Metro Phoenix Office Rentals On Track To Top Pre-Recession Levels
The Valley is on track to lease more than 3 million square feet of office space this year. Commercial real estate firm Jones Lang LaSalle (JLL) says it it would be the highest level in a decade.
JLL says metro Phoenix ranked third in the nation for leasing office space during the first half of this year behind Silicon Valley and Chicago.
The firm’s managing director in Phoenix, Karsten Peterson, says it’s currently tracking 80 potential tenants.
“It’s over six million square feet of tenants that are looking at options in the market whether they’re relocations, downsizing, expansion, new tenants to the market, it’s just activity, but that’s a lot of activity,” he said.
Peterson says they’re looking at a combination of filling existing space, rehabbing old buildings and building new ones. They won’t fill all land here, he says, because some are exploring multiple markets.
While new structures are being built, Peterson says there isn’t as much speculative product as before the Great Recession. Speculative buildings are essentially built with no tenants lined up, a kind of ‘build it and they will come’ philosophy.
“I think the banks are a little wiser now and a little more careful following traditional banking underwriting rather than rolling the dice a little more,” he said. “It’s better because we’re not seeing a spike of buildings get thrown on the market which can cause an oversupply and that leads to buildings going back to lenders and developments going under.”
The average asking rent for Class A buildings, which are generally the newest structures with quality amenities in highly desirable locations, is $27.78 per square foot while the average for Class B buildings is $21.51.