Middle Market Digest: This Week in Southwest

The Phoenix market is continuing to grow with increasing investor interest. This week, the Phoenix market saw trades in all asset class and significant office lease expansions. While housing is the most active, the market is still struggling in other asset classes. Industrial and retail were flat or slowed in the third quarter, but office absorption was strong and is up for the year. Still, Southern California continues to lead the Southwest market in terms of activity, with office market activity dominating this week. Anaheim and San Diego had a major office campus trade and Los Angeles closed a major lease deal in Downtown Los Angeles. Here’s a look at this week’s trends, announcements and deals that you may have missed in Southern California, Utah, Arizona and Nevada.

BY THE NUMBERS

PHOENIX—The Phoenix office market reached 184,040 square feet of net absorption in the third quarter, a significant increase over last year. The activity pushed the vacancy rate down 190 basis points to 14.3%. There is no new office product in the pipeline, however, there are several repositioning projects, including , the 200,000 sq. ft. La Placita Village in downtown Tucson will be converted to mixed-use residential in the first half of 2018. In retail, the market had more than 50,000 square feet of negative net absorption as a result of major move outs in the Southwest and Central regions of the market. Vacancy increased only slightly to 7.2% and lease rates increased to $15.90 per foot. The industrial market also saw a rough quarter, with the vacancy rate up 40 basis points to 8.2%.  Lease rates increase 6% to $0.50 per foot.