The $12.5-million sale of the Bank of America building and the $32.5-million transfer of the Unisource Energy Tower illustrates "the fact that there is ample demand for well-located buildings within the CBD," says David A. Wetta, Marcus & Millichap's senior vice president and regional manager in Phoenix, "and that investors are willing to pay premium prices for stabilized properties with high-quality, long-term tenants."

Ryan Spiekerman, senior market analyst with Marcus & Millichap, tells GlobeSt.com that Tucson has seen a lot of 1031 exchange interest as well as courting from major asset management companies looking for a resting place for investment dollars while the rest of the nation recovers from the recession.

Still, the Tucson area isn't set for any investment dollar outpouring for speculative development. The absence of major private employers creates a shortage of demand for large blocks of contiguous office space, according to researchers.

Spiekerman says new construction for last year tallied 500,000 sf, with more than 50% being owner-occupied space. Researchers say the number will fall to about 300,000 sf this year.

Tucson's saving grace, says Spiekerman, is it continues to be a shelter for investors wanting to "wait out the glut" and the steadily decreasing gap between Tucson and Phoenix. "Tucson is becoming an annex of Phoenix," he says. With only 90 miles separating them, Spiekerman says, Phoenix-based companies wanting to set up regional offices in Tucson are bringing the two cities together.

As for vacancy improvements, Tucson will have to wait like the rest of the nation. The finding is the rate has jumped 2% to 10.4%, with no hope for change until the first half of 2003.