PHOENIX-Exclusive second quarter data from Jones Lang LaSalle indicates the local office market has bottomed. “We’ve seen the worst of it,” says Dennis Desmond, senior managing director in the firm’s local office. “That doesn’t mean the market will skyrocket back to 2006 and 2007 levels, but the message I am sharing with investors is that now is the time to buy so they can ride the market back up.”
Perhaps the most notable statistic prepared by Jones Lang LaSalle addresses rental rates, Desmond notes. He points out that during the second quarter, marketwide rental rates decreased just two cents, while class A rents actually got a bit of a “bump.” Currently, the average rental rate is $21.59.
Desmond notes that the Phoenix office market has historically seen double digit rental rate growth in recovering markets. “No one will underwrite that today, but everyone is counting on it,” he says. “I think it will happen again. In 2014, that growth could be spectacular.”
Today, however, the market still lacks a spark. “We’re not jumping up and down about absorption gains in 2011,” Desmond tells GlobeSt.com, acknowledging that the market during most recent recession the market “got as bad” as he’d ever seen it.
Second quarter data indicates that absorption was 190,691 square feet; year-to-date absorption was 323,272 square feet. Currently, the marketwide vacancy rate is 26.7%. “A healthy market for Phoenix has historically been 15% vacancy – that’s generally when you begin to see developers begin to come back for spec office,” Desmond explains. “We’ve got a ways to go for that to happen.”
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
