While many Phoenix offices remain empty due to continued remote work, downtown isn’t quite the ghost town one might expect.
Experts in commercial real estate, restaurant and traffic patterns all say that downtown Phoenix is faring quite well, despite the impact the COVID-19 pandemic continues to have on our everyday life.
However, office space leasing continues to struggle across the U.S. and in the Phoenix metro.
CBRE Arizona’s First Vice President Chris Marchildon said that while downtown has developed into a true urban core and technology center over the last decade or so, with all the hotels, restaurants and bars to go along with it, the city’s demand for office leasing has not yet caught up.
“The current office space vacancy is 20.9% in downtown Phoenix, which is only slightly higher than the metro Phoenix average of 19.7%,” said Marchildon. “The majority of new tenants and expansion of existing tenants have been more drawn to markets like Tempe, Chandler and Scottsdale.”
But, he added, things in the industry are beginning to show signs of significant improvement. While larger spaces of 100,000 square feet or more are slower to fill up, smaller spaces are more active in the area. The landscape will likely look different at the end of the summer as employees slowly return to in-person work for the first time in over a year.
“The consensus is that post Labor Day many more employees will physically occupy a majority of their office space,” said Marchildon. “However, many employers are also looking to strategically implement a hybrid model.”
But while office spaces are sparsely populated, the same can’t be said for downtown Phoenix roads.
Dr. Vladimir Livshits, Director of Transportation Technologies and Services at the Maricopa Association of Governments, said that the number of cars MAG sees on the road is exceeding pre-COVID levels.
“Right now, traffic volumes are actually exceeding pre-COVID conditions,” he said.
“But what’s interesting, travel behavior is not the same because congestion is still at the same level as it was pre-COVID.”
There are many factors that affect local travel patterns and behaviors, he said, including the time of day, mode of travel, and changes in travel destinations and origins. Some of that can be attributed to the prevalence of telework, according to Dr. Livshits.
The lowest number of vehicles on the road MAG experts observed during the pandemic came during the second week of April in 2020, when traffic was down to 63% of its normal conditions. The volume eventually rose to 87% in June of that year and dipped to below 80% in July 2020 before recovering back to normal conditions as of March 2021. But, as Dr. Livshits pointed out, downtown traffic is impacted by more than just the number of employees working from home.
“Traffic is affected not only by telework, but by changes in land use, by new developments, it’s affected by construction in the region, it’s significantly affected by what’s called transitional and seasonal populations,” he said.
Downtown’s booming development is also proving beneficial to its growing restaurant scene.
Jeff Carlberg, the managing partner and operator of Il Bosco Pizza, said his business actually thrived during the pandemic, despite forced closures, supply chain issues and an increased dependence on takeout. Il Bosco, which boasts a location in Scottsdale, opened its second restaurant downtown in January at 918 N. 5th Street.
“Prior to COVID, we were doing really well,” he said. “Dine-in was busy, to-go was busy. We were growing our business and then COVID hit. We redid everything to focus and be more efficient at takeout. We learned that in a quick fashion and the business took off. We actually doubled during COVID. Now, people are excited to get back.”
Il Bosco is even seeking to expand to two new parts of the Valley by the end of the year, eyeing east Gilbert and northwest Phoenix for its next restaurants.
But its new downtown location is doing well, even without a weekday lunch offering for the time being. Carlberg said he’s hoping to start that up once ASU opens its brand-new biomedical building next door so they can capture its 850 employees.
“The density down here is growing leaps and bounds,” he said. “We have so many condominiums and apartment complexes going up around us, and that’s the reason why you’re seeing so many restaurants pop up. There’s a need for it.”