One of Arizona’s Largest Employers Prepares To Sublease Out Namesake Tower

Article originally posted on CoStar on February 29, 2024

Already struggling with a record swath of vacant office space, downtown Phoenix is set to be dealt another blow with one of Arizona’s largest employers preparing to sublease out an entire tower that has served as its global headquarters.

Freeport-McMoRan, a publicly traded mining company also known as Freeport, confirmed that it is looking to offload nearly 250,000 square feet in its namesake building at 333 N. Central Ave. The company, which employs about 1,000 people in the region, has enlisted help from brokerage Cresa to market the site to prospective takers.

Similar to other corporate giants across the United States, Freeport’s decision to substantially trim its real estate portfolio is in response to the company’s formalized hybrid work policy. The move to sublease its space at the Freeport-McMoRan Center was “based on the success” of Freeport’s flexible work environment, Linda Hayes, the company’s vice president of communications, said in a statement.

Instead of making the commute downtown, Freeport employees are instead heading to space the company occupies at the Cotton Center, a 280-acre business park located on the outskirts of the city. The recently renovated facilities “offer flexible work and meeting spaces designed to be collaborative, efficient and more conducive to a hybrid working model,” Hayes said, adding that while the company will continue to retain a strong presence in the Phoenix area, it will be balanced with its attempts at “supporting a work environment that best meets the needs of our employees.”

Freeport has leased its space at the downtown Phoenix tower for the past 15 or so years. Its lease for the top eight floors of the 26-story tower isn’t set to expire until May 2027, according to CoStar data. The property is also home to the Westin Phoenix Downtown hotel.

A majority of the sublease headlines over the past couple of years have been generated by big tech companies such as Meta or Microsoft that have aggressively and quickly tried to slash their previously vast real estate portfolios. Yet the ongoing impacts of remote and hybrid work models, initially adopted at the onset of the pandemic, have extended far beyond any single industry.

Fewer employees making their way to physical office space has meant companies are downsizing their spaces or getting rid of them altogether, often looking to subleases as a way to get out of their obligations before a lease is set to expire.

There is more than 205 million square feet of available sublease space sitting on the national office market, according to CoStar analysis, slightly less than the mid-2023 peak but still double the amount reported in 2019. Upward of half of that space is vacant, a sign that even if it’s available, there’s a dwindling pool of interested tenants willing to take it.

For Phoenix, the impending Freeport listing will likely deal a hefty bruise to a market that is already one of the nation’s most affected when it comes to sublease availability. There is nearly 8 million square feet of sublease space currently being marketed across the area, according to CoStar data, accounting for roughly 4% of the region’s total office supply.

To compound those challenges, tenants in the Phoenix area last year gave back 2 million square feet more of office space than they took on, the market’s worst performance in more than a decade, according to the data.

Freeport, which employs more than 25,000 people around the world, is Arizona’s second-largest publicly traded company. Its sublease plans were earlier reported by the Phoenix Business Journal.