"We're not out of the woods yet," Stewart Park, head researcher for Cushman & Wakefield of Arizona Inc., tells GlobeSt.com "It's probably going to be 2003 before we see a drastic reduction in sublease space."
Park said the up-tick in the Valley's office absorption rates, reflective of a national trend, is the first positive indicator in the last 16 months. "To have a quarter of positive activity is a definite change," said Parks. "We can see the market is starting to recover but we're still a little shaky."
Yet as more office space comes on the market in the fourth quarter, net absorption may slow, he noted. Net absorption in the third quarter totaled 249,528 sf, bringing the year-to-date total to 402,366 sf. Last year's third quarter numbers showed a net absorption of only 117,247 sf. The suburbs led the leasing surge with a 313,463-sf net absorption while the CBD continued its negative performance, backsliding 63,935 sf into the red.
The glut of office space means good news for tenants, who saw rents drop by 25 cents per sf in the third quarter with that decline expected to continue. Jim Wentworth, senior managing director with Cushman & Wakefield, tells GlobeSt.com that an increase in the Valley's employment rate could change all that because companies will be forced to expand and rents subsequently would rise along with demand for more space.
"People like Motorola and Intel and other major employers have to hire people back before they'll need to expand and take additional facilities," Wentworth noted. "Our (office absorption rates) really trail those employment numbers by six to 12 months.
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