Commercial real estate affords insight into what is driving the economy, through industry accounting of the strength of its various sectors — office, industrial, retail and multifamily. All sectors of the Valley’s commercial real estate market are seeing significant new development, with more than 7.5 million square feet of office, industrial and retail space and more than 4,800 multi-family units currently under construction.
The uptick in new construction shows momentum in our market, however the question has to be posed: Why new construction when there is still double-digit vacancy rates? The answer is that current tenant demand is overwhelmingly about location and quality.
Users want high-quality, functional space in submarkets that offer easy access to amenities, transportation options and skilled workers, for office and industrial users, and in premium shopping centers for retailers. This is reflective of national trends; demand is for new, high-quality space, and this is where most of the leasing and sales activity is, as well as occupancy and rent growth. Availability is much tighter in Class A office buildings; in efficient, well-designed industrial buildings; and in newer lifestyle and regional shopping centers.
To meet user demand, developers have broken ground on new speculative development and redevelopment projects and build-to-suit options. The market has become more bifurcated between Class A projects and everything else. For most product types, we are seeing significantly improved performance when landlords are willing to invest in, and upgrade, their existing, older assets — from converting old, industrial or office space to new “creative office” space or simple upgrades to common areas to keep older retail centers looking fresh. Ultimately, the thing to remember is that, in a market where the divide between Class A and everything else is widening, you have to be willing to take the necessary steps to meet tenant demand.
This issue’s cover story looks at where we are now in the development cycle, with investment and construction. With input from developers of some of the significant projects and other industry leaders, it explores how issues such as water, light rail and traffic are shaping development.
In another feature article in this issue, Kory Kogon explores the impact of technology on productivity in the business world — which may not always have a positive effect. And the bottom line comes under questioning scrutiny in Lisa Earle McLeod’s Roundtable article as she discusses reasons a “profits only” strategy may not result in long-term business profitability. Articles on these topics, and more, provide readers with varied and relevant information to help our business community grow.
This issue of In Business Magazine also provides businesses a guide to the best in commercial real estate services in the Valley, which will be available online for a full year.
Please enjoy this annual commercial real estate issue of In Business Magazine.
DTZ Managing Principal Bryon Carney has nearly 30 years of experience in commercial real estate. He is responsible for the company’s strategic planning as well as guiding the day-to-day operations of the firm’s 125 professionals. Under his guidance, the Arizona office of DTZ has grown into one of the largest and most successful commercial brokerage offices in the Southwest. In his management role, Carney successfully directed three corporate brand changes, first as the company became the independently owned and operated Grubb & Ellis|BRE Commercial in 2003. In 2010, he was one of three leaders of Western U.S. firms that joined forces with 12 formerly independent companies to form Cassidy Turley. Most recently, in 2015, he was part of the national leadership group that oversaw the change to DTZ, a global top-three commercial real estate services company.