The Phoenix office market slowed a bit last year, but this year has regained momentum. Marketwide vacancy in the third quarter was 15.9%, the lowest it has been since 2008, Kidder Mathews reports.
Leasing activity was nearly 2.5M SF in Q3, pointing to high levels of demand for office space spurred by a strong local economy. Currently metro Phoenix is enjoying an unemployment rate of 4.3%.
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Two especially hot submarkets in the third quarter were Tempe and Chandler. According to Kidder Mathews data, Tempe saw more than 313K SF of leasing activity in Q3 (and 564K SF year-to-date), while Chandler saw more than 259K SF (and 528K SF year-to-date), more than any other Phoenix submarket.
Developers expect the momentum to continue in the East Valley (including both Chandler and Tempe) and are going ahead with major projects. In September, Houston-based Hines broke ground on the Offices at Chandler Viridian, a 250K SF office building.
Soon afterward, the architectural and engineering firm Stantec inked a 55K SF lease to locate its Southwest regional office at the property. It was one of the largest East Valley leases in the third quarter.
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"Breaking ground on the Offices at Chandler Viridian is implementing the vision of our mixed-use environment,” Hines Managing Director and Arizona Leader Chris Anderson said. “The groundbreaking represents investment in this high-profile location near the Chandler Fashion Center and Price Road Corridor."
The Offices at Chandler Viridian is part of the Chandler Viridian master plan development, a 25-acre mixed-use project that also includes a Cambria Hotel & Suites, Broadstone Fashion Center apartments, retail offerings at Chandler Viridian Primegate and a pedestrian promenade to the Chandler Fashion Center mall.
Construction of the office property will be completed in late 2018. CBRE's Jerry Roberts and Patrick Boyle are leading the office leasing and represented Hines in the lease with Stantec. Keith Lammersen and Brian Connolly with JLL represented Stantec.
Find out more about the Phoenix office market at Bisnow's Phoenix State of the Market on Thursday at One Arizona Center. Anderson will be a speaker at the event.
