Why some Phoenix offices sit empty and others can't keep up with demand

There's a tale of two office markets unfolding in the Valley: Nearly a quarter of our office space sits vacant , and yet we don't have enough high-end buildings to meet employer demand.

The big picture: The pandemic seems to have permanently changed the way many Americans work , and companies don't need as much space as they once did.

Yes, but: The businesses that have returned to in-person work often want luxury headquarter-like buildings with amenities that make leaving the house worthwhile.

• Just in the past few months, PulteGroup Inc. and WillScot Mobile Mini announced they would relocate their Phoenix offices to recently completed buildings in Scottsdale, underscoring the demand for new offices, CBRE vice president Charlie von Arentschildt told Axios.

Zoom in: Phoenix is not building enough of that type of "trophy" office space, von Arentschildt said.

• There is currently about 290,000 square feet under construction, the lowest level since 2012.
• Von Arentschildt said he predicts the Valley will see at least one quarter where there is no active construction of high-end offices next year, which has never happened in the modern era.

Context: Von Arentschildt said developers are holding off because they're unsure they'll be able to lease the buildings at the sky-high prices they'd have to charge.

• Constructing and financing these projects in today's inflated economy would require rents 30% to 40% higher than current top-of-market rates to pencil out, he said.

The intrigue: Von Arentschildt noted he's also seeing significant investment in the "bottom third of the market" office buildings — but mostly because these older, often single-story buildings are easy to demolish or repurpose.

Between the lines: It's the middle-of-the-road inventory — buildings worth more than just the land they're built on but not nice enough to appeal to the current market demand — that's driving up the overall office vacancy rate.

By the numbers: Phoenix's vacancy rate at the end of the second quarter was 24% in the second quarter, up from 19.1% pre-pandemic, according to Moody's.

Zoom out: Nationwide, office vacancy rates reached a record 20.1% in the second quarter — the highest since at least 1979, when Moody's began tracking.