PHOENIX—Both the Phoenix office and industrial markets had a strong showing in third quarter. The office sector is still faced with a 20%-plus vacancy, however, increasing net absorption has helped bring it down from more than 27% a few short years ago. Additionally, built up demand for new office construction, both spec and build to suit, continues to distort inventory just enough to slow vacancy progress, according to a report by Lee & Associates.
Matt DePinto, senior research analyst, Lee & Associates, tells GlobeSt.com: “The overall Valley CRE market is moving forward at a steady and sustainable pace without the hyperbole and outright rejection of market fundamentals that lead up to the crash in 2008. The pace is moving at clip that allows greater access to those wanting to get into the market in a small way yet there are enough high-profile deals to whet the appetite of big institutional investors.”
Prior to the recession, the Phoenix office sector was extremely overbuilt from the last boom cycle. Arizona's entire real estate market collapsed, including the housing market. The Phoenix market at that point had sunk lower than any other market in the country (with the exception of Las Vegas).
For the industrial market, most indicators show that this quarter's numbers are finally at a point not seen since 2007, says Lee & Associates. For the past eight years, this sector has battled back each quarter, only to get knocked down again and then recover somewhat the next quarter. Abundant, well-priced inventory is scattered throughout a diverse geography and able to satisfy most needs of the lessee and buyer. There are sections with obsolete product, but the construction pipeline is poised to meet the replacement needs of the sector. Given all the success of the industrial sector, it could be doing even better if the Valley's single-family housing market had not fallen so deeply, says DePinto.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
