Vacancy rates trended lower for fifth consecutive year in 2015
The chart below presents statistical data in the fourth quarter of 2015 for Class A, Class B and Class C office space in Metro Phoenix related to total inventory, vacancy, vacancy rates, net absorption, and average rental rates. Note that the Class A category had the lowest vacancy rate of the three building types coming in at 15.4%. Economists, developers and investors were delighted to learn that the overall vacancy rate in the Greater Phoenix office market ended 2015 at 17.2% down 90 basis points from 18.1% on December 31, 2014.
2015 Greater Phoenix office market golden nuggets
- Net absorption peaked in the fourth quarter of 2015 bringing the total for the year to approximately 3.5 million square feet making it the strongest single year of office absorption since 2006.
- Because tenant demand is on the rise, construction of new space is accelerating at a rapid pace. Developers currently have nearly 3 million square feet of new space under construction.
- Class A asking rents increased 6.6% in 2015 to $26.56 per square foot after gaining 5.3% in 2014.
- Vacancy rates in Class A building throughout Metro Phoenix declined in 2015 from 17.5% to 15.4%.
- With employment growth rates projected to grow in Metro Phoenix during 2016, tenant demand for office space will cause further declines in vacancy rates.
- Sales attributable to office buildings totaled about $3 billion in 2015 reflecting an impressive growth of 50% compared to 2014.
In summary, the future of the office market sector in Metro Phoenix looks bright and optimistic in the coming year.
Gary Ringel, CGREA
The primary source for information in this article is the Greater Phoenix/Office 4Q 2015 Research & Forecast Report published by Colliers International.