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Avison Young releases its First Quarter 2023 Office Market Report for Phoenix

Avison Young releases its First Quarter 2023 Office Market Report for Phoenix April 12, 2023
Phoenix, AZ – Avison Young recently released its First Quarter 2023 Phoenix Office Market Report. 

While rental rates fell slightly for both class B and C buildings, average rents increased for class A space as demand for trophy office properties continues. Well-located, quality assets with amenities are being sought out more than ever as businesses look to attract and retain employees and encourage a return to the office. 

Overall, the office vacancy rate ended in Q1 at 22.8% as sublease space has been elevated and companies shrink their footprint in an effort to right-size. 

“The headwinds of the economy, higher interest rates, and a sluggish return to the office have hit office properties harder than other commercial property types across the nation. While Phoenix has been more resilient than a number of major markets and still has strong fundamentals, the increased amount of available sublease space has led to a 10-year vacancy high and a very low investment sales volume. Tenants are looking for smaller spaces and continuing a flight to quality, which has led some office owners to look at repurposing their properties,” said David Genovese, Avison Young Principal and Managing Director – Phoenix.

Office sales volume was down significantly last quarter with $110.7 million transacted throughout. Over the past decade, Phoenix has averaged a quarterly transaction volume of $435.5 million. Though sales volume is down for office, it should be noted that more owners are opting to repurpose their properties into more stable product types rather than sell to preserve property values.

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