Q2 2022 Office Market
The second quarter posted the highest level of net absorption since the start of the pandemic ending at 517,623 square feet, bringing the year-to-date total to 374,044 square feet. This healthy figure was fueled by the delivery of the 287,000-square-foot, Class A project in Tempe called 100 Mill, which delivered in April over 92 percent pre-leased. Direct vacancy decreased 70 basis points year-over-year, ending at 13.5 percent. Sublease availability continues to be relentless. An additional 740,568 square feet of sublease space hit the market during second quarter.
Key Takeaways
- Year-to-date sales volume reached 1.6 billion
- Rental rates increased 3.77 percent year-over-year to 28.62 per square foot
- 740,568 square feet of sublease space was added to the market
Despite the economic headwinds that are feared in the U.S. economy, the Phoenix MSA is experiencing an extremely healthy performance. As of May 2022, Phoenix metro had grown its labor force by 81,000 employees compared to May 2021, which represents a 3.7 percent increase. The second quarter posted the highest level of net absorption since the start of the pandemic. Investment sales volume during second quarter fell short from the first quarter, but saw significant improvement compared to second quarter 2021.
Outlook
The Phoenix economy is in a unique position to weather a downturn in the economy. The array of different industries that have moved into the market or existing companies that have expanded will help keep our area stabilized. The rapid growth and future pipeline of the labor force continues to remain robust.
