Why The Phoenix Office Market Paused In Q3
The Phoenix office market took something of a pause in absorption and rent growth during the third quarter—but is it a short pause or the beginning of something else?
"The third quarter represents a bit of slowing in the Phoenix office market,” Colliers International in Greater Phoenix research director Pete O’Neil tells us. “Net absorption slowed a bit, and the pace of rent gains was more modest than in recent quarters, with job growth coming in lower than originally forecast. But the shift is certainly nothing dramatic or alarming."
In its most recent report on the Phoenix office market, Colliers International finds employment growth slowed to an annualized pace of 2.2% by the end of Q3, down from 3.5% a year ago. Even so, companies are still expanding, and, while absorption did slow a little, it was still a sizable 930k SF for the quarter.
Developers delivered about 470k SF of new office space to the market during the third quarter, according to Colliers. More than 1.8M SF is under construction, with about 1M SF of that being spec space. Average rent was up 5% year-over-year.
Pete remains optimistic about next year. "We still think there is sufficient momentum in the market to close 2016 on a solid note," he says. "We're still forecasting additional improvement in fundamentals in 2017, even though the third quarter was a bit of a slowdown."