The Phoenix office market hasn't faltered yet. According to anew report from Colliers International, the officemarket completed its 33rd consecutive quarter of growthin the second quarter, despite the economic disruption cause by thepandemic. The market continued to see positive net absorption andthe vacancy rate remained below 15%. However, it could still be tooearly to see signs of the dislocation.

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"Colliers tracks absorption when a tenant moves in, not on thesign date. 2019 set this quarter to preform very well,"Phil Hernandez of Colliers International, tellsGlobeSt.com. "However, the next two quarters will look drasticallydifferent if one of two things do not happen; either the Cavassonbuilding delivers and Nationwide moves in, or we see large dealsclose in the next few weeks. There are a lot of large deals thathave been paused since March, hopefully the tenants are able tomove forward relatively soon."

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Like the national market, Phoenix also saw a jobs rebound in Maywith unemployment trends reversing. This was largely linked to thereopening of the market. "Unemployment revolved around the stateclosure in April, the jobs lost were primarily with leisure andhospitality," says Hernandez. "On May 15th, the state softly openedback up, not everyone got their jobs back, but there was a sharpincrease of employee returning to work. Metro Phoenix was gainingso many jobs in late 2019 and early 2020 that finance and insurancemaintained a positive year-over-year growth for month Januarythough June."

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Unsurprisingly, class-A office performance is outpacing class-Bperformance. "Companies looking for employees are finding that anemployee is more will to commit to a company depending on thequality of their office space," adds Hernandez. "This is not sayingthat all class-B buildings are far less attractive, but class-Abuildings have a desired appeal to them."

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While the market has continued to perform over the last fourmonths, Hernandez says that the outlook for the market is stillgray. "Companies are putting their space up for sublease at anincredible rate because they also do not know what is going tohappen with the market," says Hernandez. "Until there is a vaccineor society feels comfortable and zero returning to work, weanticipate more sublease space hitting the market as peoplecontinue working from home. But there is an upside to this; officespace layout will be reevaluated to ensure that all employees havesix-foot space between each employee. This will decrease thedensity and increase the amount of square footage a tenant willrequire."

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.