Researchers say close to three million sf was absorbed in 2005, more than double the 2004 direct net absorption. Larry Downey, C&W's senior director, says one of the strongest submarkets was the CBD, which absorbed 575,754 sf by year's end. In comparison, the CBD incurred 192,345 sf of negative net absorption in 2004.
Overall vacancy, in the meantime, continued dropping, bottoming out at 14.4% by year-end 2005 in the 60.9-million-sf inventory. It was 18.4% for the year before. The Camelback Corridor demonstrated strong gains, posting a 15.6% vacancy at the end of 2005 versus 21.2% in 2004. "Camelback one of our higher class A market office corridors," Downey tells GlobeSt.com. "That's a submarket with some very high-end projects and strong amenities, and it's near the airport."
The increased demand also has led to more construction, with the addition of a little more than one million sf to the inventory. In 2004, 714,103 sf delivered. Researchers say there was less rentable office space at the end of 2005--despite the construction--than year-end 2004 due to conversion of buildings to office condos or residences.
As strong demand continues and vacancies drop, Downey says rental rates could top $35 per sf in some submarkets, driving concessions to disappear for smaller tenants. "For the larger tenants, we're still likely to see strong build-to-suit deals," he adds.
Overall, the metro's future looks bright due to continued employment gains and corporate expansions and relocations. "We're looking at another strong and dynamic year for the year," Downey predicts.
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