"The Phoenix office market may be feeling the pinch a bit more (than other markets) with corporate headquarters downsizing and layoffs mounting," the team says in its 2002 Forecast. Rent, naturally, is not as lucrative and vacancy is rising with large amounts of sublease and direct and new product now choking the CBD and suburban markets.
Grubb & Ellis researchers say this year's strongest demand will come from local business expansions as opposed to its national employer base. The major players, says the forecast, will opt for the security of renewals.
The firm says current conditions will prevail until year's end. By then, high pre-leasing requirements and decline in sublease space will get things in check in metro Phoenix. "Despite the short-term slowdown, the long-term outlook for the area is very strong," conclude the researchers.
Of the more than 51.8 million sf of office inventory in the region, the CBD bears a 14.6% vacancy and the suburban markets, 17.1%. Construction is nil in the CBD while the suburbs have nearly 1.5 million sf of product coming out of the ground. Absorption, though, remains on the positive side, with it looking like 531,000 sf will have been filled in all markets, according to the report.
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