"In a market like this if you're representing an owner, you'reencouraging short-term deals and encouraging them not to spend alot of money in terms of tenant improvements," says ThomasJohnston, senior managing director and branch manager with Cushman& Wakefield of Arizona Inc. "Conversely, if you're representinga tenant, you're encouraging that person to do long-term leases,more concessions from the landlord, more TI dollars and a lowerrent."

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C&W's midyear statistics show overall vacancy at 17.2% inthe 70.6-million-sf inventory. At this time last year, vacancystood at 14.8%. Net absorption for the Q2 '08 stood at 61,583sf.

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Grubb & Ellis' Q2 report shows a similar story: vacancy at18.6% in a 63.3-million-sf inventory and net absorption of 27,414sf. Year to date, net absorption is in the red by 178,795 sf.

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Jerry Noble, first vice president with CB Richard Ellis' Phoenixoffice, tells GlobeSt.com that higher vacancies and slow absorptionhave meant more concessions for tenants, a trend that is likely tocontinue for awhile. "We've seen free rent coming into the marketsubstantially and rental rates backing down from 5% to 15%depending on the part of town," he says.

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Johnston points out that today's environment is keeping tenantrepresentatives busy, but it also means building owner brokers havetheir work cut out for them. "This presents an opportunity to startsowing seeds and building relationships," he adds. "One of ourbrokers said the other day that he's giving a lot of free adviceright now."

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Although Johnston and Noble agree that the market is soft, bothhave different predictions as to when Phoenix will come out of it.Johnston says the first part of 2009 will be tough, but thingsshould move forward by 2010.

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Noble, however, isn't quite as optimistic, pointing out that thecore markets continue to under perform and the housing market isstill in flux. "If we could get back to an absorption numberbetween 400,000 sf and 800,000 sf and stay on the positive side ofthat ledger, we'll be in a decent spot," he says. "Withconstruction slowing down, that will give the market a chance tocatch up with itself."

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