PHOENIX-With Phoenix's overall office vacancy rate in the 23% range, speculative and build-to-suit office development seems like it should be a far-off event. Yet new class-A office projects are, in fact, starting to pop up in key Valley locations.

If this story were purely about vacancies, we would say that it's not time. But a closer inspection of the Phoenix office market reveals an environment in recovery, where companies are starting to grow again, job numbers are on the rise and an uptick in leasing is underway. A closer inspection also shows that Phoenix's 20-plus percent of unoccupied space is clearly divided between two camps: efficient and inefficient.

When we break out just the efficient office space on the market in Phoenix today (i.e. non-owner user properties over 50,000 square feet built since 2009), overall vacancy drops to just 11.4%. In fact, in this sector, Phoenix has absorbed virtually all new product that has come online since 2009. Unlike recessionary years, when newly built inventory hit an all-time high of 30%, tenants' current and increasing appetite for newer, more efficient space has resulted in occupancy in recent developments that is well above market averages.

This efficient inventory represents a mixture of large blocks of corporate space (the most active) and space that may be 10 to 15 years old but is still functional and seeing relatively good activity. Local office product outside of this realm is dominated by 20-plus-year-old buildings that lack efficiencies and are lagging behind in terms of lease activity and interest. In some cases, this product is even starting to be repurposed according to market demand.

When viewed in this light, there is actually a limited supply of big, quality blocks of office space in Phoenix. This leaves many larger tenant requirements to chose between one of two options: constructing a build-to-suit project for their company or looking for vacant/speculative opportunities that are efficient and can be quickly modified to respond to their specific needs and today's trends in employment and space use.

GoDaddy's new 150,000-square-foot technology and customer service center at the ASU Research Park in Tempe, and Aetna's new two-story, 140,000 square feet at Liberty Cotton Center Business Park are prime examples of large tenants opting for a build-to-suit. Discovery Business Campus in Tempe exemplifies the speculative option. Discovery's existing inventory is fully leased, with new speculative and build-to-suit opportunities available on the remainder of the site. Discovery is located directly alongside the Loop 101 Freeway and within the Price Corridor—one of Phoenix's most desirable technology, science and office corridors. During first quarter 2014, Discovery owner Wentworth Property Company/Discovery Business Park is proceeding with its first speculative undertaking, a three-story, approximately 160,000-square-foot Class A office building that will feature 17' slab-to-slab floor heights, approximately 52,600-square-foot floor plates, a 7.24/1,000 parking ratio and the ability to be LEED Certified.

The GoDaddy, Aetna and Discovery projects are strategic builds, as they all meet timely criteria in terms of office layout and the changing dynamic of workplace operations. According to a joint Jones Lang LaSalle/CoreNet report, the average space/density per person for class-A office product over the past decade has been cut almost in half, from 300 square feet-per-person in 2001 to just 170 square feet-per-person by 2012. In short, it generally takes more jobs and people to fill office space now than it did 10-plus years ago. The report went on to note that 72% of firms surveyed plan to increase their space density even more by 2015, with many leading organizations planning to push density to 150 square feet-per-person, and in some cases, less.

Office tenants, landlords, developers and brokers must all take this new criterion into consideration when evaluating the usability of existing office inventory. Does space have an adequate parking ratio to accommodate high-density users? Does the building have infrastructure to service a heavier occupancy load? Does it respond to Class A market demands, like nearby shopping and dining amenities, easy freeway access and proximity to a high-quality workforce?

These factors are key when considering where and when to build speculative class A office space in Phoenix. As we enter 2014, the East Valley has emerged as a market leader on this front—particularly submarkets like Tempe and Chandler, which have experienced a vacancy drop of more than 230 basis points since 2008. These areas have the features that forward-thinking employers are looking for, such as a confluence of freeway systems, quality workforce (Arizona State University is a major driver of this) and large blocks of quality land along freeways like the Loop 101 that also still provide the kind of dining and shopping amenities that employers get with closer-in submarkets. While other Phoenix submarkets are steadily regaining ground in their own right, we expect the East Valley and newer-grade office space to continue to outperform other Phoenix office market sectors, in what will be an exciting year ahead.

Mark Gustin is managing director in the Phoenix office of Jones Lang LaSalle. He specializes in all facets of office and back office space. The views expressed in this column are the author's own.