PHOENIX-Demand has remained steady for office product and absorption ate up some of the vacant space during the third quarter. Experts suggest, however, that overbuilding could become a concern since there is 3.2 million sf to 3.5 million sf of new space scheduled to come on line within six months.

Blake Hastings, vice president with Phoenix-based Grubb & Ellis/BRE Commercial LLC, says it could take about one year to absorb what’s under construction. “I think we’re in a time in which we won’t be seeing a growth of 20% a year like we did in 2005, but growth will be steady as we eat up the excess space,” he tells

Grubb & Ellis’ Q3 report shows a total inventory of 60 million sf, with 8.9 million or 14.9% of vacant space. Its research team has identified 3.2 million sf that’s under construction. The Q3 absorption was 555,719 sf.

CB Richard Ellis’ Q3 report pegs inventory at 66.9 million sf, with 8.6 million sf or 12.9% vacant. Its team concluded that net absorption was 224,406 sf for the quarter. The report notes there is 3.5 million sf under construction.

One major area of focus is the Scottsdale market. Although it’s been a popular market for office activity, Hastings acknowledges that concerns about overbuilding especially apply to that submarket. “There’s a lot of competition out there,” he says. “In one deal we were working in that area, we had about 10 other building owners in competition with us.”

The numbers underscore the concern. The CBRE report puts Scottsdale’s inventory at 15.1 million sf, of which 13.32% or 959,864 sf is empty. The quarterly net absorption was only 185,432, with 1.19 million sf under construction.

Grubb & Ellis’ Scottsdale numbers are slightly different, with 12.8 million sf of inventory and two million sf or 15% vacant. Its researchers put absorption at 550,000 sf. But again, a little less than one million sf is under construction.

Hastings points out that the subprime fallout is beginning to have an impact on the office market although the entire home-building and mortgage industry began slowing down before that fiscal crisis began. However, many subprime lenders with small and large amounts of office space are melting away, leaving vacancies. “You had New Century Financial that came here, took space, then left almost overnight. That’s 30,000 sf of sudden space,” Hastings stresses.

Still, Hastings says he doesn’t see oversupply as a long-term problem. “Some landlords will lose tenants and some will see occupancy decline,” he says. “Once the supply is under control, then we’ll go back to a steady growth, probably by the end of 2008.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join now!

  • Free unlimited access to's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including and

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.