Skip to main content Skip to footer

Phoenix growth fuels strong medical office market

Net absorption strengthens and rental rates rise in metro area

PHOENIX, August 4, 2021 – The Greater Phoenix medical office building market is posting positive net absorption and rising rental rates as the city experiences nationally recognized population growth, according to a report released by Colliers in Arizona. 

Positive net absorption of medical office space during second quarter totaled 206,449 square feet, recovering from first quarter’s negative net absorption and bringing the year-to-date net absorption to 173,331 square feet. Arrowhead posted the largest net absorption for the quarter with 111,656 square feet, followed by Glendale at 44,699 square feet. Approximately 47 percent more deals were signed during second quarter, marking a rise of 49 percent year-over-year.

Vacancy declined as absorption picked up, falling 10 basis points during second quarter and 30 basis points year-over-year. The current vacancy rate is 13.1 percent across the metro area. The Airport Area submarket shows zero vacancy, while Downtown North posted the second lowest vacancy at 2.9 percent. Evaluating submarkets with more than a million square feet of medical office inventory, the Loop 303/Surprise submarket posted the largest decrease in year-over-year vacancy, falling 5.9 percent from mid-year 2020 to 10.2 percent.

Rental rates are on the rise in the medical office building market, elevating to an average rate of $23.05 per square foot at the mid-year point. This marks a 6.1 percent elevation in rents year-over-year. West-I-10 posted the largest year-over-year increase in rental rates, rising 12.2 percent to $24.67 per square foot. Land prices have risen for new developments, which will result in further rental rate increases.

Construction of new projects slowed to below the five-year average with only 231,000 square feet currently underway. The majority of current construction benefiting from population growth is situated in the Southeast and West Valley areas. Two new buildings were completed during second quarter, totaling 150,500 square feet. Banner Health completed 128,000 square feet in the Arrowhead submarket and San Tan Medical was completed in the Gateway Airport/Loop 202 submarket. 

Investment sales of medical office properties picked up during second quarter, with 15 transactions adding $66 million to the volume of sales completed this year. However, second quarter sales did not reach the historic price per square foot number that was reached in the first quarter. 

As a result, the 2021 year-to-date average price per square foot fell to $195.45. Only one property sold for more than $300 per square foot during the quarter. Most of the traded properties were classified as B and C buildings built before 2005. CAP rates also are declining from 2020 levels, dropping 90 basis points to an average of 6.7 percent.

Pro-business activity under the guidance of Governor Ducey helped Greater Phoenix maintain a strong economy, fueling rapid growth in the business sector and population immigration. An additional factor is the expansion of universities combined with their alignment with cutting edge research to set the stage for further growth in the medical office market. 

About Colliers
Colliers (NASDAQ, TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 67 countries, our more than 15,000 enterprising professionals work collaboratively to provide expert advice to real estate occupiers, owners and investors. For more than 25 years, our experienced leadership with significant insider ownership has delivered compound annual investment returns of almost 20% for shareholders. With annualized revenues of $3.0 billion ($3.3 billion including affiliates) and $40 billion of assets under management, we maximize the potential of property and accelerate the success of our clients and our people. Learn more at, Twitter @Colliers or LinkedIn.

Colliers in Arizona has served clients locally and globally for more than 40 years.

Related Experts

Phillip Hernandez

Director, Research | Arizona


As research manager for Colliers in Arizona, Phillip Hernandez is responsible for proactively developing and implementing research objectives and directing all research activity for the Arizona offices.

He provides leading-edge, thought-provoking research and analysis of market data for use in producing quarterly statistical market reports for each property discipline, as well as other ad hoc reports, research projects and presentations. Phillip analyzes and interprets real estate trends and maintains a database of economic indicators to provide forecasts.

Regardless of the property type or sector, Phillip believes each has a story to tell and that data provides the opportunity to redefine the narrative. With a background in location analytics, he is highly experienced in interpreting complex data sets. Using the latest technology, Phillip developed a system to blend analytics with a visually attractive approach to bring data to life.

Focusing on business development, he leverages market intelligence and insights for thought leadership content strategy in support of client engagement. His goal is to strategically align research and business development efforts and present research in an easily digestible format that promotes Colliers’ market share and revenue growth.

Colleagues describe Phillip as a brilliant storyteller and a passionate, creative and experienced professional.

Prior to joining Colliers, he served as a business analyst at CBRE, where he specialized in creating tailored research reports, as well as unique and interactive applications and dashboards that elevated the market position of assets. Phillip delivered weekly research updates, with relevant lease and sale comps, custom competitive sets and current market activity.

He provided complex market and trend analyses, monitored an extensive database of proprietary market data, and delivered custom quarterly and annual reports that were strategically positioned towards targeted clients. He also led weekly department research meetings to develop initiatives surrounding market trends, produce innovative industry solutions and analyze client-centric objectives.

Previously, Phillip was a GIS analyst for the central region of CBRE. Working exclusively with top-performing markets, he created unique models that illustrated custom real estate datasets through location analytics. Phillip produced high-quality geographic and demographic maps, and investigated multiple approaches to storytelling through map and market analytics.

View expert

Casey Koziol

Sales Assistant


Casey Koziol is a sales assistant for Colliers in Arizona, specializing in landlord and tenant representation for the sale and leasing of office and industrial properties.

He prioritizes his clients’ best interests to ensure their requirements are fully considered and met, from initial steps through final transaction negotiations. Casey works diligently to attract qualified tenants and buyers to his clients’ properties.

As a lifelong resident of Arizona, Casey’s in-depth knowledge of the MSA enables him to identify sites that deliver the greatest benefit to a client’s day-to-day operations. His financial acumen ensures clients’ return on investment meets their expectations.

Leveraging his research expertise, Casey tracks and monitors market conditions, trends and tenants-in-the-market to guide clients towards informed real estate decisions that support their business.

As a participant in Colliers’ unique and intense broker training initiative, Casey pairs with various senior brokerage teams for three-month periods. This affords him the opportunity to work across property types with experienced professionals, while also generating business and building client relationships.

Clients and colleagues describe Casey as an ambitious and results-oriented professional, who strives for service excellence. His integrity, collaborative approach, effective communications and creative problem-solving make him a valued partner to his clients and team.

Casey joined Colliers in 2019, as a research analyst, delivering in-depth analysis of market conditions and trends. He compiled market statistics across all property disciplines, including industrial, office, retail, healthcare, multifamily and land. In support of sales, leasing and business development, Casey created compelling client-facing presentations, illustrating and interpreting real estate and economic trends.

Casey’s background includes working with landlord and tenant clients, primarily in the industrial and education sectors.

Prior to joining Colliers, Casey served as a real estate sales and acquisitions intern at Tucson Realty & Trust Company, where he specialized in identifying potential buyers and sellers for commercial properties in the Tucson metropolitan area. Accomplishments included locating a buyer for an industrial storage property in south Tucson and facilitating a 1031 exchange on behalf of a client.

Casey was also a marketing analyst intern for Keyser Commercial Real Estate in Scottsdale. He supported business development efforts through researching properties on CoStar for existing and potential clients for the tenant-focused firm.

His interests and activities include international travel, professional and collegiate sports, open water diving (scuba certified) and a variety of adventure challenges. He is semi-fluent in written and spoken Spanish, after spending a semester in Spain.

View expert