With Phoenix-area Housing Recovering

September 26, 2013

With Phoenix-area Housing Recovering

What about Commercial Real Estate? The Consensus Is In

TEMPE, Ariz. (Sept. 26, 2013) — We’ve focused lots of attention on the recovery of the Phoenix-area housing market, but many of us have no idea whether the commercial real estate market is coming back yet. This month, the W. P. Carey School of Business at Arizona State University brought together a group of the area’s most successful brokers for a forum and survey about progress on apartments, retail, industrial, offices and more. Some of the survey answers may surprise you.

“We talked with a lot of people feeling the market from their own individual perspectives, and because of that, it was hard to get consensus on many of the issues,” explains the forum organizer, Mark Stapp, director of the Master of Real Estate Development program at the W. P. Carey School of Business. “Everyone generally agreed we’re recovering in the commercial market, but we’re not there yet. At this point, lots of investor money is chasing only a few good deals in specific areas of the Valley. This is causing prices on the best property to go up, as people try to handle economic uncertainty and position themselves for a broader recovery.”

The brokers participating in The Commercial Real Estate Broker Forum came from a variety of sectors, specializations and brokerage houses across the Valley. The W. P. Carey School will continue to do this survey with them on a quarterly basis, to track perceptions, insights and trends on the commercial real estate market. The reports will each be available for download at the school’s website, www.wpcarey.asu.edu/realtyreports, under “Commercial Survey.”

Here are some of the results from the Quarter 4, 2013 survey:

Where are we in the cycle?
     o 87 percent – Recovery, 13 percent – Expansion, 0 percent – Correction, 0 percent – Maturity, 0 percent - Recession
Is the tight inventory for homes on the market affecting the commercial side at all?
     o 40 percent – Yes; 40 percent – Not yet, but it will; 13 percent – No; 7 percent – No response
Will the number of people who have stopped working or stopped looking for work affect commercial real estate/industrial/office/retail/multifamily?
     o 80 percent – Not yet, but it will; 20 percent – Absolutely; 0 percent – Not at all
Where are apartment rents headed in the next three months?
     o 53 percent – Stationary, 34 percent – Up, 13 percent – No response, 0 –percent – Down
Where are general industrial vacancy rates headed in the next three months?
     o 53 percent – Down, 27 percent – Stationary, 20 percent – No response, 0 percent – Up
Where are office vacancy rates headed in the next three months?
     o 67 percent – Down, 27 percent – Stationary, 6 percent – No response, 0 percent – Up
• Where are retail vacancy rates headed in the next three months?
     o 60 percent – Down, 13 percent – Stationary, 13 percent – No response, 13 percent – Up
Where are interest rates for commercial loans headed in the next three months?
     o 93 percent – Up, 7 percent – Down, Stationary – 0 percent, No response – 0 percent
Where are investor returns headed in the next three months?
     o 47 percent – Down, 33 percent – Stationary, 20 percent - Up
 
W. P. CAREY SCHOOL OF BUSINESS
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 more than 50 National Merit Scholars. For more information, please visit wpcarey.asu.edu and http://knowwpcarey.com.