Phoenix’s workplace development exercise continued to stay gradual, with builders beginning development on solely three initiatives, in line with CommercialEdge information. On par with nationwide developments in development prices, The Valley posted one of many smallest pipelines amongst peer markets.
Equally, solely 17 workplace belongings traded within the first two months of 2025, leading to one of many lowest greenback volumes amongst main U.S. markets. With the properties that ranked within the prime 5 offers comprising lower than 100,000 sq. toes, the common sale value thus far ranked beneath the nationwide common of $177 per sq. foot.
New provide crashes, development exercise slows
For the reason that begin of 2025, development begins in Phoenix comprised 170,521 sq. toes throughout three properties, whereas deliveries marked a 100% year-over-year decline as no different challenge got here on-line, CommercialEdge information reveals.
As of February, the metro had 826,426 sq. toes of house below improvement, accounting for 0.6 p.c of present inventory—beneath the nationwide determine of 0.7 p.c and on par with Orlando. Amongst related markets, Austin led the rating with 3.7 p.c, adopted by San Diego (3.2 p.c) and Nashville (2.6 p.c). When including initiatives in planning levels to the determine, Phoenix’s share reached 2.2 p.c, nonetheless beneath the nationwide common of two.6 p.c however surpassing Houston and Atlanta’s 1.9 p.c.
The Valley’s under-construction pipeline remained one of many smallest amongst high-volume secondary markets. The chief on this class was Austin, with 3.6 million sq. toes underway, whereas San Diego adopted, with 3.2 million sq. toes.
The checklist of prime workplace initiatives underway in Phoenix stays unchanged since our earlier market replace: the 199,222-square-foot constructing often known as Gilbert Spectrum’s Constructing 3 remains to be the biggest improvement within the metro. Owned by SunCap Property Group, the challenge is estimated to succeed in completion by the top of April.
The second-largest challenge below development is HonorHealth Medical Campus at Peoria, the 100,000-square-foot medical workplace facility owned by HonorHealth. The challenge topped out in April 2024 and is predicted to succeed in completion this yr. The identical developer has the third largest improvement in Phoenix.
Dubbed HonorHealth Medical Campus at Pima Heart, the 97,538-square-foot medical workplace challenge broke floor in October 2024 and is predicted to succeed in completion by the top of July this yr. Developed in partnership with Boldt Healthcare Actual Property, the property might be utilized by HonorHealth as a whole-patient care facility.
Phoenix workplace belongings commerce at reasonably priced costs
Yr-to-date by way of February, Phoenix’s transaction quantity reached $42 million, with 17 properties totaling 817,702 sq. toes altering palms. The deal quantity decreased by 8.1 p.c on a year-over-year foundation. Throughout Solar Belt markets the Bay Space led with $467 million in gross sales. Different markets that adopted embrace Houston ($261 million) and Dallas ($205 million), whereas Detroit ($17 million) and Charlotte ($12 million) had been on the opposite aspect of the spectrum.
Notable transactions in Phoenix that closed because the begin of the yr embrace properties beneath 100,000 sq. toes. One instance is Baseline Companions’ $23.5 million acquisition of The Discussion board at Gilbert Ranch. Bought by Expansive, the 92,440-square-foot workplace constructing is at 1530 E. Williams Subject Highway in Gilbert, Ariz.
One other vital sale was Sportex Security’s $16.8 million buy of 1415 W. third St. in Tempe, Ariz. The 82,266-square-foot flex workplace property got here on-line in 1981 and was bought by The RMR Group.
As of February, the common sale value within the metro stood at $124 per sq. foot—beneath the nationwide common of $177 per sq. foot. Workplace offers had been pricier amongst related markets, such because the Bay Space ($208 per sq. foot), Houston ($139 per sq. foot) and Dallas ($131 per sq. foot). The most costly Solar Belt metro was San Diego, the place belongings swapped at $662 per sq. foot, whereas Nashville posted probably the most reasonably priced common value at $64 per sq. foot.
As of February, coworking house in Phoenix totaled 2.9 million sq. toes throughout 155 places, greater than in San Diego (2.4 million sq. toes) and Austin (1.8 million sq. toes). The metro’s shared house provide noticed a greater than double improve when in comparison with the 1.2 million sq. toes recorded throughout the identical interval of 2024.
The share of flex workplace house as proportion of whole leasable workplace house stood at 2 p.c in Phoenix—on par with the nationwide common and surpassing a number of related markets, resembling Dallas, Austin and Houston, the place the share reached 1.8 p.c.
The highest 5 flex workplace suppliers with the biggest footprints within the metro remained unchanged since our earlier protection. Regus led with 557,012 sq. toes of shared house, adopted by Industrious (259,344 sq. toes), Expansive (207,095 sq. toes) and Areas (171,460 sq. toes).
Regular emptiness amongst Solar Belt metros
As of February, The Valley’s emptiness price reached 18.7 p.c—beneath the nationwide price of 19.7 p.c.
Metros with excessive vacancies included Austin (27.4 p.c), Dallas (23.8 p.c), Houston (23.1 p.c) and San Diego (20.8 p.c), whereas town with the bottom determine was Charlotte, with a 15.5 p.c price.
Leases signed within the metro thus far embrace RED Improvement’s 24,722-square-foot deal at its CityScape, a 27-story workplace tower within the metropolis’s central enterprise district. The tenant is non-profit group Go to Phoenix, that may relocate and set up its new headquarters on the 1.2 million-square-foot property.
Workplace-to-residential makeovers in Phoenix
Whereas the workplace sector continues to wrestle with rising emptiness charges and property values drop, office-to-residential conversion current as a well-liked alternative for house owners and traders looking for to repurpose underutilized workplace buildings.
CommercialEdge’s Conversion Feasibility Index launched final yr as a software meant to judge a constructing’s potential for residential repurposing, in addition to to focus on which markets pose sturdy candidates. Utilizing property-level scores, the CFI rating contains three tiers, with belongings posting Tier I scores being probably the most appropriate candidates for such adaptive reuse initiatives.
In Phoenix there are solely 5 workplace buildings within the Tier I class, with a CFI rating between 90 and 100. Totaling 504,627 sq. toes, these buildings got here on-line between 1929 and 1977 and are situated within the metropolis’s central enterprise district. In the meantime, there have been 169 buildings encompassing 16.5 million sq. toes within the Tier II class, with scores between 75 and 89 factors.
One instance is Caliber Cos.’ makeover of Canyon Company Heart, a two-building workplace campus that might be transformed into 400 residential items. The previous workplace advanced included 312,000 sq. toes of house and is situated in an Alternative Zone. The developer plans to begin the two-phase development this yr and expects to ship the $40 million challenge by 2027.
