Prudential Commercial Real Estate: News

NEWS

PHOENIX OFFICE MARKET HANGS ON TIGHT

Local Businesses Take Advantage of Increased Space and Lower Rents

Scottsdale , Arizona -- Apr 10, 2008 - In its highly anticipated first quarter 2008 report, Prudential Commercial Real Estate's Arizona operation reports lower demand due to slower job creation, higher vacancy and a favorable market for tenants.

In the face of a softer office market, Phoenix buyers and tenants reassess business expectations and economic conditions at the start of 2008. Slowing rent growth will allow tenants to obtain additional space, which will alleviate increasing vacancy throughout the Valley, most specifically in the suburban submarkets. Opportunities are available to tenants seeking expansion in the Phoenix metro office market.

In Prudential Commercial Real Estate's first-quarter report, vacancy was calculated at 15.2%. 1,050,000 square feet of office space was delivered in the first quarter and the Valley has over 5 million square feet in the planning stage. Net absorption totaled an approximate negative 50,000 square feet. New space will increase by over 4 million square feet in 2008.

Prudential forecasts that vacancy will continue to increase this year, however it can be expected to moderate by year-end into 2009. Office condo sales are expected to grow as businesses reassess the advantages of owning versus leasing. Building owners have been re-pricing to meet on-going demand.

"Throughout 2008, vacancy will rise modestly before leveling out," says David Illsley, managing director/designated broker of the Prudential Commercial Real Estate's Arizona operation. "The long-term economic outlook remains favorable for Arizona with the Phoenix metro office market being a cost-effective location for many businesses."

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Phoenix Office Remained Buoyant Throughout 2007

Scottsdale , Ariz., -- Jan 23 , 2008 - In its highly anticipated fourth quarter 2007 report, Prudential Commercial Real Estate's Arizona operation reports increased sales activity, completions and low absorption. Despite the volatility of the single-family home market the commercial market sustained strength throughout 2007.

Prudential Commercial Real Estate forecasts that over 34,000 new jobs will be added by the end of 2008, which is a 1.7 percent increase over 2007, and more than 10,000 of these jobs will be office-using positions. In response to this job creation, office space increased by over one million square feet in the fourth quarter and over 3.8 million square feet in 2007. New development is expected to increase by 3.5 million square feet in 2008.

Demand for commercial assets remained strong throughout 2007. Office sales (including office condos) skyrocketed reporting over 700 sales and a total sales volume of $3.7 billion. Small business took advantage of a large pool of new office condos, claiming 11.2 percent of sales volume and almost 50 percent of overall office sales in 2007. Speculative office development rose swiftly placing upward pressure on vacancy. Additionally, sublease space flooded the market this year due to the subprime fallout.

"In the first half of 2008, we estimate sales activity to level-out. Building owners will try to move office assets by repricing," says David Illsley, managing director/designated broker of the Prudential Commercial Real Estate's Arizona operation. "With spec office space rising in 2007, developers are urged to pre-lease before construction can begin in 2008."

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