After office investment plummeted in 2020, the first half of 2021 showed that Phoenix was nearing the volume of office investment the market saw before the pandemic arrived.
According to data from the CBRE team of Barry Gabel, Chris Marchildon and Will Mast, in the first six months of 2021, the Phoenix market saw $947.93 million worth of office sales, compared to $576.92 million in the first half of 2020. The team tracks office sales worth more than $1 million and larger than 20,000 square feet.
While the number of sales and total value were both lower than the same point in 2019, the data points to investor interest returning to Phoenix after a 2020 hiatus during the pandemic. In the first half of 2021, there were 56 office sales in the Valley tracked by the team. In 2020 and 2019, there were 47 and 63, respectively.
Marchildon said another indicator is the investor interest in buildings that are selling in the largest deals. So far in 2021 there have been two office deals over $100 million. At the same point in both 2020 and 2019 there had not been any office sales over $100 million.
In total in 2021 there have been nine office sales worth more than $30 million each, and 15 sales worth $15 million or more, totaling $656 million for those 24 deals. Offices that have been especially attractive to investors are buildings with long-term leases to high quality tenants. The PetSmart headquarters building in north Phoenix, which is fully occupied by PetSmart, is the highest priced office sale of the year so far. It was purchased by Portland-based BPM Real Estate group for $110 million.
“We do have some individual deals that are coming close to peak pricing,” Gabel said. “We’ve seen an uptick in price per square foot when it comes to quality assets.”
The average price per square foot has been $199 in 2021, higher than the previous three years but still below 2008’s peak price of $222 per square foot, according to CBRE research. The PetSmart building sold for $301 per square foot and the Anchor Centre, the second-largest office sale in 2021 so far, sold for $311 per square foot.