Axios Phoenix
July 25, 2024
1 big thing: Office space conundrum
There's a tale of two office markets unfolding in the Valley: Nearly a quarter of our office space sits vacant, and yet we don't have enough high-end buildings to meet employer demand.
The big picture: The pandemic seems to have permanently changed the way many Americans work, and companies don't need as much space as they once did.
Yes, but: The businesses that have returned to in-person work often want luxury headquarter-like buildings with amenities that make leaving the house worthwhile.
- Just in the past few months, PulteGroup Inc. and WillScot Mobile Mini announced they would relocate their Phoenix offices to recently completed buildings in Scottsdale, underscoring the demand for new offices, CBRE vice president Charlie von Arentschildt told Axios.
Zoom in: Phoenix is not building enough of that type of "trophy" office space, von Arentschildt said.
- There is currently about 290,000 square feet under construction, the lowest level since 2012.
- Von Arentschildt said he predicts the Valley will see at least one quarter next year during which there is no active office construction, and that has never happened in the modern era.
Context: Von Arentschildt said developers are holding off because they're unsure they'd be able to lease the buildings at the sky-high prices they'd have to charge.
- Constructing and financing these projects in today's inflated economy would require rents 30% to 40% higher than current top-of-market rates to pencil out, he said.
The intrigue: Von Arentschildt noted he's also seeing significant investment in the "bottom third of the market" office buildings — but mostly because these older, often single-story buildings are easy to demolish or repurpose.
Between the lines: It's the middle-of-the-road inventory — buildings worth more than just the land they're built on but not nice enough to appeal to the current market demand — that's driving up the overall office vacancy rate.
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3. Chart du jour: We want pools
Houses for sale with swimming pools are flooding the market nationally — and they're an especially popular amenity in the Valley's housing market.
By the numbers: The share of metro Phoenix home listings offering a pool rose from 33% in 2017 to 56% in the first half of this year, per Realtor.com data shared with Axios.
Zoom in: New pool construction was particularly popular during the pandemic, when families found themselves stuck at home.
Yes, but: Inflation has largely chilled the pool building market since then.
- New pool construction could be down as much as 20% from last year, swimming pool supplies distributor Pool Corporation reported in late June, pointing to "cautious consumer spending on big-ticket items."
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5. 😎 Your weekend, planned
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