The experts say Phoenix-area commercial real estate is officially in recovery mode, but still short of expansion. A full 100 percent of the real estate brokers participating in a quarterly survey from the W. P. Carey School of Business at Arizona State University agree the Valley’s commercial sector has followed the local housing market into recovery, but the recovery is slow, uneven and likely to remain that way through much of this year.
The participants recently came together for a forum and the survey about progress on apartments, retail, industrial, offices and more. Ninety percent say they don’t think Phoenix-area land prices have reached their peak yet. Meantime, certain areas, such as Scottsdale, central Phoenix and the southeast Valley, are doing much better than others in the commercial market, with progress overall.
“We’re seeing little bits of improvement in different parts of the Phoenix-area commercial real estate market,” explains one of the forum’s organizers, Mark Stapp, director of the Master of Real Estate Development program at the W. P. Carey School of Business. “While we’re still dealing with fundamental weakness in the national economy, I do expect to see a significant bounce in the local commercial real estate market within the next year as things continue to get better.”
The brokers participating in The Commercial Real Estate Broker Forum come from a variety of sectors, specializations and brokerage houses across the Valley. The event is moderated and partly organized by Pete Bolton, executive vice president and managing director of Newmark Grubb Knight Frank’s Phoenix office. Quarterly reports are available for download at the W. P. Carey School’s website.
Here are some of the Quarter 1, 2014 results:
- Where are we in the cycle?
- 100 percent – Recovery, 0 percent – Expansion, 0 percent – Correction, 0 percent – Maturity, 0 percent – Recession
- (NOTE: Only 87 percent said the area was in recovery in Quarter 4, 2013.)
- In what direction is the metro Phoenix market moving?
- 73 percent – Up, 27 percent – Stationary, 0 percent – Down
- Is uncertainty in the federal government affecting the commercial real estate market and hindering our local growth potential?
- 100 percent – Yes, 0 percent – No
- Will the number of people who have stopped working or stopped looking for work affect commercial real estate/industrial/office/retail/multifamily?
- 40 percent – Not yet, but it will, 30 percent – No, 30 percent – Yes
- Have land prices reached their peak?
- 90 percent – No, 10 percent – Yes
- Have homebuilders stopped buying land?
- 100 percent – No, 0 percent – Yes
- Where are apartment rents headed in the next three months?
- 45 percent – Stationary, 40 percent – Up, 10 percent – Down; 5 percent – No response
- Where are office vacancy rates headed in the next three months?
- 64 percent – Down, 27 percent – Stationary, 9 percent – Up
- Where are retail vacancy rates headed in the next three months?
- 73 percent – Stationary, 18 percent – Down, 9 percent – Up
- Is this a landlord or tenant industrial market?
- 100 percent – Tenant, 0 percent – Landlord
- Where are interest rates for commercial loans headed in the next three months?
- 91 percent – Stationary, 9 percent – Up, 0 percent – Down
- Where are investor returns headed in the next three months?
- 64 percent – Stationary, 18 percent – Up, 18 percent – Down
Those interested in real estate can hear more about how the housing side of the market is doing at an event next weekend. Stapp will be one of the speakers when the W. P. Carey School of Business and The Arizona Republic present “Phoenix Housing Market Explained II” on Jan. 25 at ASU’s Tempe campus.