Qthe terrible may be boring, but when it relates to commercial real estate outlook and commercial real estate industry Phoenix, there is no good change for business.
“At this point in the market and cycle, Phoenix has everything,” said Roland Murphy, research director at ABI Multifamily. “We are still very affordable, we are very successful in economic development across a range of postal levels / industries, and we are modernizing and adapting our standard of living better.
The United States is the most important factor for the economic experts who are in the final stages of a growth cycle entering the 11th year. Many people show that there is a global economic slowdown and that there is a warning that could start a recession in the United States.
However, commercial real estate experts in Greater Phoenix see a significant room for growth in all sectors of the market. The strongest sectors in the next decade are multi-business and industrial markets, as people arriving in Arizona are expected to continue and the demand for logistics, manufacturing space and strong distribution will continue.
It is like a total steam ahead in 2020 for the industrial market. Delivery and vacancies were moving smoothly in 2020 and there was an increase in rents, so all signs show that there is a healthy market for industrial products.
“We are a very healthy and active market,” said Steve Larson, JLL Executive Vice President. “People are optimistic about the current state of the industry and the future of the runway. I hope that we will see more manufacturing and logistics requirements landing here, which will continue at fairness. ”
The industrial market appears to be well balanced, with healthy activity in sub-supermarkets throughout the Glen.
“I am very optimistic about its high tech manufacturing space, particularly around Chandler Gate airports and (Phoenix-Mesa),” said Pat Harlan, JLL executive vice president. “We are looking at solid pre-leasing activity in these two sub-groups, both of which have a limited amount of land available.
“The South East Valley is currently under construction of approximately 2.3 million square feet, which is right when you look at the vacancy rate of 6.9 per cent and the 2 million square feet sucked in the area through the third quarter of 2019.”
“The sub-supermarket Loop 303 / I-10 and the sub-supermarkets of Loop 202 / East Chandler have great vibrancy,” said Isy Sonabend, Senior Vice President at NAI Horizon. “Both industrial markets are building strong cycles and the construction of state-of-the-art companies with Fortune 500 companies. Western Valley subsidiaries are building on the prospect of ecommerce and manufacturing… warehouses and large box plants. ”
Another type of product that the Valley should expect is more than data centers. Microsoft bought land in the Western Valley with plans or data center campuses, and in the Eastern Valley, Google attracted an Elliot Technology Path in Google's Mesa.
Most of the new industrial growth in the Valley will be in the form of distribution and logistics centers to serve the growing e-commerce market. While these are large-scale products, there is plenty of activity going into 2020 for small and medium-sized industrial tenants.
“Everyone is listening to the major data centers and e-commerce remains strong, as well as advanced manufacturing,” said Will Strong, executive management director, Cushman & Wakefield. “There is a good balance, as is the case. tender sheets for our offers of investment sale remain complete and our leasing partners continue to lease space. ”
Solid economic characteristics? Check.
Large number of new residents? Check.
Increased demand for rented housing? Check.
Great Phoenix market checks all the boxes showing a very healthy environment for owners, operators and heterogeneous developers. Due to the strong momentum and the fact that the market is extremely short on the supply Phoenix is one of the best markets for multi-business investors in the next few years.
“These strong vacancies, combined with the intensity of overall housing supply (single and multi-family), have historically been driving vacancy rates to low levels and Phoenix should be maintained among the largest rental growth markets nationally. in 2020, ”said Matt Pesch, Deputy President of the CBRE division Phoenix Multifamily Institutions Property. “Phoenix remains one of the most affordable markets in the West United States.” T
New multimodal projects are planned throughout the Glen, but more is needed. According to Tom Brophy, research director at Colliers International in Arizona, there is a deficit of 20,000 to 30,000 units based on Maricopa County's population growth.
“They have had the lowest vacancy rates since the 1970s,” said Chris Roach, Associate Vice President, Colliers International in Arizona. “Some of the biggest developers are raising construction costs and skilled labor shortages.” T
But these blinds do not match the demographics and aspirations of people moving into the Valley.
“We are living through tectonic shifts pushing us longer and longer in a more centralized society that really started in 2011 and 2012,” said Cindy Cooke, Senior Executive Vice President at Colliers International in Arizona. “Renter family levels have increased by almost 7 per cent since 2000. More localized, Maricopa County has seen a dramatic increase of 20 per cent.
The increase in the number of residents in Maricopa County and the option of renting instead of purchases has resulted in a housing shortfall, which the Phoenix market cannot remedy.
“According to our estimate, the Phoenix metro is building 10,000 to 15,000 housing units annually,” said Asher Gunter, Executive Vice President of CBRE Phoenix Multifamily Institutions Properties. “Due to the current shortage of labor, developers are unlikely to be able to build quickly to keep pace.” T
One potential field for investors to pay the high demand for multi-million products into the value-added market. In the Phoenix market, the average multi-dimensional development was built in 100 units or more in 1994, making the vast majority of these properties more acute for improvement. While investors focus on key markets such as Central and Midtown Phoenix, Tempe and Scottsdale already in value-added properties, there are many other areas that could see investor activity in the years ahead.
“Glendale has a great opportunity to add value, as well as the more mature parts of Chandler and South Phoenix,” said Murphy. “Investors need to be more informed and selective than they did a few years ago, but shoppers still have the opportunity to be careful.”
The Greater Phoenix office market follows a similar path to the industrial and multimedia markets. The outlook for 2020 and subsequently is strong based on a large number of companies moving into the market. These companies are fleeing higher operating costs in coastal markets or expanding into the market, making demand for office space high.
“New buyers entering high water pricing are not afraid; they are looking for flags in Phoenix and are looking for price alternatives in the West Coast gate markets such as San Francisco, Seattle and Los Angeles, ”according to Michael Garlick and CJ Osbrink, Newmark executive management directors. “Especially in Thampe, Scottsdale and the Camelback Trail, who are driving the highest rents and have the most aggressive buyer pools.” T
The numbers entering the last quarter of 2019 were unprecedented, with record intakes (over 3 million square feet through R3), recording the number of buildings and a healthy amount of pre-leasing activity by curatorial companies. Since 2010, the vacancy rate has fallen by 40 percent, from 19.7 percent in 2010 to the current low rate of 11.7 percent.
“Phoenix is in a good position to continue corporate expansion and see relocation,” said Steven Schwartz, managing director of ViaWest Group. “This is due to a pro-business environment including low business cost, low cost of living, close to California (not to be in California really), excellent quality of life, and our universities are bringing qualified graduates. in critical areas.
“In recent years we have recorded the absorption of the office and is in a variety of industries and diversified industries, including financial services, healthcare and technology. This is the first growth cycle with a diversity of industry diversity. ”
A large number of Coworking institutions are already renting a large amount of space at two office developments starting up in 2020, Block 23 at CityScape and The Watermark. The other major office projects expected to be delivered in 2020 are Wexford (227,000 SF), I.D. Tempe Phase I (185,833 SF), 777 Tower at Novus Innovation Path (169,500 SF) and Phase V Rio2100 (169,000 SF).
All these products are hoping to attract large tenants to fill this new Class A space quickly.
“If absorption velocity continues, and all the indicators will be, it will be more difficult for small tenants to find space,” said Laurel Lewis, Senior Vice President for NAI Horizon. “The lease rates are still rising and there is no ready lease space. Tenants will have to start looking for space earlier than they have in recent years. The competition for a ready space with a lease is heating up.
The market sector alone could slow down the retail sector, due to changing consumer habits. In the Greater Phoenix area, the retail industry is healthy, with an overall vacancy rate of 6.9 per cent, equivalent to pre-recession levels.
“Residential growth, infrastructure, education and employment will drive the retail market in 2020,” said Rommie Mojahed, retail and sales leasing director for SVN | Commercial Desert Consultants. “However, I am concerned about the rising building costs and the high rates recorded, but we are still much cheaper than California.” T
Scott Glenn, Marcus & Millichap's national retail director, said that the Phoenix retail market was seen as a primary market for national investors, which was not always the case.
“At any time the population is growing, job growth, family formation; these are all good for retail, ”Glenn said. “And, there has been little new build since the last big cycle, so that this has helped keep vacancy rates down.” T
Retail construction is taking place in the suburbs and developers continue to bring new products to the location of new housing developments. In the more established parts of the Valley, there is likely to be little new construction as many large box shops are closed.
“There is a very limited development of shopping centers because so many large box tenants are becoming more competitive in the digital economy,” said Dave Cheatham, president of Velocity Retail Group. “I think in 2020 the amount of new development will reduce by at least 30 per cent. This will result in a delay in the development of new shops and will result in a reduction in land take. ”
Keith said that the most active market category is small buildings (below 10,000 square feet) with the inhabitants of any tenant or multiple tenants.
Both Cheatham and Mojahed believe that the arrival of the Fry Food Store in South Phoenix will help strengthen retail prospects in the Central Business District.
“Roosevelt Row is a great example of restaurants and entertainment, and there's more on the way,” said Mojahed.
“All new residential projects that create a larger population base add up to 24 hours more demand for retailing,” said Cheatham. “This is a healthy and positive move to the mid-Phoenix market, as Phoenix matures and comes with other major metro areas.” T
One of the ongoing retail issues that will not have been resolved for at least a few years is that of former iconic bags such as Slow Fiesta in Mesa and Metrocenter Mall. The previously strong retail centers are better than their use as shopping centers, but with the right redevelopment, they could again be valuable community assets.
“I believe there will be education and employment or employment opportunities,” said Mojahed. “Both sites offer access to the main road and the numerous parking serving these types of uses.” T
“(Redevelopment can be complicated) as many of the major tenants have multiple ownership which can affect the owner of Mall,” said Cheatham. “Covenant, Codes and Restrictions often hinder the transformation of these projects to the needs of today's real estate, even though the real estate is well located.” T
The prospect of the land
Land values will continue to rise as the wider Valley expands. In the core business areas in the Valley, there are many very rare empty, as developers are introducing these infill development opportunities. The area surrounding the new South Mountain Loop 202 road, which will operate in 2020, is one area that will see a sharp rise in land values.
“I think this great road is a great way to connect the Eastern Valley with the Western Valley,” said Kuldip Verma, founder and president of Vermaland. “I think we will start to grow and develop this area. I understand many new projects coming to that area. ”
Vermaland has a huge portfolio of land, mainly in the West Valley, and is confident that its investment in that part of the Valley will pay off. It mentions all the growth in Buckeye, the fastest growing city in the United States since July 2017 to July 2018. In addition, some of the world's most successful companies such as Google and Amazon are buying land in Glen. Western, and even Bill Gates and a group of which he is a part, he received 30,000 acres of land for development.
“I see much of the growth to come to the Phoenix in the west,” said Verma. “It is one of the areas where land prices are still relatively low. Certain parts of the Western Valley are only a few hours from parts of California. ”
Another area may be ripe for development than Pinal County. Nikola Motors and Lucid Motors have worked on their manufacturing facilities in County Pear and are expected to bring in over 5,000 jobs. Enter the expected support companies in these two automobile devices, and the number of new jobs could tick over 10,000. Developers have long adopted a fan-and-sight approach to the purchase of land in County Pearse, but now that work is underway on these major employment drivers, 2020 land transactions could be seen. in that sub-market.