The Phoenix medical office market experienced a surge in absorption during the second quarter as coronavirus cases increased in the region. As a result, the asset class has managed to outperform expectations during the pandemic with 192,001 square feet of net absorption led by Maricopa Integrated Health Systems, according to research from Colliers International. The vacancy rate also fell slightly to 13.8%.

"Medical office added 244,956 square feet of inventory in the second quarter, with a vacancy rate of only 18%. This was the highest about of inventory delivery in the past 10 quarters," Phil Hernandez, regional manager at Colliers International, tells GlobeSt.com. "This was primarily led by Maricopa Integrated Health System taking occupancy of their recently completed 127,000 square foot building in Glendale."

In addition to the strong leasing activity, rental rates also increased .7% during the second quarter and 4.3% year-over-year. At the mid-year, asking rents averaged $21.58 in the market. "Phoenix continues to be a very tight market with vacancy remaining below 15%, this creates strong competition for available space. Adding new quality space to the inventory sets a higher competitive market increasing rents," says Hernandez.