Phoenix Office Absorption Hits 14-Year Record

Renters aren’t the only people moving to Phoenix for a better deal. Companies are also flocking to the pro-business city and driving significant growth in the office market. According to a recent report from JLL, the office market is heading toward a 14-year absorption record in Phoenix. This year, office absorption is 3.07 million square feet, surpassing the city’s previous three-quarter record in 2005 of 2.9 million square feet of absorption.

“Big corporate users, finance and insurance are our top growth industries. We are seeing a lot of new tech growth in our market, thanks to California,” John Pierson managing director at JLL, tells GlobeSt.com. “The market is evolving, and some of us who have been in the market for 20 years are seeing the market change from a seven-year cycle to 24-consecutive quarters of positive absorption. We just had our three best quarters ever, and we are still tracking users that are north of 25,000 feet that are active in the market. That is in addition to what we just recorded, which was at record levels.”

Phoenix is experiencing economic, job and population growth that has served as the catalyst for activity across the market and asset classes; however, while existing companies are expanding, Phoenix is also benefitting from California’s loss. “We are also seeing inward migration from outward migration from California,” says Pierson. “California users are faced with higher taxes and public utility issues, and all of the states surrounding California have benefitted tremendously. They have a long-term problem, and while they get it resolved, we are benefitting.”

The result has been office growth as well as diversification. “Phoenix is no longer the construction and hospitality market, which was subject to economic fluctuations. We are now very well balanced by technology, financial industries, education and healthcare markets,” says Pierson. “We are very much diversified, so if we were to have a major correction, we don’t feel like we are going to get hit like we have in the past. We feel more insulated from that.”

This is the new normal for Phoenix, and Pierson expects more companies and even corporate headquarters to plant roots in Phoenix. “The more the population grows and evolves, the more the corporate headquarters we will start to see grow,” he says. “We are already seeing some of that, and we think that will be our next phase of expansion in the office market.”