Categories Narrative, Office Market

1-Minute Phoenix Metro Office Market Update: Q2 2019

It’s July in Phoenix and it is hot — both in temperature and in the office market.  The office market remains hot but office net absorption (job growth) cooled off in the 2nd quarter, posting just 245,000 SF in Q2.  Mid-year net absorption stands at 1.5 million SF and will likely hit 3 million SF by the end of the year.  There is 2.2 million SF of new construction in progress with most of it delivering by Q4 this year.  All these numbers mean vacancy held still at 16.9% during the first half of 2019.  We believe we will see a noticeable decrease in six months maybe even getting vacancy into the 15% range.  By Q4, we will have experienced another year where tenant demand outpaced new supply, and vacancy continues to tighten.

For this quarter’s report, I thought it would be helpful to compare Phoenix’s stats to the rest of the country.  Here is a link to a national Costar report released last month.  It’s 25 pages if you have the time to read it, but if you can’t, don’t worry, I have highlights:

  • National vacancy sits at approximately 9.75%, compared to Phoenix at 16.9% — This is normal as Phoenix is a growth market.  We cannot grow with vacancies in the low teens much less single digits.
  • Over the past 12 months New York delivered 4.9 million SF of new buildings; Phoenix delivered 2 million SF.
  • Compared to the 2.2 million SF under construction Lee & Associates Arizona reported this quarter, New York has 25 million SF under construction!
  • Phoenix’s net absorption over the past 12 months reached 4.4 million SF.  The ONLY area that scored higher was New York at 5.5 million SF.
  • Phoenix experienced a 3.6 % increase in rent growth while San Jose (Silicon Valley) grew at 7.6%.  No surprise, we are seeing a ton of activity from Northern California companies in Metro Phoenix.

Below is a link to our Lee & Associates Arizona Second Quarter Office Report and as always, here are my 3 local takeaways:

  • Tempe is the Tom Brady of Submarkets in Metro Phoenix.  This city continues to beat its competition for job growth, all the time…… Just like it did in the first half of 2019.
  • WeWork signed yet another big lease.  The CoWorking giant took 90,000 SF in Downtown Phoenix with plans for additional locations.  They are coming to Phoenix in a big way.
  • Sublease inventory is declining.  A year ago, subleases accounted for 1.9% of the available space on the market. Today they are only 1.3%

Please give me a call to discuss these trends further or how I can help you with your office needs.




Click to Read the Report

Categories Narrative

5 Generations in the Work Force

I saw the below graph and article and it hit me:  there are 5 generations now in the work force.  How is anybody managing that?  Then my commercial real estate mind immediately kicked in and thought:  how are we designing space to accommodate the various needs of each cohort?

The truth is, I’m sure we are….at all.  What we are seeing is almost exclusive focus on the largest group—the millennials.  Why?  In 2016, they became the largest generation in the work force and they keep coming. 

Here are a few takeaways:

– How does management handle 5 different generations with many different opinions and work ethics?  This is really not a takeaway, rather a question because I don’t know the answer.
– Millennials now account for the largest generation in the workforce (35%), surpassing Gen Xers (33%).
– Millennials are more tech savvy. How will this affect the future of the workplace?
– Post millennials (born after ’96) already make up 5% of the workforce.
– With many Baby Boomers retiring every year, their presence in the workforce is declining and losing influence.

We deal with macro questions like this every day.  While we might not have all the answers, we can continue to ask better questions and help our clients navigate issues like these as they relate to their office space.


Millennials are the largest generation in the U.S. labor force

APRIL 11, 2018

More than one-in-three American labor force participants (35%) are Millennials, making them the largest generation in the U.S. labor force, according to a Pew Research Center analysis of U.S. Census Bureau data.

As of 2017 – the most recent year for which data are available – 56 million Millennials (those ages 21 to 36 in 2017) were working or looking for work. That was more than the 53 million Generation Xers, who accounted for a third of the labor force. And it was well ahead of the 41 million Baby Boomers, who represented a quarter of the total. Millennials surpassed Gen Xers in 2016.

Meanwhile, the oldest members of the post-Millennial generation (those born after 1996) are now of working age.

Last year, 9 million post-Millennials (those who have reached working age, 16 to 20) were employed or looking for work, comprising 5% of the labor force.

These labor force estimates are based on the Current Population Survey, which is designed by the U.S. Bureau of Labor Statistics and serves as the basis for its unemployment and labor force statistics.

In 2017 the Generation X labor force was down from its peak of 54 million in 2008. The decline reflects a drop in the overall number of Gen X adults (Census Bureau population estimates indicate that their population peaked in 2015). In addition, last year only 82% of Gen Xers were working or looking for work, which is lower than their share in the labor force in 2008 (84%).

Though still sizable, the Baby Boom generation’s sway in the workforce is waning. In the early and mid-1980s, Boomers made up a majority of the nation’s labor force. The youngest Boomer was 53 years old in 2017, while the oldest Boomers were older than 70. With more Boomers retiring every year and not much immigration to affect their numbers, the size of the Boomer workforce will continue to shrink.

While the Millennial labor force is still growing, partly due to immigration, it is unlikely that the Millennial labor force will reach the peak size of the Boomer labor force (66 million in 1997). The Census Bureau projects that the Millennial population will peak at 75 million. At that number, a high rate of labor force participation would be needed to reach a labor force of 66 million.

Note: This post was originally published on May 11, 2015, under the headline “Millennials surpass Gen Xers as the largest generation in U.S. labor force,” which reflected the Center’s definition of Millennials at the time (born between 1981 and 1997). This updated version reflects the Center’s newly revised definition, under which Millennial births end in 1996, and the incorporation of more recent information.

Categories Narrative

The Shrinking Middle Class


There has been a lot of talk about the middle class getting squeezed and the numbers below bear this out.  Take a look at the graphs.  What does this mean to the average worker?

  • Rent, medical costs and tuition have increased more than income, shrinking savings.
  • The median hourly wage in the U.S. is $27.35.
  • Since 1995, compensation for graduate degree holders has risen 28%.  Despite all the tech companies saying you don’t need a degree, the numbers don’t tell the same story.  I am happy to say my fourth child, Claire, just earned her undergraduate degree from LSU. All four of our kids have now graduated with at least a bachelors degree.  This statistic is one of the reasons why we pushed our kids to go to college.
  • Since 1995, compensation for those with only a High School diploma has only risen 5%.—This segment should be focused on a trade where the compensation is much higher.

This article was written at the end of 2018.  There is some evidence that wages are starting to rise pretty rapidly for those with only a HS diploma.  Let’s hope that continues.

Give me a call or email me if you would like to discuss this any further. 









The Shrinking Middle Class: By the Numbers

By Nicolas Rapp and Matthew Heimer
December 20, 2018

The American middle-class ideal was forged in the decades after World War II, when economic growth and wage increases climbed in lockstep for nearly 30 years. That pairing dissolved abruptly in the 1970s. Between 1973 and 2017, according to the Economic Policy Institute, the productivity of the economy grew 77%—but average compensation rose only 12.4%, adjusted for inflation. This divergence coincided with a shift in economic gravity, away from manufacturing and toward services and “knowledge industries.” That shift weakened the labor unions that had helped rank-and-file workers in many professions claim a bigger share of the bounty. Just as important were tax reforms that favored investment and real estate earnings over wage income. The upshot: an economic order in which the capital-owning class enjoys great advantages—and the costs of admission to and exclusion from that class grow ever higher.

shrinking middle class 1

The Tightening Squeeze of City Living
The information revolution has increased the concentration of jobs in certain U.S. cities, especially in a few hotly competitive coastal metro areas. That dynamic has driven housing costs beyond what many middle-class earners can afford, making it harder for them to save for home ownership or other financial goals. (The median U.S. hourly wage was $27.35 in November; it’s lower in most of the Midwest and South.)
Methodology info (PDF)

shrinking middle class 2

To The Victors Go The Spoils
Tax breaks for investors and property owners have helped concentrate wealth among the top 10%. The growing impact of higher education on earnings has had a similar effect. Since 1995, average income for graduate degree holders has risen 28%; for those with only a high-school diploma, that figure is 5%.

shrinking middle class 3

In Awkward Global Company
The bottom 90% of U.S. earners take home a smaller share of income than do their counterparts in most industrial economies—including in far less free societies like China’s.

shrinking middle class 4

Purchasing Power And Savings Wane
Incomes haven’t risen as fast as rent, medical costs, or tuition—three of the biggest burdens for U.S. households. As a result, savings rates have declined, leaving middle-class earners more vulnerable to being bankrupted by an emergency or a job loss—and less able to put away money for retirement or for future generations.