Phoenix Office Building Dips to Lowest Level

Metropolitan Phoenix’s office-building pace dropped to its lowest level in nearly two years during the second quarter, as the city’s soft market conditions encouraged lenders to tighten their purse strings.

About 3.2-million-square-feet of new office space was under construction in the second quarter, down from a peak of 7.6 million square feet in the third quarter of last year, according to Mountain West, a Phoenix-based real estate consulting and information services firm. Many lenders don’t want to fund new space because the the area’s office-vacancy rate is close to 30% and some landlords are making big concessions to tenants, the report said.

The market should improve as more new space is absorbed, and a healthy building pace should resume by mid-1988, the Mountain West report said.