TUCSON-On the surface, office vacancy rates for the area might seem a little alarming: a 3% spike in six months. But local experts say there’s no need to be overly concerned.

In its latest market report, CB Richard Ellis calculated vacancy was 12% in the eight-million-sf inventory. Tucson experts tell GlobeSt.com that the vacancies are more due to internal business shifts rather than of people leaving the area for greener climates. “We’ve had a lot of build-to-suits and tenants going to those,” says Bruce Suppes, senior associate and office specialist in CBRE’s Tucson office.

Also impacting vacancy rates are office condos. According to Suppes and Buzz Isaacson, broker with Tucson-based Buzz Isaacson Realty LLC, those purchasing office condos are primarily medical firms and professional companies, such as lawyers and financial planners. “Almost all of our growth is internal,” Isaacson explains. “These days, I’m dealing with two lawyers splitting off from a firm and going out on their own and needing space or a medical group that needs an additional location to expand. This is as opposed to someone from outside the area scouting Tucson and comparing it to other cities.”

What’s also driving smaller users to the office condo arena is escalating lease rates. Suppes points out that triple net leases average $20 per sf. Add tenant improvements onto that and the lease end up close to $30 per sf. As a result, he says “a lot of folks felt like buying office condos was the way to go.”

Despite 388,000 sf of office space coming on line in 2006 and a similar amount anticipated for 2007, Isaacson and Suppes see vacancy rates dropping a couple of points in the coming year. Suppes isn’t certain if too many office condos might be a problem, but Isaacson is not as concerned. Office condos are pre-sold and built in phases. “We may have pockets of overbuilding,” he adds. “But in all, there are high barriers to entry and very little land available for building.”

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