Office
vacancy rates in Valley hit recordBy
J. Craig Anderson The
Arizona Republic 10.15.09
1 of every 4 square feet of
Valley office space currently empty
At
no time in the
Phoenix
area's history has so much office space sat empty.
Nearly
1 out of every 4 square feet of Valley office space was vacant
in the third quarter ending Sept. 30, commercial-real-estate
experts said.
That's
about 28 million square feet of empty space, according to
Phoenix
commercial-realty brokerage Colliers International, one of
several Valley firms tracking the progress of sales and the
leasing of office, industrial and retail buildings.
By
almost anyone's measure, the local market for commercial real
estate is as bad as it ever has been.
But
even the most pessimistic analysts and brokers agree that the
real-estate crash positions
Phoenix
as an attractive relocation area for companies in more
expensive states, such as
California
.
"Actually,
the leasing agents are optimistic," said Broker Mindy
Korth of Phoenix-based CB Richard Ellis.
Still,
Korth said only one thing can rescue the Valley's real-estate
market and economy: jobs.
Although
their numbers vary slightly, all the local brokerages pegged
the Valley's overall office-vacancy rate at 20 to 25 percent.
Jim
Achen of the
Phoenix
commercial-real-estate brokerage TransWestern said it's likely
the problem will get worse before it gets better.
"Unfortunately,
I think our vacancy is going to inch up a little
further," Achen said.
Within
the next few months, about 2 million more square feet of
office space will open, and less than 20 percent of it has
been reported as spoken for by a future tenant.
One
of the soon-to-open buildings, the 400,000-square-foot One
Central Park East office tower in downtown
Phoenix
, has yet to announce a lease agreement despite plans to open
by the end of the year.
Korth
said One Central Park is a desirable location that ultimately
will find its audience. But she agreed with other experts that
the high prices paid by companies such as One Central Park
developer Mesirow Financial Real Estate Inc. could make it
difficult to pay the bills, based on today's lower lease
rates.
More
than 2,200 commercial properties in
Maricopa
County
have received 90-day foreclosure notices since Jan. 1,
representing more than $7 billion in real-estate loans on
which the borrowers have failed to make payments.
The
problem, sparked by property-value declines and a lack of
refinancing options, has produced a steady flow of distressed
commercial properties onto the market, with a heavy emphasis
on small and midsize office and retail centers.
Industrial
and warehouse properties also have suffered tremendously, due
in large part to disappearing jobs. More than 4 million square
feet of previously occupied industrial and warehouse space has
been vacated so far this year.
Commercial-real-estate
broker Bret Isbell said the number of foreclosure notices
issued has been holding steady at 300 to 400 a month since
January, but actual foreclosures vary more widely because it
can take months - potentially even years - for a property in
default to be repossessed by the lender or sold to a third
party.
In
Arizona
, a lender can foreclose in either of two ways: It can take
the borrower to court via foreclosure, or it can bypass the
court system and call for a trustee's sale, which is quicker
and less expensive but requires the lender to waive certain
legal rights.
Isbell,
a broker with Scottsdale-based GPE Commercial Advisors, said
there's no indication that the pace of commercial foreclosures
is about to taper off. If anything, it's still building
momentum, he said.
However,
not all the news is bad, Colliers International broker Jim
Keeley said.
Keeley,
who has handled clients at Scottsdale Airpark - now more than
one-third empty - said that just since August, he has seen a
surge in inquiries from companies interested in relocating to
the area.
"The
whole world fell apart as of last September," Keeley
said. "Things aren't great, but it's finally getting a
little better."
For more
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