PHOENIX-Not so long ago, investment sales professionals here were “wishin’ and hopin’ and prayin’” for a sign that the market had hit bottom and was on its way up again. Today, it’s not just wishful thinking – investor interest has returned to the local office market, according to experts.
“Activity here is robust, and that’s something that I couldn’t have said 12 months ago,” says Jan Fincham, a principal with Lee & Associates’ local office. “Investors see Phoenix as a prime fishing spot for value.”
While institutional investors have yet to return to Phoenix in large numbers, private investors more than make up for the lack of institutional demand, Fincham tells GlobeSt.com. “Private investors see the opportunity to purchase assets at below replacement cost in a market that they know has performed well in the past,” he explains.
Fincham notes that foreign investors, particularly those from Canada, are an increasingly important part of the investor mix in Phoenix. “Canadians have always loved Phoenix because of the weather, and given the strength of their currency, they are now investing here,” he says.
Fincham notes that Canadian investors initially sought out opportunities with residential properties and have moved into commercial real estate. He currently is working with four Canadian investors to identify opportunities in the Valley.
Investor demand has rebounded enough so that prices are climbing and cap rates are compressing, according to Patrick Dempsey, a principal with Lee & Associates’ Phoenix office. He tells GlobeSt.com that cap rates have moved from 9% to 10% in 2009 to 7.5% to 8% today.
“We’ve had almost 36 months of correction, and prices are back to a point where we are affordable, particularly when compared to California and Nevada,” Dempsey says. “Investors now anticipate improvement.”
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