Phoenix ranks among the top North American tech markets for office leasing activity this year, registering gains in both office rents and tech jobs,, according to CBRE’s annual Tech-30 report.
Phoenix proved to be resilient even though it posted negative net absorption, a proxy for office demand, from last year’s third quarter to this year’s second quarter. Net absorption measures the amount of space newly leased against the amount newly vacated in a given timeframe. Nearly 13% of office leases are from tech companies in Phoenix.
Among the leading tech submarkets in each Tech-30 market, Tempe ranks nationally among the Top 10 submarkets for net absorption from Q2 2023 to Q2 2024. The premier tech submarket is located near Arizona State University and other major tech companies. Its features typically include higher rents, lower vacancies, and higher-quality office space than in its cities.
“Tempe’s office market continues to solidify itself as a tech hub, reflecting its strategic location near Arizona State, a supportive business environment and a talented workforce,” said Tim Kempton, associate at CBRE. “The university is driven by innovation, and you have seen recently its commitment to being a leader in artificial intelligence, which can drive more capital and companies to the market.”
Other notable figures for Phoenix in the report:
- Tech companies accounted for 38.5% of the $162.5 million in venture capital funding secured by Phoenix companies in the first half of this year.
- Phoenix’s office market registered 1% rent growth from Q2 2023 to Q2 2024.
- Phoenix notched a 0.8 growth rate for tech jobs from 2022 to 2023, the 10th largest rate among Tech-30 markets.
CBRE’s Tech-30 report, now in its 13th year, measures the tech industry’s impact on office demand and rents in the 30 leading tech markets in the U.S. and Canada, as well as select submarkets.
In the U.S., the tech industry increased its share of office leasing activity to 18% in the first three quarters of this year, boosted in part by the growth of the artificial intelligence industry, according to CBRE’s annual Tech-30 report.
Tech notched a 3.8-percentage point gain so far this year from its 14.2% share of U.S. office leasing for all of 2023. The industry’s share so far this year exceeds that of the Finance & Insurance industry (16.5%) and the Professional & Business Services industry (15.7%). Tech had trailed both industries in 2022 and the first half of 2023 before reclaiming the lead in last year’s third quarter. It now has held its lead in five consecutive quarters.
Read the full report here.
