Urban core office space might be getting most of the attention, but under-the-radar deals are filling suburban office markets at a brisk clip in certain markets, such as metro Phoenix.
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Among the top 58 U.S. markets, the Phoenix market accounted for 8% of total suburban absorption nationwide in 2016, tied for second most with Los Angeles, according to new data from CBRE. Dallas-Fort Worth was first, with 13% of all suburban absorption. New Jersey and Austin each accounted for 4%.
That fits in with a pattern of suburban markets strengthening in comparison to downtowns, CBRE reports. While downtown markets are still outperforming the suburbs by some metrics, the gap in vacancy is shrinking in many markets across the country. In 2016, the overall suburban vacancy rate was 340 basis points more than the downtown vacancy rate, a significant improvement over the long-run average gap of 430 bps since 2000.
Among the 58 suburban markets tracked by CBRE, 50 markets recorded positive absorption in 2016, including 15 with more than 1M SF of absorption, including Phoenix with more than 3.1M SF last year.
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The recent health of Phoenix's suburbs, especially Class-A focused Scottsdale and the tech-focused Tempe, is a continuation of a long-standing trend.
“Unlike its peers, Phoenix’s suburban office market is unique in that it has historically outperformed Downtown,” said Kevin Calihan, a corporate office specialist with CBRE’s Phoenix office. “Low vacancy rates and inventory levels bode well for the market’s continued strength.”
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