“We’ve seen a couple of users coming in and taking large amounts of space,” notes Chris Jantz, vice president of research with Cassidy Turley BRE Commercial. “But it’s more that existing users have made moves from one location to another; either a market move from a not-so-rosy area to a better one, or from one building to another.”

“Tenants are taking the opportunity to upgrade to higher-end space,” says Pete O’Neil, senior research analyst with Colliers International. O’Neil adds that softness in the market is predominantly in class B and class C spaces. “If you’re a B or C owner now,” O’Neil remarks, “it’s tough.” CBRE’s executive vice president Mindy Korth agrees, adding that “the A, A-minus and B-plus properties are welcoming new tenants. The C and B-minus properties are saying goodbye.”

This flight to quality has led to a dearth of space in the class A category, especially large blocks of contiguous space in high-demand markets. The CBD seems to be performing extremely well, as are Chandler and Tempe. Then there is Scottsdale, which rarely disappoints.

Jantz notes that, for example, in the high-end Camelback Corridor, there is only one option in which a potential tenant could assemble about 90,000 square feet. Korth goes a few steps further, pointing out that Chandler has only space more than 100,000 square feet that is available; with Scottsdale Airpark having only two such spaces.

But get down to the smaller spaces, and there is still plenty available – and it’s hoped that the smaller tenants will start taking those smaller chunks of space. Otherwise, not much is anticipated to change in 2012, at least, not from a leasing perspective. “There won’t be a whole lot of new companies moving to Phoenix, but more people continuing their flight to quality,” Lambeth says. “We’ll see the same kind of thing we’ve seen this year, but a slight improvement.”

But as 2012 draws to a close, there could be approval of speculative space, especially in areas in which large chunks of premier class A space are lacking. “It won’t happen in 2012,” Jantz says, “but we could be surprised to hear that something would be approved for 2013 or 2014. At the mixed-use CBD CityScape and Hayden Ferry Lakeside in Tempe, “these are conversations that are taking place,” Jantz remarks. “They’re shaking the trees already.”

That’s the mid-term, however. In the very near term, O’Neil and Jantz want to see more small tenants taking down more space. “We need to see a lot more small tenant growth to make a dent in the vacancy space here,” Jantz remarks. Adds O’Neil: “If we can continue to get any kind of positive absorption, and with the lack of development activity, we can knock vacancy that much lower.”