Commercial real estate in Scottsdale is still influenced by the economy, social factors and population trends. Customer service job demand continues to push large absorption in the office space market. There has been an increase in demand for office space in the submarkets. Scottsdale Airpark and Scottsdale South has seen a large increase of demand for commercial office space and sublease office space.
Class A office space is in high demand and has seen nearly twice as much recent absorption as Class B or Class C. Also, the majority of new construction in the city is going to be Class A commercial office space. Class A offices are averaging a price of $25 per square foot while Class B and Class C are $20 PSF and $15 PSF, respectively.
The Metro Phoenix office market has been experiencing an uptick in recent demand. In 2013 vacancy rate was 21% and one year later we saw the fourth quarter of 2014’s vacancy rate at a healthy 19.1%. This increase in demand for office space in phoenix has lead to an increase in rent prices from landlords. On average rent has increased $1.00 per square foot, and looks to be trending upward. There is a large amount of new office buildings being built, currently 2.5 million square feet, this is the largest amount of offices space being built in Phoenix since the 2008 depression. The majority of this growth and all of the construction of new commercial office buildings is being driven by the suburban office markets. Although average price per square foot is the same vs the central business district. there is a 5% difference in vacancy rate. also, all of the construction of new office stock takes place in Tempe North, Scottsdale Airpark, Price Corridor, Mesa, and Chandler/Gilbert.
Phoenix’s economy grew from farming, spurred by king cotton, into manufacturing and is now holding some of the largest job growth in the country. Today, Real estate, Financial services, Manufacturing, Healthcare and Retail are the largest contributors to the city’s GDP. Office support jobs and Sales are the two largest employment categories in Phoenix at close to 20% of the workforce. Larger companies such as Avnet, PetSmart, Honeywell Aerospace and American Express have made a home in Phoenix. There has also been a surge of California technology companies coming to the city to employ large amounts of customer service representatives. Paypal was one of the first and most recently San Francisco startup Zenefits just leased enough space to hold 1,500 employees. With a growing demand for US customer service, Phoenix's office market will continue to grow to support these employees.
Phoenix first started as a farm in the Salt River Valley, and was declared a town one year later in 1868. One month later the first office was built, the United States Post Office with the founder of the farm, Jack Swilling, acting as postmaster. As the town grew through the 1870’s, it’s second office was built - a telegraph office - along with sixteen saloons and a handful of dance halls. By 1881, Phoenix became an official city with a population of 2,500. The railroad came shortly after that, and the population boomed, so the territory made Phoenix it’s capital. William Taft, in 1912, placed Phoenix as the capital of the brand new state. Eight years later, in 1920, over 1000 buildings we built in the city, including the first skyscraper, The Heard Building. After the advent of cheaper A/C in the 1950’s Phoenix begin to grow immensely. The construction that took place in 1959 alone is larger than any other 10 years combined. In the 1960’s, more building began to spring up including a larger stock of commercial office space. Phoenix City Square, Phoenix Financial Center, and the Phoenix Corporate Center were all built during this decade. The 1970’s brought a rapid growth to the downtown office market. in 1972, Arizona's largest office tower was constructed. Chase Tower stands at 40 stories, has three wings, and does not have any setbacks. Also, the US Bank Center, Wells Fargo Plaza, and Phoenix Symphony Hall were all constructed before the end of 1979.