By Matt Hudgins | The Wall Street Journal
Despite relatively high office vacancy rates, some investors are starting to pay up for office buildings in midsize office markets such as Phoenix on the bet that vacancies soon will fall and rental rates will rise.
It is a risky bet. Even though job growth has picked up, the nation’s office market is recovering at a slow pace and occupancy still hasn’t returned to prerecession levels. Nationwide, the office vacancy rate was 16.6% during the second quarter, according to REIS Inc. While that is much improved from the peak of 17.6% in the first quarter of 2011, it still is higher than the low point of 8% in the third quarter of 2000. In Phoenix, the nation’s 18th-largest office market, the vacancy rate is much higher at more than 25%, according to REIS.
