TUCSON—Tucson's third quarter office numbers continue to be amixed bag. GlobeSt.com speaks with BuzzIsaacson, CBRE first vice president, toget his take on the numbers.

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The third quarter produced the office market's first negativenet absorption in three quarters, with negative 79,284 square feet.This reduces the year-to-date total positive absorption to 20,944square feet. The Q3 2014 average asking rate on a full servicebasis for tracked office product in the Tucson market was recordedat $19.47 per square foot per year, up $0.19 from Q2 2014, whichwas $19.28. As a comparison, the Q3 2013 rate was recorded at$19.35, which is in between the Q2 2014 and Q3 2014rates. With limited new tenants in the market and ampleavailable space, the Tucson office market has seen many existingtenants take the opportunity to upgrade their offices. Conversely,with insufficient new tenant activities, landlords have beenmotivated to move space, and have offered lower rates and/orconcessions in high quality vacant space.

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GlobeSt.com: What do you think is the reasonfor the negative absorption?

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Isaacson: The negative absorption is primarilythe result of rightsizing and consolidation. The market hasnot been able generate the momentum to positively offset groupsthat are reducing their space requirements. On the positiveside, the size of the Tucson market provides the opportunity for afew larger deals to quickly shift the market outlook and absorptionnumbers.

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GlobeSt.com: What do you think is the reasonfor the lack of new tenants?

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Isaacson: Many of the emerging markets thathave created momentum in other cities have not impacted our marketwith new jobs. Some local companies have remained tentativeas they have not seen enough sustained growth to move into anexpansion mode.

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GlobeSt.com: How will the landlord motivationto move space take shape and affect the market?

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Isaacson: Landlord motivation will affect themarket in a variety of ways. Landlords with aging productwill be required to remain very aggressive with rates andincentives. Landlords with existing tenants will continue tosee the value of protecting their existing rent roll, and will workto avoid the costs associated with turnover. The motivationwill also encourage some landlords to invest in their buildings toupdate the asset or establish a new use.

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