Phoenix, AZ – Avison Young recently released its Third Quarter 2022 Phoenix Office Market Report. At 23% vacancy, which is up from previous quarters, average asking rents increased for the third consecutive quarter, rising from $29.70 per square foot (psf) in Q2 to $29.98 psf in Q3. Tempe, Scottsdale Airpark, and the Camelback Corridor saw the highest average rents, with all three submarkets recording an average rental rate above $35 psf.

Net absorption totaled -963,252 sf in Q3, as Tempe and Sky Harbor experienced a significant rise in total vacant space. The Camelback Corridor, Midtown, Downtown, and Central Phoenix submarkets were the four submarkets that recorded a net gain in absorption.

“While the office sector is still trying to find its way in the post-pandemic sluggish return to office environment, Phoenix has emerged as a tale of two cities. On one end, we have a flight to quality and office users are paying new highs for office rents for new construction and high-end amenities. On the other end, we have companies downsizing or giving up space completely, which is driving vacancy higher. While this is expected to linger in the short-term, the population growth and strong fundamentals in Phoenix should level us out sooner than other areas of the U.S.,” said David Genovese, Avison Young Principal and Managing Director – Phoenix.

There are currently 13 different office projects under construction across the greater Phoenix region, totaling 1,243,548 sf of rentable space. Phoenix also saw its first notable office delivery of 2022 in Q3, as The Beam on Farmer at 433 S Farmer Ave in Tempe, AZ was delivered in September. The Beam on Farmer is a five-story class A office building that includes 183,526 sf of rentable building area. 
Total investment sales came in at just over $500 million in Q3, with the largest transaction coming from the $66.35 million sale of the Camelback Collective building at 2801 E Camelback. The average transaction price for office buildings was $218.51 psf in Q3.