The Phoenix Office of JLL has released its Q3 2024 Phoenix Office Market Dynamics report, noting a continued stabilization in the local office sector with vacancy rates decreasing, the sublease market showing positive trends and rental rates on the rebound.
The total metro Phoenix office market vacancy rate decreased by 10 basis points during the third quarter to 25.1%. This marks the first decline in local vacancy rates in almost five years.
Per the JLL report, vacancy and availability rates in the metro Phoenix office sublease market were also on the decline, falling by 80 basis points year-to-date to 5.0%. Part of this improvement reflected the transition of unleased sublease space reverting to direct vacancies as leases have expired. Despite this transition, the direct vacancy rate remained relatively stable at 20.1%, showing minimal quarter-over-quarter change.
A slowdown in moveouts and lease expirations mitigated occupancy losses in the third quarter, while pre-built spaces and high-quality subleases attracted ongoing interest. Demand also remained strong for amenity-rich spaces, with positive absorption trends in key submarkets.
This added support to a third quarter rebound in direct asking rents, which have now increased 3.1% year-to-date after a moderate decline earlier this year.
“We’re seeing Phoenix’s positive office market trends play out in real-time,” said Trevor Pratt, Managing Director, JLL. “An increase in touring and leasing activity, a more earnest push for return-to-office, and a reduction in sublease space – particularly in popular locations like the Camelback Corridor, Scottsdale, Tempe and other areas of the southeast Valley – has increased the comfort level for tenants looking to lease and owners who are improving their buildings to better compete with plug-and-play, amenitized Class A product. The consensus is that a momentum is building, and it has staying power.”
In Phoenix, JLL is a market leader employing more than 550 of the region’s most recognized industry experts offering office, industrial, retail, healthcare and data center brokerage, tenant representation, facility and investment management, capital markets, multifamily investments and development services, and related services within the real estate leasing, investment and management process. In 2023, the Phoenix team completed more than 120 million square feet in lease and sale transactions, with a total transaction volume of more than $1.1 billion, and directed $67 million in project management across 63 projects.
