PHOENIX-As the local office market continues to lag other major markets across the US, tenants here are making the most of the situation and trading up. Companies are relocating from older, lower quality buildings into newer, class A properties, according to research from Cassidy Turley BRE Commercial.
“It’s definitely still a tenant’s market here in Phoenix,” says Chris Jantz, vice president of research for Cassidy Turley BRE Commercial. “A lot of tenants are taking advantage of the market. They’re thinking: ‘I want to upgrade my image, and I can do that now and possibly even pay less than what I was paying for my previous space.’”
Cassidy Turley’s first quarter office market report clearly illustrates this trend, Jantz tells GlobeSt.com. He points to the fact that the entire office market ended the first quarter with 92,385 square feet of negative net absorption. In contrast, the class A office market was the only category to post positive net absorption of 46,738 square feet.
One of the best examples of this “trading up” trend is the deal struck between Cole Real Estate Investments and Hines. Cole leased roughly 110,000 square feet at 24th at Camelback II, a new 11-story, 300,000-square-foot class A building. The firm will relocate from an older building during the first quarter 2012, and in the process, it will get new office space and an image boost.
Jantz says much of the leasing activity has not yet shown up in the market statistics. At the end of first quarter, for example, the overall market vacancy rate was 28.3%, up from 27.3% for the same period last year. The first quarter 2011 vacancy rate is the highest in about 10 years, he estimates.
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