According to the Q4 2017 Phoenix Office Market report from JLL, a leading professional services firm that specializes in real estate and investment management, Tempe has enjoyed more than 27 percent of all office absorption since the start of Phoenix’s four-year positive absorption streak, in which the Valley has recorded annual absorption gains totaling 2.0 million square feet or more.
This is the longest streak of its kind in the Phoenix office market, and, although the pace of growth is slowing, JLL data indicates that the Valley has not yet peaked. The volume of tenants still in the market — currently encompassing 62 active requirements representing 3.5 million square feet of space — suggest there is still room to grow, even if users must get creative with the options currently available.
The recent Marina Heights sale is expected to further boost investor interest in Class A trophy assets. The five-building, 2.0-million-square-foot Marina Heights project, which serves as a regional hub for State Farm, was sold in December 2017 for $928 million, making it the largest office sale in Arizona history and positioning Tempe as the most in-demand office submarket this cycle.
In a Phoenix office market already experiencing its fourth consecutive year of annual absorption gains, landmark deals such as this are expected to have an additional top-down impact. “The State Farm campus and downtown Tempe area are a nice welcome to Phoenix as you fly into Sky Harbor International Airport,” says JLL Senior Managing Director Dennis Desmond. “The fact that State Farm chose to build this campus off Tempe Town Lake solidifies the area as a central business district of Tempe and further solidifies that market as an economic force in Metro Phoenix.”
“The sale is an equally strong testament to the robust investment interest that Metro Phoenix is seeing from institutional buyers,” adds JLL Senior Vice President Tivon Moffitt. “We expect this sale will spur even more interest from institutional buyers, which will create more opportunities for Arizona-based capital firms to invest in significant trophy assets valley-wide, as was the case with State Farm.”