Overall vacancy dropped from 17.6% to 16.8% during the quarter. At the onset of 2001, vacancy was riding at 13.1%.

"We're pleased with this rally and are optimistic that this level of leasing will continue through yearend," says Tim Whittemore, New York City-based C&W's senior director in Arizona. "The pace of leasing activity certainly picked up during third quarter and we have anticipated continued acceleration. However, the terrorist attacks of Sept. 11 resulted in some companies putting lease plans on hold. So we are likely not to see a significant increase in the absorption pace until next year."

The office market's slight improvement in the third quarter is only a brief reprieve, Whittemore says, expect an increase in the vacancy rate in the fourth quarter. "The third quarter decline in overall vacancy occurred because we had a surge in leasing while a relatively small amount of new product came on line," he explains. "This provided us with a 'vacancy honeymoon' of sorts. Anticipated construction completions for fourth quarter will drive the vacancy figures back up."