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Market Report

Phoenix Office Market Report

2024 Investment Forecast

While Class B/C Rent Growth Elicits Investment,
It May Potentially Motivate Tenants to Upgrade

Rent changes could benefit Class A landscape. Continued demand from consumer-facing services, primarily in the form of back-office and call center support for financial, law and health care firms, led Phoenix to post the fourth-fastest Class B/C average asking rent growth in the nation through most of 2023. The Class A metric, meanwhile, ticked down after the segment’s vacant stock jumped 10 percent in the year. Entering 2024, the difference between these two metrics was at an all-time low of $5.40 per square foot on average, which may motivate some tenants to upgrade following lease expirations. A sub-4 percent unemployment rate to start the year may also highlight the recruitment value of amenity-rich assets, boding well for Class A spaces with nearby restaurants and retail. On this note, location and age should remain differentiators separating the most successful top-tier offices. North Tempe and Scottsdale Airpark account for a large portion of this year’s new move-ins, due to their abundance of newer mixed-use space and nearby entertainment. The Central Corridor, in contrast, is home to generally older and more traditional Class A buildings that have had a harder time attracting tenants.
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