PHX Office Market Parties Like It's 2006!
Happy New Year, circa 2006! At least for the Phoenix office market.
Colliers International's Bob Mulhern and Pete O'Neil liken this year's fundamentals performance to the 2006 market: nearly 3M SF of absorption (881k SF alone this past quarter) with the vacancy rate finally dropping below 18%. The duo tells us rents are also rising: asking rents are $21.08/SF, a 7% gain since the cycle low, with Class-A space commanding some $24.50/SF.
And 2015 will probably not look like 2008, when the market started to collapse. “We are seeing that demand and net absorption will increase,” Pete says, adding he predicts an up to 12% pop in net absorption for 2015. Still, there are some concerns. While absorption was strong, so was the advent of new supply, which tallied 1M SF this year (including American Traffic Solutions 110k SF deal at Waypoint, shown), and with nearly 3M SF underway for next year. “For us, it's too bad that we have a lot of inventory that doesn't really meet up with the current RFP requirements for some of the most active user prospects,” Bob says. While rent growth may moderate as a result, the duo feel tenants will ultimately absorb that space unless something beyond anyone's control derails the economy.