o˜ ce sales and leasing activity picks up to close 2017 · research & forecast report greater...

Research & Forecast Report

GREATER PHOENIX | OFFICE4Q 2017

O� ce Sales and Leasing Activity Picks Up to Close 2017Key Takeaways > Conditions in the Greater Phoenix offi ce market bounced back during the fourth quarter after a slowdown in the third quarter. Vacancy crept lower and net absorption gained momentum.

> Vacancy fell by 20 basis points during the fourth quarter, ending 2017 at 16.1 percent. The rate inched down 10 basis points from one year earlier. This marked the seventh consecutive year where offi ce vacancy has improved in Greater Phoenix.

> The average asking rent rose 3.3 percent in 2017, closing the fourth quarter at $24.40 per square foot. This marked a deceleration in the pace of rent growth; asking rents advanced by more than 5 percent per year in both 2015 and 2016.

> Sales activity picked up to close the year, highlighted by a record-setting sale of the State Farm regional headquarters at Marina Heights. The median price rose and cap rates compressed during the fourth quarter.

Greater Phoenix Offi ce Market

The Greater Phoenix offi ce market rebounded a bit during the fourth quarter following modest activity levels in the preceding three months. For the full year, net absorption totaled more than 1.7 million square feet, representing more than 1 percent of total inventory, but down from 2014-2016 levels, when the market averaged net absorption of more than 3 million square feet per year. While the absorption totals in 2017 lagged fi gures from recent years, there was suffi cient tenant activity to drive the vacancy rate lower for the seventh straight year.

One of the forces that has infl uenced the cooling pace of absorption has been the slowing rate of job growth. Employment growth averaged more than 50,000 net new jobs per year from 2012-2016, but the fi nal total for 2017 will likely be closer to 45,000 new positions. The slowdown is most dramatic in white-collar industries. Growth in offi ce-using employment sectors averaged

Summary Statistics Phoenix Market

Phoenix Class A

PhoenixClass B

Vacancy Rate 16.1% 14.8% 17.3%

Change from 4Q 2016 (bps) -10 -20 0

Net Absorption (thousands SF) 539 (61) 363

New Construction (thousands SF) 287 271 16

Under Construction (thousands SF) 1,696 1,463 232

Asking RentsPer Square Foot Per Year

$24.40 $28.70 $22.68

Change from 4Q 2016 3.3% 2.6% 3.3%

Market IndicatorsRelative to prior period

MarketQ4 2017

Market Q4 2016

Vacancy

Net Absorption

Construction

Rental Rate

Fourth Quarter Employment Trends*

Total Nonfarm Phoenix Metro

Offi ce-Using Phoenix Metro

Total Nonfarm United States

Offi ce-Using United States

*Source: Bureau of Labor Statistics

2 Greater Phoenix Research & Forecast Report | 4Q 2017 | Office | Colliers International2

more than 4 percent per year for the past five years, but will total less than 2 percent in 2017. The forecast for 2018 calls for continued job growth across several industries in Greater Phoenix.

Investment activity gained momentum during the fourth quarter and the improving investor sentiment was highlighted by the record-

setting sale of the Marina Heights project in Tempe. The five-building project was constructed for State Farm and came online beginning in 2015, with the final phase completing in early 2017. The project sold for more than $900 million, a record figure for a commercial real estate transaction in Greater Phoenix and one of the five largest office sales in the United States in 2017.

OFFICE SALE ACTIVITY

Property Address Submarket Sale Date Sale Price Size SF Sale Price SF Class

300-600 E Rio Salado Pky., Tempe Tempe 12/7 $928,000,000 2,024,139 $459 A

4150 & 4250 N Drinkwater Blvd., Scottsdale Scottsdale South 12/22 $68,933,000 226,112 $305 A

3333 E Camelback Rd., Phoenix Camelback Corridor 12/19 $21,250,000 96,248 $221 B

Recent Transactions in the Market

OFFICE LEASE ACTIVITY

Building Name/Address Submarket Lease Type Tenant Size SF Class

3201 E Elwood St., Phoenix Airport Area Sublease Texacle 77,132 B

4301 N Scottsdale Rd., Scottsdale Scottsdale South Expansion Indeed 52,641 B

2550 W Union Hills Dr., Phoenix Deer Valley Move In Waste Management 47,568 B

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Historical Absorption, Deliveries and Vacancy Rates

Greater Phoenix Office Market (continued)

UPDATE!

3 Greater Phoenix Research & Forecast Report | 4Q 2017 | Office | Colliers International

Vacancy: > Vacancy dipped to close 2017, falling 20 basis points in the fourth quarter to 16.1 percent. The local vacancy rate was steady throughout the year, remaining in a very tight band and never going above 16.5 percent or below 16 percent. Vacancy dipped 10 basis points from the year-end 2016 figure.

> After dipping to its lowest point since 2007 during the third quarter, vacancy in Class A buildings inched higher during the final three months of this year. Class A vacancy rose 60 basis points from the third quarter to the fourth quarter, ending 2017 at 14.8 percent.

> While vacancy has been declining across the Greater Phoenix market for the past several years, there are still areas in the market where the rate remains elevated. Vacancy is above 20 percent in the Downtown North, Airport Area and Northwest Phoenix submarkets.

> Forecast: Vacancy is forecast to dip by 50 basis points in 2018, falling to 15.6 percent. The rate has improved in each of the past seven years, although annual declines were more significant earlier in the recovery cycle.

Absorption and Leasing Activity: > Following a third quarter where net absorption was minimal, conditions strengthened during the fourth quarter. Net absorption totaled nearly 540,000 square feet in the fourth quarter, similar to figures recorded in late-2016 and during the first half of this year.

> After averaging more than 3 million square feet during the past three years, net absorption in 2017 was a tick over 1.7 million square feet. A decline in build-to-suit deliveries and a few prominent tenant move-outs were largely responsible for the drop-off in net absorption.

> Tenant demand in the Camelback Corridor submarket was positive for the sixth consecutive year in 2017. Net absorption totaled more than 262,000 square feet in the Camelback Corridor in 2017, and the amount of vacant space in the submarket has been cut in half since late-2011.

> Forecast: After slowing in 2017, net absorption is forecast to gain momentum in the year ahead. Net absorption should total approximately 2.5 million square feet in 2018.

Rental Rates: > Rents continued to push higher, although the pace of growth slowed in 2017. Asking rents posted a 3.3 percent increase in 2017, ending the year at $24.40 per square foot. Rents rose by more than 5 percent per year in both 2015 and 2016.

Vacancy by Property Class

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Class A Class B Class C

Asking Rent Trends

Vacancy Among Major Submarkets

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> Rents are increasing across all classes of the market, with the strongest gains being recorded in the lower tiers. Asking rents in Class C buildings spiked by more than 6 percent in 2017. The increase can be attributed to the tightening availability of space throughout the market, resulting in fewer affordable options for tenants.

> Average asking rents in two submarkets ticked above $30 per square foot in 2017. The highest average asking rents in Greater Phoenix are in the Scottsdale South submarket followed by the Camelback Corridor submarket. Both submarkets posted annual rent increases of approximately 4 percent in 2017.

> Forecast: Asking rents have increased in each of the past five years and are forecast to rise again in 2018. Rent growth will likely be in the 4-percent range across the Greater Phoenix metro area in 2018.

Construction: > Construction picked up somewhat during the fourth quarter, totaling more than 287,000 square feet after very little new office space came online in the third quarter. During the second half of 2017, less than 360,000 square feet of office space was delivered, the lowest two-quarter total since late-2013/early-2014.

> For the full year, approximately 2.1 million square feet of new construction was delivered, down from more than 2.3 million square feet in 2016.

> Projects totaling nearly 1.7 million square feet were under construction at year-end 2017, up approximately 5 percent from the figure one year ago.

> Forecast: Construction will slow to approximately 1.5 million square feet in 2018, down from more than 2.1 million square feet in 2017.

Investment Trends: > Sales transactions of office buildings ticked up during the fourth quarter, rising by more than 10 percent from the third quarter total. Dollar volume surged in the fourth quarter, fueled by the $928-million sale/leaseback of the Marina Heights project in Tempe.

> The median price in properties that sold during the fourth quarter was $184 per square foot, up more than 30 percent from the figure in the third quarter. The median price for all of 2017 was $138 per square foot, a 6 percent increase from the 2016 median price. Larger properties are selling at higher prices; the median price in sales of buildings over 100,000 square feet was $201 per square foot in 2017.

> Cap rates dipped below 7 percent during the fourth quarter, bringing the average for all of 2017 to 7.5 percent. Cap rates in 2017 were down approximately 30 basis points from the 2016 average.

Rental Rates (continued): Employment Overview

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Office MarketEXISTING PROPERTIES DIRECT VACANCY SUBLEASE VACANCY TOTAL VACANCY NET ABSORPTION - SF NEW SUPPLY - SF UNDER CONSTR AVG. RENT

CLASS BLDGS. TOTAL INVENTORY SF SF RATE SF RATE SF Q4-17 Q4-16 CURRENT

PERIOD YTD CURRENT PERIOD YTD SF RATE (FS)

CENTRAL BUSINESS DISTRICT

Downtown North

A 14 4,452,176 1,034,587 23.2% 12,907 0.3% 1,047,494 23.5% 21.9% (76,346) (73,270) - - $24.90

B 88 6,415,955 1,435,806 22.4% 23,789 0.4% 1,459,595 22.7% 22.0% (12,371) (63,132) - - - $20.47

C 42 906,078 41,460 4.6% 2,350 0.3% 43,810 4.8% 17.6% 75,754 82,366 - - $15.79

Total 144 11,774,209 2,511,853 21.3% 39,046 0.3% 2,550,899 21.7% 21.6% (12,963) (54,036) - - - $22.07

Downtown South

A 11 4,917,401 747,104 15.2% 108,912 2.2% 856,016 17.4% 15.5% 75,720 (94,278) - - 205,000 $30.65

B 27 2,542,340 328,925 12.9% - 0.0% 328,925 12.9% 17.6% 34,465 117,799 - - 26,174 $28.36

C 23 904,815 87,504 9.7% - 0.0% 87,504 9.7% 8.7% 450 (8,951) - - $23.31

Total 61 8,364,556 1,163,533 13.9% 108,912 1.3% 1,272,445 15.2% 15.4% 110,635 14,570 - - 231,174 $29.76

SUBURBAN

44th St. Corridor

A 13 1,716,218 320,845 18.7% 2,100 0.1% 322,945 18.8% 19.3% 1,232 7,983 - - - $26.86

B 37 1,636,779 247,522 15.1% - 0.0% 247,522 15.1% 12.0% 15,517 (51,599) - - - $25.35

C 14 306,591 14,462 4.7% - 0.0% 14,462 4.7% 5.4% 762 2,190 - - - $13.80

Total 64 3,659,588 582,829 15.9% 2,100 0.1% 584,929 16.0% 14.9% 17,511 (41,426) - - - $25.85

Airport Area

A 15 2,032,740 411,427 20.2% 17,797 0.9% 429,224 21.1% 30.4% 5,181 188,263 - - 235,000 $26.21

B 132 8,555,904 1,661,488 19.4% 518,440 6.1% 2,179,928 25.5% 21.7% 89,726 (87,119) - 305,523 $23.11

C 20 513,592 57,061 11.1% - 0.0% 57,061 11.1% 10.7% (22,029) (2,183) - - - $16.34

Total 167 11,102,236 2,129,976 19.2% 536,237 4.8% 2,666,213 24.0% 22.8% 72,878 98,961 - 305,523 235,000 $23.55

Arrowhead

A 2 187,352 32,650 17.4% - 0.0% 32,650 17.4% 0.0% 2,865 (32,650) - - - $27.64

B 98 2,437,192 338,890 13.9% - 0.0% 338,890 13.9% 11.3% (43,323) (54,976) - 10,500 - $25.17

C 13 252,314 60,333 23.9% - 0.0% 60,333 23.9% 24.8% 1,521 2,291 - - - $20.94

Total 113 2,876,858 431,873 15.0% - 0.0% 431,873 15.0% 11.7% (38,937) (85,335) - 10,500 - $24.51

Camelback Corridor

A 25 4,637,995 669,625 14.4% 73,356 1.6% 742,981 16.0% 20.6% 177,974 211,498 - - 118,090 $34.16

B 78 3,436,235 527,985 15.4% 13,881 0.4% 541,866 15.8% 17.3% 59,889 51,850 - - - $24.15

C 21 374,107 23,553 6.3% - 0.0% 23,553 6.3% 5.9% (419) (1,316) - - - $19.32

Total 124 8,448,337 1,221,163 14.5% 87,237 1.0% 1,308,400 15.5% 18.6% 237,444 262,032 - - 118,090 $30.10

Chandler

A 21 2,673,925 314,271 11.8% 11,355 0.4% 325,626 12.2% 14.4% (61,794) 111,053 - 60,181 403,296 $27.65

B 142 5,789,576 1,044,419 18.0% 26,471 0.5% 1,070,890 18.5% 20.2% 97,848 124,049 - 325,469 - $23.58

C 13 214,374 28,839 13.5% - 0.0% 28,839 13.5% 14.5% 2,662 2,263 - - - $21.51

Total 176 8,677,875 1,387,529 16.0% 37,826 0.4% 1,425,355 16.4% 18.3% 38,716 237,365 - 385,650 403,296 $24.45

Deer Valley Airport

A 24 4,021,274 224,886 5.6% - 0.0% 224,886 5.6% 7.9% 3,472 230,335 - 150,000 - $26.17

B 108 6,985,739 1,470,484 21.0% 7,787 0.1% 1,478,271 21.2% 20.1% (13,813) (75,309) - - $20.92

C 9 164,859 3,819 2.3% - 0.0% 3,819 2.3% 10.3% (701) 13,168 - - - $15.65

Total 141 11,171,872 1,699,189 15.2% 7,787 0.1% 1,706,976 15.3% 15.7% (11,042) 168,194 - 150,000 - $22.02

Gateway Airport/Loop 202

A 1 43,231 15,933 36.9% - 0.0% 15,933 36.9% 0.0% - 27,298 - 43,231 - $31.00

B 47 1,269,891 148,335 11.7% 6,579 0.5% 154,914 12.2% 15.5% (1,297) 41,316 - - - $23.64

C 2 33,232 2,360 7.1% - 0.0% 2,360 7.1% 0.0% - (2,360) - - - $16.80

Total 50 1,346,354 166,628 12.4% 6,579 0.5% 173,207 12.9% 15.1% (1,297) 66,254 - 43,231 - $24.10



CLASS BLDGS. TOTAL INVENTORY SF SF RATE SF RATE SF Q4-17 Q4-16 CURRENT


SUBURBAN

Glendale

A 5 521,061 60,347 11.6% - 0.0% 60,347 11.6% 7.3% - (22,153) - - - $26.76

B 33 1,589,425 308,602 19.4% 17,106 1.1% 325,708 20.5% 24.9% 15,107 82,788 16,000 125,000 $23.70

C 13 366,889 49,266 13.4% - 0.0% 49,266 13.4% 11.1% (8,605) (8,605) - - - $16.38

Total 51 2,477,375 418,215 16.9% 17,106 0.7% 435,321 17.6% 19.1% 6,502 52,030 - 16,000 125,000 $23.58

Loop 303/Surprise

A 0 - - 0.0% - 0.0% - 0.0% 0.0% - - - - - $-

B 43 1,304,812 231,935 17.8% 6,178 0.4% 238,113 18.2% 18.3% (14,069) 22,496 - 26,200 - $23.06

C 4 57,399 3,299 5.7% - 0.0% 3,299 5.7% 2.9% 768 (1,661) - - - $19.50

Total 47 1,362,211 235,234 17.3% 6,178 0.5% 241,412 17.7% 17.7% (13,301) 20,835 - 26,200 - $23.02

Mesa Downtown

A 0 - - 0.0% - 0.0% - 0.0% 0.0% - - - - - $-

B 19 680,831 18,187 2.7% - 0.0% 18,187 2.7% 2.3% (2,719) (2,224) - - - $16.18

C 16 254,308 31,826 12.5% - 0.0% 31,826 12.5% 18.1% 434 14,152 - - - $10.98

Total 35 930,208 58,354 6.3% - 0.0% 58,354 6.3% 9.1% 4,223 14,213 - - - $14.04

Mesa East

A 0 - - 0.0% - 0.0% - 0.0% 0.0% - - - - - $-

B 43 1,347,530 76,470 5.7% - 0.0% 76,470 5.7% 8.8% 12,814 41,760 - - - $18.77

C 31 642,117 68,654 10.7% - 0.0% 68,654 10.7% 18.1% 27,063 47,533 - - - $17.13

Total 74 1,989,647 145,124 7.3% - 0.0% 145,124 7.3% 11.8% 39,877 89,293 - - - $17.84

Midtown/Central Phoenix

A 0 - - 0.0% - 0.0% - 0.0% 0.0% - - - - - $-

B 79 2,854,043 355,633 12.5% 7,921 0.2% 363,554 12.7% 12.8% (13,192) 506 - - - $20.25

C 53 965,739 108,546 11.2% 1,256 0.1% 109,802 11.4% 10.7% 7,569 (6,623) - - - $15.40

Total 132 3,819,782 464,179 12.2% 9,177 0.2% 473,356 12.4% 12.2% (5,623) (6,117) - - - $19.39

Northwest Phoenix

A 10 1,293,130 272,277 21.1% 14,725 0.0% 287,002 22.2% 21.9% (37,392) (3,739) - - - $22.61

B 118 5,004,397 1,329,696 26.6% - 0.0% 1,329,696 26.6% 28.1% 93,329 74,758 - - - $18.08

C 99 2,099,594 334,895 16.0% - 0.0% 334,895 16.0% 17.7% 27,233 36,425 - - - $15.33

Total 227 8,397,121 1,936,868 23.1% 14,725 0.1% 1,951,593 23.2% 24.5% 83,170 107,444 - - - $18.83

Paradise Valley

A 14 1,410,268 218,346 15.5% 24,134 1.7% 242,480 17.2% 17.4% (19,088) 2,743 - - - $27.64

B 61 1,965,668 251,918 12.8% 4,580 0.2% 256,498 13.0% 11.2% 13,241 (21,190) 16,165 16,165 - $22.03

C 22 331,006 51,597 15.6% - 0.0% 51,597 15.6% 19.3% 9,482 12,253 - - - $19.43

Total 97 3,706,942 521,861 14.1% 28,714 0.8% 550,575 14.9% 14.3% 3,635 (6,194) 16,165 16,165 - $24.93

Piestewa Peak Corridor

A 3 409,370 13,776 3.4% 35,498 8.7% 49,274 12.0% 8.5% (15,309) (14,313) - - - $27.56

B 43 2,147,706 421,540 19.6% 34,852 1.6% 456,392 21.3% 22.1% 1,827 17,591 - - - $21.39

C 21 333,852 18,884 5.7% - 0.0% 18,884 5.7% 5.9% (3,366) 976 - - - $19.87

Total 67 2,890,928 454,200 15.7% 70,350 2.4% 524,550 18.1% 18.3% (16,848) 4,254 - - - $21.92

Scottsdale Airpark

A 57 6,603,943 1,179,023 17.9% 34,430 0.5% 1,213,453 18.4% 13.0% (423,770) (353,067) - - - $29.56

B 194 5,253,137 449,741 8.6% 88,901 1.7% 538,642 10.3% 11.5% 48,771 67,994 - - 36,735 $23.61

C 8 124,960 5,789 4.6% - 0.0% 5,789 4.6% 10.2% 3,300 6,990 - - - $16.97

Total 259 11,982,040 1,634,553 13.6% 123,331 1.1% 1,757,884 14.7% 12.3% (371,699) (278,083) - - 36,735 $27.33



CLASS BLDGS. TOTAL INVENTORY SF SF RATE SF RATE SF Q4-17 Q4 -16 CURRENT


SUBURBAN

Scottsdale Central

A 28 2,677,525 231,452 8.6% 53,045 2.0% 284,497 10.6% 12.1% (113,073) 38,815 - - - $27.27

B 127 4,603,350 565,197 12.3% 20,107 0.4% 585,304 12.7% 14.6% 11,468 84,518 - - - $24.10

C 9 124,738 2,673 2.1% - 0.0% 2,673 2.1% 0.8% 3,111 (1,691) - - - $17.74

Total 164 7,405,613 799,322 10.8% 73,152 1.0% 872,474 11.8% 13.4% (98,494) 121,642 - - - $25.55

Scottsdale South

A 18 2,402,764 304,509 12.7% 15,476 0.6% 319,985 13.3% 14.7% 350,276 264,359 271,000 271,000 - $32.30

B 75 2,674,250 403,027 15.1% - 0.0% 403,027 15.1% 13.9% 10,151 (32,458) - - - $29.24

C 35 594,190 77,857 13.1% 3,000 0.5% 80,857 13.6% 21.6% 46,941 47,490 - - - $24.94

Total 128 5,671,204 785,393 13.8% 18,476 0.4% 803,869 14.2% 15.0% 407,368 279,391 271,000 271,000 - $30.18

South Tempe/Ahwatukee

A 6 776,034 5,129 0.7% - 0.0% 5,129 0.7% 2.6% 8,840 15,364 - - - $28.32

B 121 5,357,694 878,210 16.4% 23,046 0.4% 901,256 16.8% 15.7% (37,807) (56,462) - - - $23.04

C 11 380,322 151,472 39.8% - 0.0% 151,472 39.8% 9.5% - (115,434) - - - $16.93

Total 138 6,514,050 1,034,811 15.9% 23,046 0.3% 1,057,857 16.2% 13.8% (28,967) (156,532) - - - $23.33

Southwest Phoenix

A 4 621,135 141,670 22.8% - 0.0% 141,670 22.8% 24.2% - 8,701 - - - $28.87

B 24 987,467 72,842 7.4% - 0.0% 72,842 7.4% 3.4% (39,445) (39,445) - - 44,000 $25.86

C 18 438,049 79,740 18.2% - 0.0% 79,740 18.2% 18.6% 12,322 1,930 - - - $18.27

Total 46 2,046,651 294,252 14.4% - 0.0% 294,252 14.4% 13.0% (27,123) (28,814) - - 44,000 $24.82

Superstition Corridor

A 5 669,150 156,723 23.4% 1,478 0.2% 158,201 23.6% 21.9% 11,964 (11,803) - - - $23.32

B 122 3,683,991 336,059 9.1% 895 0.1% 336,954 9.1% 16.3% 54,740 262,264 - - - $19.28

C 24 437,052 20,762 4.8% 3,946 0.9% 24,708 5.7% 11.9% 35,861 27,218 - - - $14.20

Total 151 4,790,193 513,544 10.7% 6,319 0.2% 519,863 10.9% 16.6% 102,565 277,679 - - - $19.99

Tempe

A 26 5,754,278 332,627 5.8% 6,540 0.1% 339,167 5.9% 4.7% 48,696 545,408 - 643,745 502,481 $33.86

B 97 4,446,475 665,067 15.0% 47,574 1.1% 712,641 16.0% 12.4% (7,205) 62,613 - 252,642 $24.50

C 36 859,032 95,824 11.2% 786 0.1% 96,610 11.2% 10.4% 15,380 (7,548) - - - $17.50

Total 159 11,059,785 1,093,518 9.9% 54,900 0.5% 1,148,418 10.4% 8.4% 56,871 600,473 - 896,387 502,481 $27.92

West I-10

A 0 - - 0.0% - 0.0% - 0.0% 0.0% - - - - - $-

B 42 1,228,141 109,524 8.9% 1,657 0.1% 111,181 9.0% 9.2% (10,360) 1,632 - - - $25.49

C 13 263,433 76,049 28.9% - 0.0% 76,049 28.9% 10.8% 1,117 (47,502) - - - $16.48

Total 55 1,491,574 185,573 12.4% 1,657 0.1% 187,230 12.5% 9.5% (9,243) (45,870) - - - $20.95

GRAND TOTAL

A 302 47,820,970 6,687,207 14.0% 411,753 0.9% 7,098,960 14.8% 15.0% (60,552) 1,046,547 271,000 1,168,157 1,463,867 $28.70

B 1,998 84,198,528 13,677,502 16.2% 849,764 1.0% 14,527,266 17.3% 17.3% 363,292 570,020 16,165 952,499 231,909 $22.68

C 570 11,942,642 1,496,524 12.5% 11,338 0.1% 1,507,862 12.6% 13.4% 236,610 93,371 0 0 0 $18.19

Total 2,870 143,962,140 21,861,233 15.2% 1,272,855 0.9% 23,134,088 16.1% 16.2% 539,350 1,709,938 287,165 2,120,656 1,695,776 $24.40

QUARTERLY TOTALS

2017 4Q 2,870 143,962,140 21,861,233 15.2% 1,272,855 0.9% 23,134,088 16.1% 539,350 1,709,938 287,165 2,120,656 1,695,776 $24.40

2017 3Q 2,866 143,674,975 22,073,561 15.4% 1,291,319 0.9% 23,722,951 16.3% 40,232 - 69,431 - 1,720,861 $24.12

2017 2Q 2,864 143,605,544 22,047,053 15.4% 1,322,561 0.9% 23,296,348 16.3% 562,744 334,294 1,518,092 $23.97

2017 1Q 2,859 143,271,250 22,381,709 15.6% 1,216,355 0.8% 23,420,948 16.5% 567,612 1,429,766 1,061,268 $23.73

2016 4Q 2,852 142,135,269 21,792,885 15.3% 1,236,810 0.9% 23,860,663 16.2% 660,842 518,073 1,631,975 $23.62

As new, corrected or updated information is obtained, it is incorporated in both current and historical data, which may invalidate comparison to previously issued reports.

8 North American Research & Forecast Report | Q4 2014 | Offi ce Market Outlook | Colliers International

Copyright © 2018 Colliers International.The information contained herein has been obtained from sources deemed reliable. While every reasonable eff ort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Colliers International | Greater Phoenix2390 E. Camelback Road, Suite 100Phoenix, AZ 85016+1 602 222 5000colliers.com/greaterphoenix

FOR MORE INFORMATIONBob MulhernSr. Managing Director | Greater Phoenix+1 602 222 5038 [email protected]

Jim Keeley SIOR

Founding Partner | Scottsdale Offi ce+1 480 655 3300 [email protected]

Pete O’NeilResearch Director | Greater Phoenix+1 602 222 [email protected]

Outlook: The Greater Phoenix offi ce market is forecast to have another year of improvement in 2018. Tenant demand will likely remain healthy as businesses continue to expand. After a slowdown in 2017, the pace of expansion could receive a boost as the economy has gained momentum, consumer confi dence is elevated and corporate tax rates have been cut. These measures should support a favorable business climate in the year ahead.

One of the signifi cant shifts occurring in the Greater Phoenix offi ce market is the move from build-to-suit construction to spec development. In recent years, construction has been dominated by build-to-suit developments for State Farm, McKesson and others. Looking forward, approximately 70 percent of the square footage

currently under construction is spec development. Many of these projects are slated to come online in the second half of 2018, allowing time for these buildings to be leased ahead of delivery.

The outlook for the investment market remains healthy, due in large part to strengthening property performance which has buoyed investor sentiment. In 2017, fewer offi ce buildings sold but transaction sizes were larger. Buildings of over 100,000 square feet accounted for nearly 20 percent of transactions in 2017, up a few percentage points from 2016. In addition, nearly 30 percent of all offi ce sales topped $10 million in 2017. These trends suggest that larger transactions will likely play a more prominent role in the local offi ce investment market in the year ahead.

www.colliers.com/greaterphoenix

o˜ ce sales and leasing activity picks up to close 2017 · research & forecast report greater...

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