Phoenix Racks Up 1M SF Positive Absorption

Jim Wentworth, senior managing director for Cushman & Wakefield of Arizona Inc., credits the enviable gain to a city that's "not too reliant on any one industry." Plus, he says, the metro's positioning within 393 miles of Los Angeles primes it to reflect what is happening in Southern California and allows it to pick up some overflow.

The glowing year-end report is the first good news that the metro's had since the end of 2001 when absorption dipped into the negative after recording 3.2 million sf to the positive in 2000.

"Everything's starting to come back," Wentworth tells GlobeSt.com. And, it's only going to get better if the metro's forecast is accurate, 68,000 new jobs this year and another 90,000 in 2005.

As for the present, optimism is riding high with vacancy down and deliveries, 385,420 sf, at the lowest level in eight years. Overall vacancy is 19.5% versus last year's 21.8% in the 63 million sf of inventory. As for sublease, it was 1.2 million sf and it's now down to 800,000 sf.

C&W's research team calculated 760,505 sf of new product is rising, but close to 600,000 sf of that is in the Scottsdale Airpark. "That being one of our healthiest submarkets, we anticipate the space will lease quickly," he says.

The gloomiest news is that rent dropped for the second consecutive year and concessions are still part of the game. The latest average is $19.72 per sf.

Despite class A's strong showing, the 37.9-million-sf inventory is 17.7% empty. Its average rent is $21.66 per sf with tenants able to get as much as six months free and $35 per sf for tenant improvement allowances, says Stewart Park, C&W's Phoenix research analyst.

Wentworth predicts concessions will start to selectively disappear, clearly giving building owners some leverage. "We're still seeing a shopping trend with tenants," he said in a press release. "Those wanting to take advantage of great rates for a long-term lease will need to act soon, as the window of opportunity is starting to close.