Phoenix’s business-friendly environment and diverse workforce continues to attract new tenants to the market and support existing companies as they develop short- and long-term strategies in the new pandemic economy, according to the new JLL Q3 Phoenix Office Insight Report.
According to the report, the Phoenix market posted just over 300,000 square feet of positive absorption during the third quarter and average asking rents increased from $28.05 in Q2 to $28.29 in Q3. At the same time, office activity remains slower than this time last year, with tenants seeing more landlord concessions and under-construction space holding steady at just under 1.9 million square feet, with no new projects breaking ground at this time.
“The figures we’re seeing are still a mix of deals that were signed pre-COVID and ones that were initiated and signed after the pandemic was well underway,” said JLL Managing Director and office specialist John Pierson. “I don’t expect activity to slow in Phoenix over the next 18 months, but I do think it will look different as tenants evaluate their corporate cultures and determine how that translates to the kind of real estate they’ll need in the long-term.”
According to Pierson, this includes an exercise to right-size space on the tenant side, balanced by landlords who are still bullish on the future of the Valley and are holding rates steady, expecting a continued inflow of new-to-market requirements.
“Whether they are coming to Phoenix or already here, the tenants I’m working with see this as an opportunity to evaluate what works for them and strike their own, personalized balance between in-office and work-from-home,” said Pierson. “As a broker, I’m here to supply companies with the right questions to ask so that we can establish that plan and then find the right space for them in the modern new workplace.”
Questions asked in this process reflect on a company’s culture, type of workers and need for in-person collaboration versus an ability to manage work via remote technology. As noted in the JLL report, this will include not only local companies but also an anticipated increase in out-of-state companies looking at Phoenix as a cost-effective, long-term real estate solution.
To access JLL research for Phoenix and across the U.S., visit the company’s research page at https://www.us.jll.com/en/trends-and-insights#research.