18.2 %, on par the nationwide fee of 18.1 %. Amongst comparable markets, Austin recorded the very best fee, at 22.9 %, adopted by Dallas (21.8 %), the Bay Space (20.8 %) and Chicago (19.1 %). The one peer market with decrease emptiness was San Diego, at 17.9 %.
Landlords are persevering with to replace their property. Vero Capital, via its workplace funding platform Vero A2R, began a $29 million redevelopment plan at INISIO at Kierland, a 410,000-square-foot, two-building workplace campus in Scottsdale, Ariz. Stream Realty Companions is overseeing leasing efforts on the redevelopment undertaking, anticipated to be accomplished within the fourth quarter of 2024.
Attracting flex workplace suppliers
As of June, the metro’s coworking sector included 1.2 million sq. ft of house, accounting for 1.7 % of the metro’s complete leasable workplace house, surpassing Charlotte (1.6 %), Philadelphia (1.4 %) and the Bay Space (1.2 %).
The flex workplace suppliers with the most important complete footprints in Phoenix have been Regus, with 549,382 sq. ft, Expansive, with 204,127 sq. ft, Industrious, with 201,712 sq. ft and Bellagio Govt Plaza, with 158,862 sq. ft. Since February, Regus, Industrious and Expansive have every expanded within the metro.
In April, Lucid Non-public Workplaces signed a deal to open its second coworking house within the metro by signing a 25,000-square-foot leasing settlement with landlord Artis REIT. The corporate’s new location will probably be at MAX at Kierland, a 260,000-square-foot workplace constructing in Scottsdale, Ariz., that can embrace greater than 100 personal workplaces, with opening scheduled for November this yr.