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Office vacancy rates on a climb
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The final months of 2007 offered a glimpse of what’s in store for the Valley’s office market this year — climbing vacancy rates and a rising supply of available space.
In the fourth quarter of 2007, the office vacancy rate climbed to 13.9 percent — up from 11.1 percent a year ago, according to a new report by commercial brokerage CB Richard Ellis.
The past couple of years were very robust, said Tom Adelson, executive vice president at the brokerage.
“We were kind of a darling of the real estate world,” he said. “Developers were very aggressively looking at Phoenix.”
Now, a wave of construction continues to bring more office space to the market, even as Arizona’s job growth slows.
A total of 4.57 million square feet of space was under construction in the fourth quarter of 2007, a jump of more than 1 million square feet from the prior quarter, the report shows.
The closures and consolidations of various mortgage companies and other real estate-related firms also have added to the supply of Valley office space.
That rise in available space is good news for tenants.
Landlords will be more aggressive this year, offering concessions such as flat rental rates and higher-than-normal tenant improvement allowances, Adelson said.
Meanwhile, the credit crunch has made it difficult for some builders to obtain financing. And the slower commercial market has caused others to postpone or quash projects.
“I think it’s certainly making people more conservative in their decisions to build,” local commercial developer Bob Mayfield said.
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