The Valley clearly is in the throes of a major downturn in its office and industrial markets, but it's not completely come to a stop, according to a consensus of real estate professionals gathered for the Arizona NAIOP Chapter's Trend Watch 2001. "We were going 100 miles an hour and now it's like we are in a school zone," says Pat Feeney Jr., a CB Richard Ellis senior vice president. "We aren't in park, but user activity has dropped off."

At midyear, vacancy stood at 12.8%, its highest point since 1994 and nearly 3% higher than at the start of this year. "We are just a little supply heavy in office," Christopher Toci, associate director in the Phoenix office of Cushman & Wakefield of Arizona Inc., tells GlobeSt.com. "It's just a near-term overhang. It's not gloom and doom. We just need to get caught back up on the demand side."

More than 15.7 million sf of new office space was built in the Valley since fourth quarter 1996, spiking overall inventory nearly 28%. The past two years' absorption pace prompted the development of dozens of spec projects, most of which are due to deliver at a time when demand has all but disappeared. In 1999 and 2000, more than 7.5 million sf of office space was leased, more than any other two consecutive years. "We are adding supply and we are shrinking on the demand side," Toci says. More than two million sf of new office space has come to market this year and another three million sf is under construction.