Population Growth Pushes Phoenix Office Vacancies To Record Lows
Office vacancies hit record lows last year in the Phoenix metro area, a sign that population growth is not spreading out but piling up. Population growth and a growing labor pool are the main reasons, according to analysis by Kidder Mathews real estate, which collected data on increasing density in the workplace across the metro area. It showed leases for office space hit post-recession highs in 2019 in the Phoenix metro.
Mark Stapp focuses on real estate at A.S.U.'s W.P. Carey School of Business.
"Between now and 2030, we'll add another million people to this marketplace. The question is where do they go? And if you don't have easily expandable infrastructure, you've got to densify. And if you densify, you're going to be pushing prices up even further. It's a dilemma we're going to have to deal with as a place," he said, noting there's a decades-long pattern that is only going to continue.
He said the city's identity is evolving. "We really didn't come into existence until the late 1950s or '60s. So we're young and this is a change in our character. So, if you look at a little kid, you go 'I kind of get an idea of what they're going to look like when they grow up', but they change.
"And we've looked at metropolitan Phoenix, and we've kind of said 'I know what it's going to look like,' and we've said 'oh my gosh'. It's changing, and we are changing. And we have to mature, if we are going to continue to grow, because we simply can't accommodate the growth patterns we've had in the past," he said.
The Kidder Mathews report shows a record low vacancy rate in the 3rd quarter of last year, which led to a commercial leasing occupancy rates hitting a 10-year record high. Rental rates are highest through the East Valley followed by Midtown and east Phoenix.