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Out-of-state investors are taking a dimmer view of Tucson's office real estate as the housing slowdown takes its toll on that market, said a second-quarter market report from real estate firm Marcus & Millichap.

"After several years of out-of-state buyers flocking to the metro, particularly from California, local investors will likely face reduced competition in the quarters ahead," the report said.

One of the factors affecting the market is a predicted 2 percent drop in overall employment in Tucson this year. Office-using employers are expected to shed 1,800 jobs in Tucson this year, for a reduction of 2.4 percent, the report said.

At the same time, more space is coming online this year than last year. Roughly 136,000 square feet is expected to be added to the market this year compared with 104,000 square feet in 2007, the report said.

Economic uncertainty is expected to push up vacancy to 11.9 percent this year from 10.6 percent last year, according to the report.

Rents for office buildings are forecasted to increase less than 1 percent, but that increase will be effectively wiped out by concessions, the report said.

Nevertheless, the report called the long-term outlook for Tucson "fairly optimistic."

"Steady demand will be generated by support positions for the area's local colleges and universities, specifically the University of Arizona," the report said. "Furthermore, population-serving employment is expected to increase in the coming years as the metro area's household base expands at a rate far greater than the national average."

Jordan Simon, a partner in local office development firm Venture West, said the market is "slightly slower than the past few years," but buyers are still interested in well-located, well-developed projects. Simon said his firm sells properties only to end-users and not to investors, so he hasn't noticed a drop-off in investor interest.

One of Venture West's projects, a 30,000-square-foot complex called SwanLee Offices, near North Swan Road and East Lee Street, is about 40 percent reserved, he said.

The company has also sold about half of Innovation Corporate Center, a 100,000-square-foot complex at North Oracle and West Tangerine roads, Simon said.

"We're still seeing strength in the market," he said.