It’s shaky, but improving. Experts say the Phoenix-area commercial real estate market is now officially in a slow recovery mode. A full 100 percent of the real estate brokers participating in a quarterly survey by the W. P. Carey School of Business at Arizona State University indicate they feel “optimistic,” and 84 percent believe the market is on an upswing.
The participants recently came together for a forum and the survey about progress on apartments, retail, industrial, offices and more. They say land prices are still going up and that some areas of the Valley are already doing better than others. However, don’t expect any drastic changes over the next year.
“We expect 2015 to be much like 2014, so we’re likely looking at one more year of slow recovery,” 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. “Over the long run, we’ll grow, but in ways we haven’t in the past — like more mature, established markets that focus on infill and developing in context with what’s already there. Some reasons for our current slowdown include tight lending standards, sluggish job and wage growth, and the need to absorb around 150,000 new homes built between 2000 and 2007. I also think it will be at least 2016 before any significant new retail space comes onto the market.”
Those 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 co-organized by Pete Bolton, executive vice president and managing director of Newmark Grubb Knight Frank’s Phoenix office. Quarterly reports from the forums are available for download at the W. P. Carey School’s website, http://research.wpcarey.asu.edu/real-estate/commercial-reports under “Commercial Brokers Survey.”
Here are some of the Quarter 3, 2014, results:
- Where are we in the cycle?
- 92 percent – Recovery, 8 percent – Expansion, 0 percent – Correction, 0 percent – Maturity, 0 percent – Recession
- NOTE: 100 percent said the area was in recovery in Quarter 1, 2014.
- In what direction is the metro Phoenix market moving?
- 84 percent – Up, 8 percent – Stationary, 8 percent – Down
- What is the overall feeling about the metro Phoenix commercial real estate market?
- 100 percent – Optimistic, 0 percent – Pessimistic
- Is uncertainty in the federal government affecting the commercial real estate market and hindering our local growth potential?
- 100 percent – Yes, 0 percent – No
- Have land prices reached their peak?
- 82 percent – No, 18 percent – Yes
- Have homebuilders stopped buying land?
- 91 percent – No, 9 percent – Yes
- Is the tight inventory of homes on the market affecting the commercial side at all?
- 50 percent – Yes, 50 percent – No effect, 0 percent – Not yet, but it will
- Where are apartment rents headed in the next six months?
- 55 percent – Stationary, 45 percent – Up, 0 percent – Down
- Where are office vacancy rates headed in the next six months?
- 73 percent – Down, 9 percent – Stationary, 18 percent – Up
- Where are retail vacancy rates headed in the next six months?
- 64 percent – Down, 36 percent – Stationary, 0 percent – Up
- Is this a landlord or tenant industrial market?
- 83 percent – Tenant, 17 percent – Landlord
- Where are interest rates for commercial loans headed in the next six months?
- 75 percent – Stationary, 25 percent – Up, 0 percent – Down
- Where are investor returns headed in the next six months?
- 92 percent – Stationary, 8 percent – Down, 0 percent – Up
The W. P. Carey School of Business at Arizona State University is one of the top-ranked and largest business schools in the United States. The school is internationally regarded for its research productivity and its distinguished faculty members, including a Nobel Prize winner. Students come from about 100 countries and include about 50 National Merit Scholars.
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