CBRE has released its year-end 2012 market analysis of the Phoenix-area office, industrial and retail sectors. Report highlights include:
- The overall office market vacancy rate dropped by more than one and a half percentage points in 2012, decreasing to 23.9 percent from 25.5 percent at the end of 2011. Two years ago the vacancy rate was 26.2 percent.
- The average asking lease rate for existing office space continued to decline in 2012, ending the year at $20.35 per square foot. This was 40 cents lower than the average lease rate reported at the end of 2011. The fourth quarter also marked the 11th consecutive quarter in which asking lease rates declined, after a slight uptick in first quarter 2010.
- The Phoenix-area office market absorbed 2.0 million square feet of product in 2012, ranking it the fifth major metro area in the United States in terms of occupied space during the year. Houston, Boston, Seattle and Dallas/Ft. Worth were the only metro areas to rank higher.
- Property owners will continue to reposition their assets in 2013 in order to keep up with the abundant supply of available space on the market. Currently there is 20.5 million square feet of direct space for lease, along with 1.4 million square feet of sublease space.
- The industrial market absorbed 7.4 million square feet of product during 2012, which compares to 7.7 million square feet of absorption in 2011. In addition to large distribution and logistics companies, which dominated the market in 2011, in 2012 there was also healthy activity across the Valley among users in the 50,000- to 200,000-square-foot range.
- The overall industrial vacancy rate dropped 150 basis points in 2012 to end the year at 10.9 percent. Two years ago the rate was 14.7 percent, representing a 380 basis point drop during the period.
- An increase of 4 cents occurred in 2012, pushing the average asking industrial lease rate to $0.59 per square foot. In the past year, by product type, only distribution and general industrial product saw an increase in their average asking lease rates, while multi-tenant buildings remained the same and flex/back office properties experienced a decline in average asking rent.
- Strong demand from distribution and logistics companies has increased the amount of speculative construction. Three more speculative distribution buildings broke ground in the fourth quarter, bringing the total to five speculative distribution buildings under construction in the Southwest Valley. These buildings range in size from 313,600 square feet to 603,863 square feet.
- After three consecutive years of negative absorption, the Phoenix-area retail market recorded 1.9 million square feet of positive absorption in 2012. The retail market has now recorded positive absorption in five of the last six quarters.
- The overall retail vacancy rate made its first year-over-year decline in 2012, dropping 120 basis points to end the year at 11.0 percent.
- The average net asking lease rate for existing retail space at the end of 2012 was $15.83 per square foot, which is 13 cents lower than the average rate reported at the end of 2011. Yet, the current average asking lease rate is 30 cents higher than the rate reported at the end of 2010.
- The number of available big box spaces greater than 10,000 square feet was reduced by 40 in 2012, leaving 272 spaces and 7.1 million square feet available at the end of the year. At the end of 2011 there was 8.6 million square feet of big box space on the market.
Click here to access this quarter's MarketView reports.
If you would like commentary from a CBRE sales professional, please feel free to contact Katherine Haug at 602.735.1782.