The study by Scottsdale-based Logan Commercial Advisors says the market "came in strong" for the first quarter of this year, the latest period for which figures are available. The Phoenix-Scottsdale area, with one of the country's largest concentrations of office condominiums, was one of a number of markets around the country reporting relatively positive office condo news. In Southern California, another place where office condos caught on, developer PRES Cos. reports strong sales at one of its projects.

Developers delivered some 856,567 sf of office condo product in the Phoenix metro in the first quarter, according to Logan Commercial's report. Researchers found an additional 559,636 sf of project broke ground, with average asking prices rising to $226 per sf, up $5 from the previous quarter.

One effect of the additional space was to drive up the vacancy three percentage points to 14%. But, Logan's team points out 14% is still below the vacancy rate for general office space.

Logan's analysis is "the commercial real estate market appears to be at the tail end of the residential market shake-up." The office condo market has been facing competition from low-cost sublease office space and conditions in general are prompting many prospective buyers to take a wait-and-see approach. Nonetheless, the team observes "stability in the market is apparent and serious buyers are re-emerging."

Logan's figures suggest that asking and closing prices are quite close in the Metro Phoenix area for top-quality office condos, with final sale prices averaging $226.55 per sf for newly constructed class A shell space. The overall average for condo sales that are in escrow and scheduled to close this year for all classes of space combined are lower, $212.80 per sf, a figure that reflects what Logan's team calls "the reduction in price of some of the larger, less desirable locations."

At the same time that the market is absorbing space and prices are holding firm, the total of planned condo projects has dipped to 3.5 million sf, down from five million sf a year ago. The report concludes the decline in construction "will keep the office condo market strong."

In the Southern California, the Newport Beach, CA-based PRES team report eight office condo sales in its newly completed projects, Dove Office Condos and Quail Office Condos, both in Newport Beach. The two PRES projects feature condominiums ranging from 300 sf to 20,000 sf. Recent buyers include a law firm, accounting firm, consumer products design company and a number of entrepreneurial service firms.

PRES' projects are situated close to the 405 and 55 freeways as well as the 73 toll road, a location that the buyers cite as one of their reasons for their decisions. Brad Schroth, president of the PRES Cos., notes that down payments can run as low as 10% on the condos; additionally, many small business owners qualify for SBA financing.

Logan Commercial, in its analysis of the office condo market, also cites financing as one of the factors that has kept the market going. "Even with the tightening of lending criteria, the availability of competitive interest rates continues to make the office condo market a solid investment to both the business owner as well as the private investor," the company's report states.