Though a whopping 3.6 million sf of office space is under construction here, absorption is so strong that vacancy rates probably won’t go up—and may even drop—in the second half of this year, according to a new market study by CB Richard Ellis.

The 1.59 million sf of new space that came online in the first six months of the year was easily absorbed by burgeoning demand, the report by the brokerage firm says. The metropolitan area experienced gross absorption of 3.8 million sf and net absorption of 1.96 million sf, leaving vacancy at the start of the third quarter a healthy 9.98%–virtually unchanged from the 9.97% vacancy factor at the start of 2000.

“We are still seeing a tremendous amount of absorption from existing companies and from companies new to Phoenix,” Kevin Calihan, a broker in a local office of CB Richard Ellis, tells “There isn’t a submarket that is soft.”

More than 3.59 million sf of new office space is currently under construction. Between 1.8 million to 2 million sf of that space is expected to enter the market in the second half, but all of it will be gobbled by the area’s space-hungry tenants, Calihan says.

Some areas will fare even better than others, Calihan says. The tightest submarkets–north Scottsdale, Tempe and northwest Phoenix–will enjoy the benefits of pent-up demand well into 2001 even as developers in those areas race to complete their new projects.

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