July 27, 2020 Comments (0) Views: 583 Phoenix, Phoenix & Southwest News, Top Phoenix

Lee & Associates’ Andrew Cheney Breaks Down Phoenix Office Market

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By Lee & Associates’ Andrew Cheney

Q: How has the Phoenix market fared as the COVID-19 pandemic played out?
A:
I think we have gotten our unfair share of activity. Due to how spread out we are, how little public transportation is used by the workforce, and perceived low risk with COVID, we have seen more activity than other markets. This is on top of the fact we have an incredibly friendly business climate in our state. My team seeing five to 10 office user tours a week at our projects, whereas other brokerage teams in other markets aren’t seeing anywhere near that number. Most of these tours, however, are below the 20,000-square-foot range.

Q: What sectors have experienced positive deal flow, and which have been negatively impacted?
A:
Industrial and multifamily continue to roll. Office is positive, but a slow positive. Some office tenants have decided to let their leases expire, not renew, and work virtually short term. Retail is limping and struggling as expected.

Q: What are some examples of transactional activity you’re seeing in Phoenix?
A:
Morgan Stanley just leased 40,000 square feet in our market. Siemens took 8,000 square feet in the same submarket. I executed a lease with Dell at the end of March for 10,000 square feet. Our preliminary numbers show we are on track to do 50% of the net absorption that we did last year. Gross leasing activity in Q2 2020 was similar to Q1 2020. Each quarter was down by 20% compared to Q4 2019. There has been $197 million in sales volume of office product, since March 1 of this year.

Q: What advice do you have for the CRE industry going forward?
A:
Relax. Everyone is not going to work from home forever. They will find better ways to work and it’s the CRE industry’s job to help them add value in that quest. For tenant advisors, send your clients as much helpful information as possible and set realistic expectations. For Landlord advisors, make any deal you can.

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