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PHOENIX-The overall office market is being adversely affected by the slowing national economy, but not shut down. That’s the conclusion of a third-quarter report by the Phoenix office of Grubb & Ellis.

”However, as long as economic uncertainty continues the market will remain in a wait-and-see mode,” according to the report.

In the third quarter, the overall office vacancy rate stood at 15.8%, the highest in years. It also was the fifth consecutive quarter the vacancy rate rose. The Grubb & Ellis report notes the vacancy rate was 11.8% in the third quarter of 2000.

Contributing to its woes, available sublease space reached a high of 1.7 million sf during the third quarter of this year.

Thankfully, new development activity slowed. That’s because lenders are enforcing stringent pre-leasing requirements on construction.

Overall, rental rates are down, but many submarkets are still quoting lease rates far above 2000 levels.

Still, the overall market suffers from lackluster demand, with only 329,000 sf being absorbed in the first nine months of the year.

But Grubb & Ellis finds one positive trend — new buildings are still in demand. When Grubb & Ellis analyzed buildings less than five years old, year-to-date net absorption totaled 1.4 million sf. Also, asking rents are 13% higher than the overall rate.

The flip side shows that buildings that are 10 to 20 years old are losing more than a million sf. However, that provides opportunities for tenants seeking affordable office space, Grubb & Ellis notes.

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