Phoenix-area office market remained flat in '11

The Phoenix-area office market continued to struggle in 2011 with oversupply, high vacancy rates and a large number of property owners in default on their real-estate loans. However, conditions were ideal for office tenants to negotiate new lease agreements, which many did in 2011 -- including those with existing lease contracts that don't expire for two or three more years, local analysts said. With premium office space available at deep discounts in areas such as downtown Phoenix and the Camelback corridor, many large office tenants opted to relocate. The zero-sum migration trend benefited office-building owners in about half of the 25 Phoenix-area submarkets tracked by commercial real-estate firm Colliers International in Phoenix, while the other half of those submarkets suffered as a result. Among the areas that lost tenants overall were the Piestewa Peak corridor, Paradise Valley and midtown Phoenix, along Central Avenue between McDowell and Camelback roads. "I've got three buildings in midtown, so I'm well aware of the problem," said Jim Achen, senior vice president of Phoenix leasing and sales at commercial real-estate firm Transwestern. Still, Achen said, not all of the tenant movement in 2011 was local. Phoenix did pick up some new employment through office expansions and relocations from other states such as California.

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