"Vacancy is dropping and that's pretty good news," James Wentworth, senior managing director of Cushman & Wakefield of Arizona Inc.'s local office, tells GlobeSt.com. According to a third-quarter study of the Valley's office market by C&W, overall vacancy valley-wide fell 1.1% to 20.4% during the third quarter, just a slight dip from the mid-year figure of 21.5% and 1.5% better than one year earlier when it stood at 22.1%.
A surge in the number of tenants taking advantage of concessions helped class A office space fare the best with more than 900,000 sf of positive net absorption in that category to date this year. Valley-wide, year-to-date net absorption reached 563,621 sf, up sharply from the mid-year figure of 149,485 sf. "I'm not going to be surprised if we have one million sf of net absorption this year," Wentworth predicts, noting that a projected increase in jobs could fuel the Valley's office market to reach the one-million-sf mark.
But even as the Valley's office market continues to show signs of an upturn, some of the city's submarkets remain stagnant. The mid-town market, a cluster of high-rises along Central Avenue, has lost about 340,000 sf of net absorption this year, and class B and C space everywhere is languishing.
Building owners are seeing rental rates drop slightly with the average rent now at $19.73 per sf versus $19.98 per sf at midyear. The third-quarter reading was 83 cents per sf lower than last year at this time. But, Wentworth says, the signs are pointing to a recovery and that could be good news for all market segments.
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