Middle Market Digest: This Week in Southwest

The Phoenix market continues to see good news. Additional multifamily and industrial reports show a strong market with the potential for increased growth. Multifamily sales closed strong in the fourth quarter, and Maricopa County became the top spot in the country for population growth, with many residents from California migrating to the area. As a result, many California investors are also planting dollars there as well. The industrial market has also seen an increase in activity. The vacancy rate has now hit 7.8% and there is more than 6 million in new construction underway. To find out more about the Phoenix market and major transactions, as well as other deals in the Southwest region that you may have missed this week in Southern California, Utah, Arizona and Nevada, read on.

BY THE NUMBERS

PHOENIX—The Phoenix MSA multifamily market had another robust year fueled by both continued jobs, +2.6% and population, +2.2%, growth. On the jobs/economic investment front, the Phoenix area witnessed major announcements including: SkyBridge Arizona at Phoenix Mesa Gateway Airport (17,000+ jobs), ASU expansion (topped 100k+ students 2017/18, 3,000+ jobs), USAA (1,000+ jobs) and Bill Gates’ backed $80M smart city venture in the West Valley to name but a few. In regards to population, in 2016, Maricopa County overtook Texas’ Harris County as top spot for population growth, adding 222 residents per day or 81,000 total new residents. In 2017, according to North American Moving Services Migration Report, Arizona was the top inbound state in the country for domestic migration in 2017 and 7th in overall net population change. Additionally, U-Hauls own Migration Report pegged Tempe as the country’s top city for net inbound migration. The MSA’s total sales volume of 10+ unit properties decreased by 5% YOY, to $4.81 billion across 339 transactions representing 41,288 total units sold. California-based investors continue to be the dominant buyer of multifamily properties in the Valley accounting for 32% of total units transacted, or 13,368 units, which is a 10%+ QOQ increase. Arizona-based investors came in 2nd with a little over 5,900 units purchased. Sales of 100+ unit properties witnessed a mild contraction of 5% YOY to $4.33 billion. Average price-per-unit amount increased approximately 10% to $121,349. Whereas 100+ unit properties saw sales volume contract, 10 to 99 unit properties saw its volume increase 3% to $482M with a surge of 28% in average price-per-unit amount to $86,277. Price-per-unit increases in the smaller property size category dovetails the sales trend which began in earnest in late 2016 through YE 2017, as mid-century built, extensively repositioned properties having been coming back online for sale. In fact, pre-1980’s built product represented 72% of all transactions for 2017.