PHOENIX MARKET REPORT - GRAND 2 - Tempe , AZ - LPC Desert West
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GRAND 2 - Tempe , AZ Q1 2022 | OFFICE PHOENIX MARKET REPORT
CONTENTS
MARKET FUNDAMENTALS 02
LEASING 05
SALES ACTIVITY 07
CONSTRUCTION ACTIVITY 09
FIRST QUARTER DATA 11
ABOUT US: DESERT WEST REGION 12
DOORDASH - Tempe, AZ
PROMENADE - Scottsdale, AZ MARKET FUNDAMENTALS LINCOLN PROPERTY COMPANY | Q1 PHOENIX OFFICE | 2
FAST SPECULATIVE
DEVELOPMENT RETURNS
The Grove and 100 Mill
RENTAL RATES CLIMB
Asking rental rates have
grown by 2.05% YOY.
FACTS
are over 90% pre-leased.
LEASING ACTIVITY INVESTMENT SALES
INCREASES CARRY ON
51% of the space Investment sales consider-
under construction is pre- ation totaled nearly $900
leased. million in Q1.
LINCOLN PROPERTY COMPANY | Q1 PHOENIX OFFICE | 3
Q1 2021 Q1 2022
17.32% 17.79% 0.5%
VACANCY VACANCY
$27.68 $28.25 2.1%
LEASE RATES LEASE RATES
1.75M 1.27M -27.5%
COMPARISON
SF UNDER SF UNDER
HISTORICAL
CONSTRUCTION CONSTRUCTION
906K 94.5K -89.6%
SF DELIVERED YTD SF DELIVERED YTD
-361K -192K 46.5%
NET NET
ABSORPTION YTD ABSORPTION YTD
LINCOLN PROPERTY COMPANY | Q1 PHOENIX OFFICE | 4
3131 CAMELBACK - Phoenix, AZ LEASING FUNDAMENTALS LINCOLN PROPERTY COMPANY | Q1 PHOENIX OFFICE | 5
Despite another quarter posting negative net absorption and static PHOENIX ASKING RATES
vacancy in the Phoenix metro, the outlook for office product in 2022 is
optimistic as leasing velocity improves, rental rates climb, and investor $28.50 $28.25
activity returns. There is still uncertainty regarding the future of office, with $28.12 $28.13 $27.99
$28.00 $27.84
an evident shift in workplace culture seen throughout the world. Many $27.79 $27.68
employers are opting to use a flexible work schedule, having employees $27.37
$27.50
only come into the office a few days per week. Despite the uncertainty,
there is one trend that continues: an unmistakable flight-to-quality seen $27.00
by investors and tenants alike.
$26.50
Total vacancy increased marginally in Q1, primarily due to both
$26.00
Farmers Insurance and AAA placing large blocks of vacant space into
the market. Insurance companies now account for nearly 25% of the total $25.50
sublease availability in metro Phoenix. Class A office space is credited for
the majority of leasing activity with over 50% of transactions in the $25.00
quarter. Carvana had the biggest footprint of the quarter, signing two $24.50
deals totaling over 350k square feet. Phoenix remains one of the top 20' Q2 20' Q3 20' Q4 21' Q1 21' Q2 21' Q3 21' Q4 22' Q1
markets in the country for job growth and we expect leasing activity to
continue to improve throughout the year, with the technology sector
leading the charge. PHOENIX VACANCY
NOTABLE LEASES 120,000,000 20.00%
1. Carvana 105,000,000
18.00%
~ Building: 4025 S Riverpoint Pkwy 16.00%
90,000,000
~ Square Feet: 267,962 14.00%
~ Submarket: Airport Area 75,000,000
12.00%
2. Carvana 60,000,000 10.00%
~ Building: 1415 W 3rd Street 45,000,000
8.00%
~ Square Feet: 82,257 6.00%
~ Submarket: Tempe 30,000,000
4.00%
15,000,000
3. Alliance Bank of Arizona 2.00%
~ Building: CityScape 0 0.00%
~ Square Feet: 45,996 20' Q2 20' Q3 20' Q4 21' Q1 21' Q2 21' Q3 21' Q4 22' Q1
~ Submarket: Downtown Phoenix Total Existing SF Total Available SF Vacancy %
LINCOLN PROPERTY COMPANY | Q1 PHOENIX OFFICE | 6
Grand 1 - Tempe, AZ SALES ACTIVITY LINCOLN PROPERTY COMPANY | Q1 PHOENIX OFFICE | 7
The first quarter of the 2022 had multiple considerable office investment NET ABSORPTION
sales, as pace ramped up significantly in the month of March. The large
increase of investor activity in the last three quarters is a true indicator of
100,000
confidence in the Phoenix office market. Industrial and multi-family have
dominated investor activity for the last few years, but investors are now
reengaging in top-quality office product to place their capital. The 20' Q3 20' Q4 21' Q1 21' Q2 21' Q3 21' Q4 22' Q1
0
largest office transaction of the quarter materialized in March with the 20' Q2
sale of the four Esplanade buildings for $385 million. 85% leased at time of
sale, this market-staple project with the iconic address of 24th and -100,000
Camelback consists of nearly a million square feet of Class A office space
with countless amenities both in the building and within walking distance -200,000
at the Biltmore Fashion Park. New to market investors, Monarch
Alternative Capital & Tourmaline Capital Partners, purchased the project
for $396.83 per square foot. -300,000
The Phoenix economy continues to be one of the best-performing -400,000
markets for job growth in the country. According to the US Bureau of
Labor Statistics, the Phoenix metro had an unemployment rate of 2.4% at
the end of March. In comparison, the state average was at 3.3% and the -500,000
national average, 3.6%. Phoenix remains one of the most attractive metro Net Absorption Average
areas in the country and investors remain bullish due to the city’s growth
and affordability. With strong economic fundamentals, Phoenix is well
positioned to recapture interest from out-of-state corporations and large
users.
TOP SALES
1. Project: Esplanade I, II, III & IV 2. Project: The Johnathan & The Alexander 3. Project: Woodside Health Medical Office (Portfolio)
~ Seller: LBA Realty & Clarion Partners ~ Seller: George Oliver Companies ~ Seller: Woodside Health
~ Buyer: Monarch Alternative Capital & ~ Buyer: Asana Partners ~ Buyer: Altera Development
Tourmaline Capital Partners ~ Square Feet: 210,710 ~ Square Feet: 283,828
~ Square Feet: 970,194 ~ Sale Price: $86,500,000 / $410.24 PSF ~ Sale Price: $75,000,000 / $264.24 PSF
~ Sale Price: $385,000,000 / $396.83 PSF ~ Submarket: Chandler ~ Submarket: Portfolio Sale
~ Submarket: Camelback Corridor
LINCOLN PROPERTY COMPANY | Q1 PHOENIX OFFICE | 8GRAND 2 - Tempe, AZ CONSTRUCTION ACTIVITY LINCOLN PROPERTY COMPANY | Q1 PHOENIX OFFICE | 9
Leasing activity continues to move in a positive direction. Out of the 1.3 PHOENIX DELIVERIES
million square feet of office under construction, 51% of the space is
pre-leased. Two speculative developments, 100 Mill in Tempe and The 1,000,000
Grove on 44th Street, are asserting their presence in the market with 900,000
over 90% of the buildings leased already. This was the first quarter in over
800,000
a decade with no new office deliveries, but construction has started to
pick up again. Construction has started on Phase I of Rio Yards, another 700,000
speculative development that will deliver 150,000 square feet of Class A 600,000
office product to Tempe in early 2023.
500,000
400,000
Lincoln Property Company is pleased to present the first phase of Union, a
four-story Class-A office building with 240,000 SF available for lease. 300,000
Delivered in the first quarter of 2021, the building is primely located near 200,000
the intersection of the Loop 101 & 202 between Tempe Marketplace and
100,000
the Mesa Riverview Shopping Center. At full build-out, the project will total
1.35 million SF and provide a new employment centerpiece at the 0
20' Q2 20' Q3 20' Q4 21' Q1 21' Q2 21' Q3 21' Q4 22' Q1
confluence of Scottsdale, Tempe and Mesa.
Deliveries Average
UNDER CONSTRUCTION
PHOENIX CONSTRUCTION ACTIVITY
1. Building: One Hundred Mill 4. Building: The Beam on Farmer
~ Developer: Hines ~ Developer: Mortenson
~ Submarket: Tempe ~ Submarket: Tempe
22' Q1
~ Square Feet: 286,990 ~ Square Feet: 183,526
~ Delivery: Q2 2022 ~ Delivery: Q2 2022
2. Scottsdale Entrada 21' Q4
~ Developer: DPC Companies
~ Submarket: Scottsdale South
~ Square Feet: 248,006 21' Q3
~ Delivery: Q2 2022
3. Building: The Grove 21' Q2
~ Developer: RED Development
~ Submarket: Camelback Corridor
~ Square Feet: 263,766 500,000 1,000,000 1,500,000 2,000,000
~ Delivery: Q3 2022 LINCOLN PROPERTY COMPANY | Q1 PHOENIX OFFICE | 10FIRST QUARTER DATA
DATA SOURCE TOTAL EXISTING SF TOTAL AVAILABLE SF VACANCY % NET ABSORPTION Q1
CBRE 95,583,087 19,175,348 20.06% -415,957
Colliers 164,082,057 23,106,895 14.08% -143,579
Cushman & Wakefield 90,481,483 17,190,259 19.00% -324,819
JLL 98,377,442 18,101,449 18.40% 168,621
NGKF 96,149,065 18,556,770 19.30% -348,189
Kidder Mathews 166,511,963 26,475,402 15.90% -93,678
LPC Averages 118,530,850 20,434,354 17.79% -192,934
DATA SOURCE NET ABSORPTION YTD UNDER CONSTRUCTION COMPLETED Q1 ASKING RATES
CBRE -415,957 977,974 280,000 $28.97
Colliers -143,579 1,819,849 0 $28.12
Cushman & Wakefield -324,819 1,091,420 0 $27.35
JLL 168,621 923,926 287,000 $28.73
NGKF -348,189 1,242,970 0 $27.64
Kidder Mathews -93,678 1,572,087 0 $28.68
LPC Averages -192,934 1,271,371 94,500 $28.25
LINCOLN PROPERTY COMPANY | Q1 PHOENIX OFFICE | 11NATIONAL PRESENCE.
LOCAL FOCUS.
Lincoln Property Company’s Desert West Region
includes Arizona, Nevada, Utah and New Mexico.
Based in Phoenix and operating since 2001, we offer
a comprehensive suite of value-added services for
our clients ranging from development, construction
management, property management, leasing and
asset management services for the office, industrial and
retail sectors. Our expertise across a broad spectrum of
real estate services enables us to design and execute
projects for our clients and partners in support of their
business and financial objectives.
Desert West Region.
LINCOLN PROPERTY COMPANY | Q1 PHOENIX OFFICE | 12For additional information,
PLEASE
CONTACT:
David R. Krumwiede
Senior Executive Vice President
602.912.8877
dkrumwiede@lpc.com
John H. Orsak
Vice President
602.682.8309
jorsak@lpc.com
Nick E. Nudo
Director of Real Estate
602.912.8888
nnudo@lpc.com
‘18|’19|’20 NAIOP
Justin M. Arnitz Owner/Developer of the Year
Associate Director of Real Estate
602.912.8876
jarnitz@lpc.com
Joe J. Pierson
Real Estate Associate
602.682.8308
GRAND CAMPUS - Tempe, AZ
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