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Arizona - Flight to Quality in Phoenix

by Rick Edwards, Phoenix, June 2012

Research analysts have varying statistics to explain what's happening with the office market in Phoenix. Their numbers may be different but the message is the same. High vacancy rates and low rents are enticing tenants to move up to nicer, higher-quality offices. Brokers call it the "flight to quality." In this game of winners and losers, many existing office complexes are left over assessed for property tax purposes.

 

Double-Digit Vacancies

 

The office vacancy rate in Phoenix is anywhere from 20% to more than 28%, depending on which report you read. Even the most conservative estimates put Phoenix in much worse shape than the national average for office vacancies, which is 12.2%

 

The numbers also vary widely on first quarter 2012 net absorption. The research is more consistent on average asking rents (See box below).

 

The Big Picture

 

Market research reports may differ because they're not necessarily comparing apples to apples. The same is true for office property assessments.

 

Since no two office properties are identical, mass appraisal models cannot take all their specific characteristics and challenges within the market into effect. It's the duty of owners, managers and their tax representatives to know when the numbers are skewed and to take action to avoid over assessment.

 

The deadline has passed to file an administrative appeal for 2013 taxes. However, you have until December 15, 2012 to appeal directly with the Arizona Tax Court .

 

Phoenix Office Market Snapshot - First Quarter 2012

 

 

Vacancy

(%)

Average Asking Rent (psf)

Net Absorption (sf)

CoStar Realty Information

20.8

$20.20

+497,777

Jones Lang LaSalle

27.1

$20.71

-403,522*

Cassidy Turley BRE Commercial

28.2

$23.63

+90,965

 

*includes multi-tenant and single tenant buildings at least 20,000 sf. Medical, government, condos and owner-occupied buildings are excluded.