Phoenix Job Growth Reaches 10-Year High

Phoenix job growth has hit a 10-year high. According to research from Colliers International, Phoenix employers added 79,700 new jobs in 2018, a year-over-year increase of 3.9%. That is the fastest rate of job growth in a decade, and surprised researchers, who estimated between 2.5% and 3% job growth. The new employment activity also bumped Phoenix up to the fourth position on a list of the top-36 major employment markets in the country for new job growth. In 2017, Phoenix ranked fifth on the same list.

“This was a strong showing, and it was the fastest growth that we have seen in the last decade,” Thomas M. Brophy, research director for Arizona at Colliers International, tells GlobeSt.com. “Our economic planners have done a really good job of getting out in front of companies and showing all of the things that we have to offer. Companies are really responding to that, and you are seeing that and it is driving a lot of the job growth. All of their hard work at each of the economic development levels has paid off, and they are pulling in some big job players.”

It is no surprise that the job growth also drove leasing activity in the market, bringing the vacancy rate down 200 basis points to 13.9%. The majority of the leasing activity took place in the second and third quarters, but waned at the yearend. “There were a lot of deals done in the second and third quarter, and the market was really frenetic,” says Brophy. “This year, we have already been working on some really big deals, and you will start seeing those absorption numbers pick back up. Everything that I am seeing on daily is that we are starting off the year well. As of right now, I don’t see any kind of slow down.” Despite the slowed leasing activity, absorption was 3.5 million square feet for the year.

The Gilbert, Chandler and Deer Valley markets have been the most active office markets, followed by the Airport Area. These markets have also seen substantial new development activity, as a result of the job growth and rent growth, but Brophy does not think that new construction activity is outpacing demand. “Demand is keeping pace with new supply. You will see certain submarkets are cooling a bit and construction is finally catching up to where demand is,” he says. “Are you going to keep seeing 3% to 5% rent increases? No, I don’t think so. I think the growth will temper into more sustainable growth.”

Looking ahead, Brophy says that job growth will continue to be strong in 2019, despite some national economic volatility. However, he is hesitant to say that jobs will grow at the same pace. “Some people are saying that storm clouds are rising, and others are saying everything is fine,” he says. “I am middle of the road. For the Phoenix market, I think it will be another great year. Will it be as strong in terms of job growth, I don’t know. If you had asked me at the beginning of the year, I would have guessed job growth would have been at 2.5% or 3%, but 3.9% was surprising.”