office market snapshotpage 1 office graphs 10% 15% 20% 25% '06 '08 '10 '12 2q...
TRANSCRIPT
Arizona • Second Quarter • 2013
Office Market Snapshot
www.cassidyturley.com
ARIZONA OFFICE
Vacancy Rate
Net Absorption (In Thousands of SF)
Economic Indicators
Overall asking rental rates increased during the second quarter for the first time since 2007 to $20.39, a $0.56 increase from the first quarter 2013. Landlords are starting to increase asking rates and reduce concessions, in response to the nearly 1.8 million square feet of positive net absorption over the past 18 months. Rental rates are expected to increase in the near term but not at the pace experienced during the first quarter.
Despite lackluster net absorption of only 66,418 square feet in the second quarter, more robust occupancy gains are expected in the second half of 2013 and into early 2014. The Camelback Corridor was the largest gainer in terms of net absorption for the second consecutive quarter, recording an increase in occupancy of 146,612 square feet. The increase is due to Humana occupying 71,217 square feet at the newly renovated Anchor Centre East. Humana relocated to the Camelback Corridor from the Northwest Phoenix submarket and the North Phoenix/Desert Ridge submarket. Northwest Phoenix submarket posted the largest decline in occupancy, -137,641 square feet as Humana and several other tenants vacated space. Class A properties once again led the way in net absorption gaining 227,303 square feet, as Class B and C properties both posted declines in occupancy, losing -133,747 and -27,138 square feet respectively. The overall vacancy rate increased 10 basis points from the first quarter to 22.1 percent, due to Aetna occupying their new build-to-suit of 139,403 square feet and vacating their previous space of 116,858 square feet at Cotton Corporate Center in the Airport submarket.
At the end of the second quarter, only the Park Place Central building in the Chandler/Gilbert submarket was under construction, totaling 68,867 square feet. GoDaddy and General Motors announced build-to-suit projects during the second quarter, both expected to break ground during the third quarter. Expect more build-to-suit ground breakings and announcements in the second half of 2013.
Forecast
• Net absorption is expected to increase in the second half of 2013.
• Greater Phoenix average asking rents have hit bottom. Rental rate increases are expected to continue in high demand submarkets. Concessions will continue to slowly decline, especially in high demand submarkets and high quality functional buildings.
• Build-to-suit requirements have increased due to the lack of available large functional space and the challenging finance market for speculative construction. Most build-to-suit activity is expected to occur in the Southeast Valley. Expect to see construction activity begin to increase the second half of 2013 and the first half of 2014
Overall Metro Phoenix Rental Rates Increase for the First Time Since 2007
Market Tracker Vacancy22.1%*Arrows = Current Qtr Trend
Net Absorption 66,418 SF
Deliveries 139,403
Asking Rent$20.39 FS
2Q 13 2Q 12
Phx MSA Employment 1,896K 1,886K
Phx MSA Unemployment 6.2% 7.1%
U.S. Unemployment 7.6% 8.2%
U.S. CCI 74.9 65.3
Office Graphs
10%
15%
20%
25%
'06 '08 '10 '12 2Q '13
$16.50
$21.50
$26.50
$31.50
'06 '08 '10 '12 2Q '13
Class A ClassB
-1,0000
1,0002,0003,0004,0005,0006,000
'06 '08 '10 '12 2Q '13
Completions Net Absorption
Page 1
Office Graphs
10%
15%
20%
25%
'06 '08 '10 '12 2Q '13
$16.50
$21.50
$26.50
$31.50
'06 '08 '10 '12 2Q '13
Class A ClassB
-1,0000
1,0002,0003,0004,0005,0006,000
'06 '08 '10 '12 2Q '13
Completions Net Absorption
Page 1
Cassidy Turley Office Market SnapshotArizona • Second Quarter • 2013
TOTAL INVENTORY SUBLET DIRECT VACANCY 2Q NET YTD NET UNDER WEIGHTED AVG. BUILDINGS VACANT VACANT RATE ABSORPTION ABSORPTION CONSTRUCTION ASKING RENT
Submarket44th Street CorridorClass A 20 2,973,167 41,670 295,971 11.4% 21,189 17,222 $22.49Class B 40 2,687,342 4,982 433,738 16.4% (4,519) (39,360) $19.64Class C 7 434,519 - 15,989 3.7% - $14.70Airport Area - Class A 8 1,211,404 83,516 202,304 23.6% 39,059 36,973 $22.73Class B 72 5,816,425 14,433 947,867 17.5% (45,519) (52,018) $18.29Class C 5 196,407 - 34,900 17.8% (4,100) (19,100) $12.00Camelback Corridor - Class A 23 4,446,948 17,763 1,120,876 25.8% 124,409 276,359 $26.25Class B 52 2,920,576 9,228 699,673 24.1% 22,203 12,388 $20.10Class C 1 27,152 - 5,748 21.2% - $15.00Chandler/Gilbert - Class A 8 1,126,899 - 34,945 3.1% 688 688 68,867 $28.00Class B 37 2,862,800 - 812,495 29.0% 24,022 4,442 $21.05Class C 3 76,356 - 36,924 45.2% (488) (488) $20.03Deer Valley/Airport - Class A 16 2,826,350 - 264,696 9.4% 13,470 5,723 $20.18Class B 53 5,006,228 53,035 1,459,239 30.2% (83,471) (29,014) $20.54Class C 4 125,756 - 54,962 43.7% (3,541) (3,541) $16.86Downtown North - Class A 13 4,386,902 78,812 1,149,652 28.0% (3,815) (14,406) $21.23Class B 54 5,537,550 34,881 1,647,847 30.4% (6,868) (150,126) $18.12Class C 12 394,017 - 32,228 8.2% 5,420 (8,512) $13.99Downtown South - Class A 11 4,893,461 60,232 614,441 13.8% (26,133) (36,733) $27.38Class B 18 1,946,664 - 258,780 13.3% 47,442 43,942 $19.73Class C 9 373,344 - 163,257 43.7% 400 1,030 $14.79Glendale - Class A 2 213,579 - - - - -Class B 8 706,741 - 348,958 49.3% 6,549 11,266 $20.45Mesa Downtown - Class B 6 215,112 - 43,270 19.6% (1,369) (169) $16.29Class C 2 74,460 - 31,202 41.9% 2,398 2,398 $11.95Mesa East - Class A 2 166,264 - 41,895 25.2% 21,937 $23.00Class B 7 864,850 - 47,497 5.5% (5,582) (4,294) $13.35Class C 4 131,240 - 33,976 25.9% (2,178) (3,528) $12.46Midtown - Class B 30 1,322,175 17,266 189,084 15.6% 12,281 24,991 $17.07Class C 11 442,779 - 95,949 21.7% (5,490) (6,179) $11.46N Phoenix/Desert Ridge - Class A 14 1,650,439 - 371,395 22.5% 15,228 25,971 $22.72Class B 28 1,387,621 280 251,752 18.1% 34,035 50,194 $18.45Class C 4 111,087 - 13,913 12.5% 1,109 1,365 $15.89Northwest Phoenix - Class A 11 1,506,478 - 497,023 33.0% (58,205) (64,161) $20.38Class B 54 3,315,349 12,186 1,050,002 32.1% (81,838) (81,718) $16.86Class C 12 486,388 - 85,750 18.3% 2,402 3,869 $15.77Scottsdale Airpark - Class A 51 5,993,404 43,441 1,439,054 24.8% 31,479 (39,789) $24.00Class B 77 3,156,001 3,022 934,206 29.7% (49,966) (128,572) $20.55Class C 5 122,835 5,500 19,864 19.5% 1,810 (18,240) $12.00Scottsdale North - Class A 20 2,132,714 9,113 320,198 15.4% 41,703 (550) $22.94Class B 48 3,137,766 27,620 556,328 18.6% 12,004 29,909 $20.23Class C 1 23,854 - 2,325 9.7% - $14.44Scottsdale South - Class A 11 1,632,577 45,083 240,264 17.5% 1,318 (22,913) $23.25Class B 20 1,824,308 21,924 359,969 20.9% 17,043 12,492 $19.88Class C 2 87,210 - 24,276 27.8% 2,848 2,346 $17.34Squaw Peak Corridor - Class A 2 287,394 - 25,461 8.9% (940) (940) $21.00Class B 24 1,451,084 4,370 444,677 30.9% 7,545 9,128 $17.38Class C 1 45,254 - 6,485 14.3% 135 980 $19.75Sun City - Class A 1 80,849 - - - 6,900 6,900 Class B 19 833,957 - 203,702 24.6% (3,211) 13,962 $20.91Class C 1 29,998 - 4,572 15.2% (1,189) (1,469) $16.96Superstition Corridor - Class A 5 669,338 14,228 252,862 39.9% (12,888) (21,841) $21.39Class B 47 2,187,831 1,712 477,269 21.9% (3,224) (7,290) $16.31Class C 3 84,657 22,186 12,917 41.5% (22,359) (22,359) $14.64Tempe - Class A 9 1,647,638 4,712 188,890 11.9% (6,719) 8,729 $25.18Class B 31 1,513,646 - 216,386 14.3% 15,284 101,530 $16.40Class C 5 117,888 - 8,154 6.9% (35) 4,031 $13.02Tempe South/Chandler - Class A 5 701,819 - 37,538 5.3% 26,337 29,037 $24.73Class B 51 3,372,880 31,843 712,344 22.1% (28,191) 15,353 $19.36Class C 7 333,870 - 183,851 55.1% - $19.66West PhoenixClass A 3 316,409 - 239,231 75.6% 14,223 14,223 $21.25Class B 24 1,553,416 5,476 296,223 19.4% (18,397) (15,996) $16.09Class C 16 676,946 23,707 151,462 27.8% (4,280) 7,855 $9.15Total 1,150 96,880,372 692,221 20,746,706 22.1% 66,418 3,927 68,867 $20.39
Wils
on S
t
Turn
er R
d
Roo
ks R
d
Mill
er R
d
Ap
ache
Rd
Wat
son
Rd
Rai
nb
ow R
d
Dea
n R
d
Air
port
Rd
Tuth
ill R
d
Jack
rab
bit
Trl
Per
ryvi
lle R
d
Citr
us R
d
Patton Rd
Dixileta Dr
Lone Mountain Rd
Cot
ton
Ln
Sari
val R
d
Greenway Rd
Waddell Rd
Cactus Rd
Peoria Ave
Olive Ave
Northern Ave
Estr
ella
Pkw
y
Bu
llard
Ave
Litc
hfie
ld R
d
Dys
art
Rd
El M
irage
Rd
Avon
dal
e B
lvd
107t
h A
ve
99th
Ave
Bell Rd
Greenway Rd
Thunderbird Rd
Cactus Rd
Peoria Ave
Dunlap Ave
Northern Ave91
st A
ve
83rd
Av e
75th
Ave
67th
Ave
59th
Ave
Glendale Ave
Bethany Home Rd
43rd
Ave
35th
Ave
Camelback Rd
Thomas Rd
McDowell Rd
Indian School Rd
Van Buren St
Buckeye Rd
Lower Buckeye Rd
Broadway Rd
51st
Ave
43rd
Ave
35th
Ave
27th
Ave
19th
Ave
7th
Ave
Cen
tral
Ave
7th
St
16th
St
24th
St
Baseline Rd
Dobbins Rd32
nd S
t
Happy Valley Rd
Pinnacle Peak Rd
Deer Valley Rd
Cave
Cre
ek R
d40
th S
t
Tatu
m B
lvd
56th
St
64th
St
Scot
tsda
le R
d
Pim
a R
d
Hay
den
Rd
Lincoln DrMcDonald Dr
Chaparral Rd
7th
St
Cen
tral
Ave
7th
Ave
19th
Ave
32nd
St
16th
St
Indian School Rd
Thomas Rd
McDowell Rd
McKellips Rd
Kyr
ene
Rd
Ru
ral R
d
McC
linto
ck D
r
Guadalupe Rd
Elliot Rd
Warner Rd
Ray Rd
Williams Field Rd
Pecos Rd
Mes
a D
r
Stap
ley
Dr
Gilb
ert
Rd
Lind
say
Rd
Val V
ista
Dr
Gre
enfie
ld R
d
Southern Ave
Broadway Rd
McDowell Rd
McKellips Rd
Brown Rd
University Dr
Broadway Rd Cris
mon
Rd
Sign
al B
utte
Rd
Soss
aman
Rd
Rec
ker
Rd
Pow
er R
d
Joy Ranch Rd
Cloud Rd
Carefree Hwy
56th
St
64th
St
Scot
tsda
le R
d
Hay
den
Rd
Lone Mountain Rd
Dixileta Dr
Rio Verde Dr
128t
h S
t13
6th
St
Shea Blvd
Bell Rd
Union Hills Dr
Greenway Rd
Thunderbird Rd
Cactus Rd
Germann Rd
Queen Creek Rd
Ocotillo Rd
Chandler Heights Rd
Riggs Rd
Hunt Hwy
Dob
son
Rd
Alm
a S
choo
l Rd
McQ
uee
n R
d
Coo
per
Rd
Gilb
ert
Rd
Lind
say
Rd Va
l Vis
ta D
r
Gre
enfie
ld R
d
Hig
ley
Rd
Pow
er R
d
Soss
aman
Rd
Haw
es R
d
Rittenhouse Rd
Hunt Hwy
Baseline Rd40th
St
Bell Rd
Lake
Ple
asan
t R
d
51st
Ave
Chandler Blvd
Ray Rd
Haw
es R
d
24th
St
32nd
St
48th
St
University Dr
Pri
est
Dr
Sun Valley Pkwy
Pinnacle Peak Rd
259t
h A
ve
187t
h A
ve
163r
d A
ve
211t
h A
ve
Jomax Rd
§̈¦10 §̈¦10
§̈¦10
§̈¦10
§̈¦17
§̈¦17
§̈¦17
£¤60UV101
UV101
UV101
UV101
UV101
UV202
UV202
UV202UV202
UV202
UV87
UV87
UV51
UV74
UV303
UV303
UV303
UV347
UV85
£¤60
£¤60
UV801 £¤60£¤60
22
1814
4
8
5
13
21
10
2
15
16
12
16
7
19
3
20
11
17
9
¯
1 44th Street Corridor2 Airport Area3 Camelback Corridor4 Chandler/Gilbert5 Deer Valley/Airport6 Downtown North
7 Downtown South8 Glendale9 Mesa Downtown10 Mesa East11 Midtown12 Northwest Phoenix
13 North Phoenix/Desert Ridge14 Scottsdale Airpark15 Scottsdale North16 Scottsdale South17 Squaw Peak Corridor18 Sun City
19 Superstition Corridor20 Tempe21 Tempe South/Chandler22 West Phoenix
Cassidy Turley Office Market SnapshotArizona • Second Quarter • 2013
Inventory: Office inventory includes all multi-tenant and single tenant buildings at least 20,000 square feet. Government and medical buildings are not included.
Office Building Classifications: Class A properties are the most prestigious buildings competing for premier office users with rents above average for the area. Class B properties compete for a wide range of users with rents in the average range for the area. Class C buildings compete for tenants requiring functional space at rents below the area average. Vacancy and Availability: The vacancy rate is the amount of physically vacant space divided by the
inventory and includes direct and sublease vacant. The availability rate is the amount of space available for lease divided by the inventory.
Direct Vacant: This is the vacancy rate in space offered on the market directly by the landlord in single and multi-tenant buildings. This excludes vacant space offered for sublease and vacant space that is not offered on the market, for whatever reason.
Net Absorption: The net change in physically occupied space over a period of time.
Asking Rent: The dollar amount asked by landlords for available space expressed in dollars per square
foot per year in most parts of the country and dollars per square foot per month in areas of California and selected other markets. Office rents are reported full service (FS) where all costs of operation are paid for by the landlord up to a base year or expense stop.. The asking rent for each building in the market is weighted by the amount of available space in the building.
* Cassidy Turley Arizona statistics are audited quarterly and may result in revisions to previously reported quarterly and final year-end figures.
Office Terms And Definitions
**The competitive inventory has been reclassified and now includes owner-occupied buildings.
About Cassidy Turley Cassidy Turley is a leading commercial real estate services provider with more than 3,800 professionals in more than 60 offices nationwide. The company represents a wide range of clients—from small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm completed transactions valued at $22 billion in 2012, manages approximately 400 million square feet on behalf of institutional, corporate and private clients and supports more than 23,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. Cassidy Turley enhances its global service delivery outside North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley.com for more information about Cassidy Turley.
The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.
Copyright © 2013 Cassidy Turley. All rights reserved.
Luis Laura Research Analyst 602.468.8521 [email protected]
Bill Crowell Research Analyst 602.468.8529 [email protected]
Prepared by:Cassidy Turley 2375 E. Camelback Road, Suite 300 Phoenix, Arizona 85016 ph: 602.954.9000 fx: 602.468.8588 www.cassidyturley.com
Zach Aulick Vice President Research and Client Services 602.224.4464 [email protected]
Cassidy Turley Office Market SnapshotArizona • Second Quarter • 2013
TOTAL BLDGS
INVENTORY SUBLET VACANT
DIRECT VACANT
VACANCY RATE
2Q NET ABSORPTION
YTD NET ABSORPTION
UNDER CONSTRUCTION
AVERAGE ASKING RENT
SubmarketDowntown North 79 10,318,469 113,693 2,829,727 28.5% (5,263) (173,044) - $19.36
Downtown South 38 7,213,469 60,232 1,036,478 15.2% 21,709 8,239 - $24.46
CBD TOTAL 117 17,531,938 173,925 3,866,205 23.0% 16,446 (164,805) - $20.47
44th Street Corridor 67 6,095,028 46,652 745,698 13.0% 16,670 (22,138) - $20.93
Airport Area 85 7,224,236 97,949 1,185,071 17.8% (10,560) (34,145) - $18.93
Camelback Corridor 76 7,394,676 26,991 1,826,297 25.1% 146,612 288,747 - $23.91
Chandler/Gilbert 48 4,066,055 - 884,364 21.7% 24,222 4,642 68,867 $21.33
Deer Valley/Airport 73 7,958,334 53,035 1,778,897 23.0% (73,542) (26,832) - $20.39
Glendale 10 920,320 - 348,958 37.9% 6,549 11,266 - $20.45
Mesa Downtown 8 289,572 - 74,472 25.7% 1,029 2,229 - $14.53
Mesa East 13 1,162,354 - 123,368 10.6% (7,760) 14,115 - $16.06
Midtown 41 1,764,954 17,266 285,033 17.1% 6,791 18,812 - $15.40
N Phoenix/Desert Ridge 46 3,149,147 280 637,060 20.2% 50,372 77,530 - $20.94
Northwest Phoenix 77 5,308,215 12,186 1,632,775 31.0% (137,641) (142,010) - $18.21
Scottsdale Airpark 133 9,272,240 51,963 2,393,124 26.4% (16,677) (186,601) - $22.75
Scottsdale North 69 5,294,334 36,733 878,851 17.3% 53,707 29,359 - $21.17
Scottsdale South 33 3,544,095 67,007 624,509 19.5% 21,209 (8,075) - $21.51
Squaw Peak Corridor 27 1,783,732 4,370 476,623 27.0% 6,740 9,168 - $17.65
Sun City 21 944,804 - 208,274 22.0% 2,500 19,393 - $20.82
Superstition Corridor 55 2,941,826 38,126 743,048 26.6% (38,471) (51,490) - $18.00
Tempe 45 3,279,172 4,712 413,430 12.8% 8,530 114,290 - $19.48
Tempe South/Chandler 63 4,408,569 31,843 933,733 21.9% (1,854) 44,390 - $19.75
West Phoenix 43 2,546,771 29,183 686,916 28.1% (8,454) 6,082 - $16.73
TOTAL 1,150 96,880,372 692,221 20,746,706 22.1% 66,418 3,927 68,867 $20.39
Class
A 235 38,864,033 398,570 7,336,696 19.9% 227,303 242,429 68,867 $23.24
B 800 53,620,322 242,258 12,391,306 23.6% (133,747) (178,960) - $18.96
C 115 4,396,017 51,393 1,018,704 24.3% (27,138) (59,542) - $15.78
TOTAL 1,150 96,880,372 692,221 20,746,706 22.1% 66,418 3,927 68,867 $20.39