Office Investment in Phoenix
Phoenix office faces the same remote work headwinds as every market, but it's playing out differently here. Trophy Class A in Scottsdale and Central Phoenix is holding up fine — those semiconductor companies and healthcare systems aren't downsizing. The problem is everything else. You've got 24% vacancy in older suburban flex space and nobody wants to talk about all the sublease inventory hitting the market. If you're selling office here, your story better address return-to-office trends and why your tenant base is different. Don't pretend the fundamentals aren't challenging.
Market Context
Cap Rate Range
6.5%-8.5% depending on class and location, with Class A trophy assets in Scottsdale trading at 6.5%-7.2% and suburban Class B/C pushing 8%+
Current Vacancy
18.2% direct vacancy with another 6% in sublease space, up from 11% pre-pandemic
Rent Trend
Class A asking rents down 8% from peak, more concessions and TI allowances, $28-35/SF full service in top buildings
Absorption
Negative 1.2M SF over past 12 months, though some tech and semiconductor tenants are expanding
Price Per Unit Trend
Price per SF down 15-20% from 2021 peaks, trading around $185-220/SF for quality assets
Transaction Volume
$340M in office sales YTD, down 45% from 2019 levels but institutional buyers still active on trophy assets
Submarket Analysis
Scottsdale
6.5%-7.2% capVacancy
14.8%
Avg Rent (1BR)
$32-38/SF FS
Flight to quality benefiting Class A towers, but older product struggling
OM Tip
Emphasize proximity to semiconductor companies and stable healthcare tenants
Central Phoenix/Midtown
7.0%-7.8% capVacancy
16.5%
Avg Rent (1BR)
$26-32/SF FS
State government and healthcare providing some stability
OM Tip
Highlight walkability and transit access for younger workforce attraction
Tempe
7.2%-8.1% capVacancy
19.3%
Avg Rent (1BR)
$24-29/SF FS
ASU proximity helps but lots of older inventory competing
OM Tip
Focus on university partnerships and research tenant base
Camelback Corridor
6.8%-7.5% capVacancy
15.2%
Avg Rent (1BR)
$29-35/SF FS
Established financial services tenants, limited new supply
OM Tip
Stress tenant credit quality and long-term lease profile
West Valley
8.0%-9.2% capVacancy
24.1%
Avg Rent (1BR)
$18-24/SF FS
Struggling with remote work adoption, limited value-add opportunities
OM Tip
Consider alternative use potential or very conservative underwriting
Performance by Vintage
0
2
1
0
2
1
3
0
4
s
5
6
c
7
o
8
n
9
s
10
t
11
r
12
u
13
c
14
t
15
i
16
o
17
n
18
19
h
20
o
21
l
22
d
23
s
24
25
u
26
p
27
28
b
29
e
30
s
31
t
32
33
w
34
i
35
t
36
h
37
38
m
39
o
40
d
41
e
42
r
43
n
44
45
H
46
V
47
A
48
C
49
50
a
51
n
52
d
53
54
f
55
l
56
o
57
o
58
r
59
60
p
61
l
62
a
63
t
64
e
65
s
66
67
t
68
h
69
a
70
t
71
72
w
73
o
74
r
75
k
76
77
f
78
o
79
r
80
81
t
82
o
83
d
84
a
85
y
86
'
87
s
88
89
t
90
e
91
n
92
a
93
n
94
t
95
s
96
.
97
98
2
99
0
100
0
101
0
102
s
103
104
v
105
i
106
n
107
t
108
a
109
g
110
e
111
112
i
113
s
114
115
t
116
h
117
e
118
119
s
120
w
121
e
122
e
123
t
124
125
s
126
p
127
o
128
t
129
130
f
131
o
132
r
133
134
v
135
a
136
l
137
u
138
e
139
-
140
a
141
d
142
d
143
144
i
145
f
146
147
y
148
o
149
u
150
151
c
152
a
153
n
154
155
s
156
t
157
o
158
m
159
a
160
c
161
h
162
163
t
164
h
165
e
166
167
T
168
I
169
170
c
171
o
172
s
173
t
174
s
175
.
176
177
1
178
9
179
9
180
0
181
s
182
183
s
184
u
185
b
186
u
187
r
188
b
189
a
190
n
191
192
f
193
l
194
e
195
x
196
197
i
198
s
199
200
b
201
a
202
s
203
i
204
c
205
a
206
l
207
l
208
y
209
210
o
211
b
212
s
213
o
214
l
215
e
216
t
217
e
218
219
u
220
n
221
l
222
e
223
s
224
s
225
226
y
227
o
228
u
229
'
230
r
231
e
232
233
s
234
e
235
l
236
l
237
i
238
n
239
g
240
241
t
242
o
243
244
a
245
n
246
247
o
248
w
249
n
250
e
251
r
252
-
253
u
254
s
255
e
256
r
257
.
258
259
1
260
9
261
8
262
0
263
s
264
265
h
266
i
267
g
268
h
269
-
270
r
271
i
272
s
273
e
274
s
275
276
i
277
n
278
279
g
280
o
281
o
282
d
283
284
l
285
o
286
c
287
a
288
t
289
i
290
o
291
n
292
s
293
294
c
295
a
296
n
297
298
w
299
o
300
r
301
k
302
303
i
304
f
305
306
t
307
h
308
e
309
310
b
311
o
312
n
313
e
314
s
315
316
a
317
r
318
e
319
320
s
321
o
322
l
323
i
324
d
325
,
326
327
b
328
u
329
t
330
331
e
332
x
333
p
334
e
335
c
336
t
337
338
m
339
a
340
j
341
o
342
r
343
344
c
345
a
346
p
347
e
348
x
349
.
What Your OM Needs to Address
Sublease Competition Analysis
Show how your property competes against the 6% sublease shadow inventory
Data to Include
Comparable sublease rates, tenant improvement allowances, and lease terms in 1-mile radius
Return-to-Office Positioning
Address how your tenant base differs from national remote work trends
Data to Include
Badge swipe data, tenant industry mix, parking utilization rates
Semiconductor Industry Exposure
Quantify direct or indirect exposure to TSMC and chip manufacturing boom
Data to Include
Tenant connections to semiconductor supply chain, engineering firms serving the industry
Lease Rollover Schedule
Detail upcoming expirations and renewal probability by tenant
Data to Include
WALT, tenant credit ratings, expansion/contraction history, current market rates vs in-place
Capital Requirements
Be realistic about TI costs and building system updates needed
Data to Include
Age of HVAC, elevator modernization needs, ADA compliance status, technology infrastructure
Alternative Use Potential
Address conversion possibilities for underperforming assets
Data to Include
Zoning flexibility, ceiling heights, parking ratios, residential conversion feasibility
Investment Outlook
Short Term
Continued pressure on pricing and occupancy through 2027. Buyers want 8%+ returns and proof that your tenants are actually coming back to the office. Flight to quality means Class A in Scottsdale holds up while everything else struggles.
Medium Term
Semiconductor build-out creates some office demand by 2028-2029 as engineering firms and suppliers expand. But overall absorption stays negative until we work through the sublease inventory. Value-add plays emerge for well-located older buildings.
Long Term
Phoenix population growth eventually supports office demand again by 2030+. The question is how much space per employee we actually need. Trophy assets in prime locations win, suburban commodity space probably doesn't come back.
Buyer Profile
Opportunistic funds targeting distressed sellers, local owner-users picking up deals, some institutional interest in Class A if the basis is right. Avoid leveraged buyers who can't handle vacancy or need immediate cash flow.
Marketing a office property in Phoenix?
DealDraft generates professional offering memorandums with market-specific data and property-type expertise built in.
Create Your OM