PHOENIX-As employment growth and leasing activity ratchet up and construction output continues anemic, the researchers at Marcus & Millichap Real estate Investment Services predict a huge impact of these trends on office space. So far, office vacancy has dropped 190 basis points, year-over-year, to 21.4% -- and the forecast is for a 20.6% area-wide vacancy for the entire year.

The researchers predict that, in 2013, overall employment will increase by 3.5%, with the generation of 63,000 jobs. They also forecast that the office-using sectors will see employment increase of 3.8% (17,500 jobs).

Increase in space demand combined with vacancy improvements are pushing rents upward. During Q1 2013, rents reached a six-year low of $19.58 per square foot, then jumped approximately 3.1% by Q2 2013 to $20.17 per square foot. The Marcus & Millichap researchers forecast that asking rents will end up at $20.50 per square foot as concessions start to ease in higher-demand submarkets. Even with this increase, rents remain close to 20% below their 2007 peak.