2018 U.S. Arizona Office Market Q2-The 2018 U.S. and Arizona office market in Q2 remains on solid ground. Absorption rebounded in Q2 2018 after a period of slow but steady decline, and rents and sales held firm. Office occupancy has remained near its cyclical peak for 10 successive quarters.

While the economy is currently very strong, job growth is not translating into increased occupancy. Tech-driven markets remain the principal exception, with large-scale leasing that is predominantly pure expansion. Coworking firms are the other main demand driver and are expanding aggressively in both major and leading secondary markets.

Despite a modest decline in Q2 2018, construction levels remain elevated. While we don’t see a widespread supply risk, as tenants continue to lease the best space, there are localized concerns. While declining on an annualized basis, office sales volume held firm in Q2 2018, while pricing and cap rates remain robust.