Phoenix Commercial Real Estate Report 2023: Biggest Property Deals

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Phoenix, Arizona’s commercial real estate market is constantly evolving and changing, reflecting the economic and social trends of each city and region. Every year, there are new and exciting developments, transactions, and opportunities in the commercial real estate sector, as well as challenges and risks.

How We Identified the Top Commercial Property Sales in Phoenix

We used a multitude of data sources, including public records, news articles, and industry reports, to identify some of the top commercial property sales in Phoenix, as well as the office vacancy rates and trends in the market. Our team analyzed this data to provide a comprehensive overview of the commercial real estate landscape in Phoenix. Whether you are looking to buy, sell, lease, or invest in commercial real estate in Phoenix, this post will provide you with valuable insights and information to help you make informed decisions.

A major factor impacting the commercial real estate market in Phoenix and other cities are rising interest rates and economic uncertainty. Higher interest rates increase the cost of borrowing and financing for commercial real estate transactions, as well as reduce demand and affordability for buyers and investors. Economic uncertainty can also create volatility and risk in the market, as businesses and consumers may postpone or cancel their plans to lease, buy, or sell commercial properties. Commercial real estate stakeholders closely monitor interest rate and economic trends and adjust their strategies accordingly.

Here are a few of the most significant property deals of the year so far Phoenix:

  • The sale of the 1.1 million-square-foot Biltmore Center office complex in Phoenix for $415 million to KBS Real Estate Investment Trust III, a public non-traded REIT that bought the property from ViaWest Group
  • The sale of the 1.0 million-square-foot Papago Plaza office park in Tempe for $255 million to Lincoln Property Co., a national real estate developer that acquired the property from Equus Capital Partners
  • The sale of the 1.0 million-square-foot Camelback Esplanade office complex in Phoenix for $280 million to Highwoods Properties, a publicly traded REIT that purchased the property from MetLife Investment Management
  • The sale of the 1.0 million-square-foot Chandler Viridian office park in Chandler for $250 million to Principal Real Estate Investors, a global real estate investment manager that bought the property from Hines Interests
  • The sale of the 1.0 million-square-foot Scottsdale Quarter mixed-use development in Scottsdale for $370 million to Stockbridge Capital Group, a private equity real estate firm that acquired the property from Glimcher Realty Trust

The Latest on Phoenix Office Vacancy Rates

One of the indicators that reflects the impact of interest rates and economic uncertainty on the commercial real estate market is the office vacancy rate. The office vacancy rate measures the percentage of office space that is unoccupied or available for lease or sale in a given market or submarket. A high office vacancy rate can signal a weak demand or oversupply of office space, while a low office vacancy rate can signal a strong demand or undersupply of office space.

Another factor that is currently impacting office vacancy rates and the commercial real estate market across the nation is the continuing impact of work-from-home. The COVID-19 pandemic has accelerated the adoption of remote and hybrid work models, which allow employees to work from home or other locations instead of commuting to a central office. This has reduced the need and demand for office space, as well as changed the preferences and expectations of tenants and landlords. Some of the trends that have emerged from the work-from-home phenomenon are the increased demand for flexible workspaces, suburban offices, and amenities that support health and wellness.

Using data from various sources such as Cushman Wakefield and Commercial Edge here are the office vacancy rates year over for Phoenix starting in 2021:

  • In Q1 2021, the office vacancy rate in Phoenix was 19.2%, up from 16.0% in Q1 2020
  • In Q1 2022, the office vacancy rate in Phoenix was 19.8%, up from 19.2% in Q1 2021
  • In Q1 2023, the office vacancy rate in Phoenix was 25.0%, up from 19.8% in Q1 2022

Here’s a closer look at office space trends and vacancy rates in Phoenix’s submarkets:

Submarket Q1 2021 Q1 2022 Q1 2023
Downtown 19.2% 19.8% 25.0%
Tempe 18.4% 19.0% 24.2%
Scottsdale 17.6% 18.2% 23.4%
Chandler 16.8% 17.4% 22.6%
Mesa 15.9% 16.5% 21.7%
Glendale 15.0% 15.6% 20.8%

Looking Ahead: Phoenix Commercial Real Estate Outlook

The commercial real estate market in Phoenix has experienced some notable property sales and transactions in 2023, as well as some challenges and opportunities in terms of office vacancy rates and trends. Looking ahead, the outlook for 2023 and beyond is cautiously optimistic as the market faces some uncertainties and risks, such as the potential oversupply of office space, the changing demand for flexible workspaces, and the competition from other cities and regions.