Craig Trbovich Commercial Real Estate –
Mid-year commercial leasing results for Phoenix show a lackluster first half for 2013. Although Retail finished with a very strong second quarter, Warehouse has cooled from a hot late 2012 and early 2013 and Office has continued to show anemic progress.
Which continues to beg the question: When will we turn the corner and become a rapidly growing economy with a vibrant commercial real estate market? I don’t have a crystal ball, but an interesting change has taken place reflecting new consumer confidence and spending, which will be drivers of a rapid recovery.
For 15 straight quarters, from Q1 2009 to Q4 2012, the Federal Reserve’s Household Financial Obligations as a percent of Disposable Personal Income (FODSP) has decreased, that’s 4 years of decreasing obligations. While this was a good thing in 2009, there was also a bit of an over correction compared tohistorical numbers when Q4 2102 reached a near record low since 1980 of 15.40%:
Household Financial Obligations as a Percent of Disposable Income
| Time frame |
Average % |
Highest % |
Lowest % |
| 1980-2000 |
16.70 |
17.93 |
15.35 |
| 2001-2007 |
17.62 |
18.90 |
17.04 |
Q1 2013, with a 15.69% level was the first increase since Q1 2009 and one of the lowest in over 30 years, showing that families are gaining confidence and able to borrow again to make purchases and other financial commitments!
All along employment numbers have been steadily improving. For example, our nation has averaged over 200,000 new jobs a month over the past 6 months, compared to 160,000 over the same period last year, a 25% increase. While the unemployment still has room for improvement, it has steadily moved downward from 8.2% a year ago to the current rate of 7.6%. (Phoenix Metro unemployment was most recently reported at 6.8%, a decrease from 7.4% the year before.)
An increasing number of jobs and Americans who are willing to make longer term financial commitments show promise for an even stronger Commercial Real Estate market and US Economy as we finish 2013 and look toward 2014 in the coming months. These numbers may also help understand why the Phoenix Retail market is heating up like the Phoenix sun this summer.
Mid-Year Phoenix Lease Statistics
Phoenix Retail
|
2013 Q2 |
2013 Q1 |
2012 Yr End |
|
| Lease vacancy rate |
10.8% |
11.1% |
11.2% |
| Lease SF net absorption |
1,032,306 |
471,851 |
2,767,984 |
| Average lease rate (net) |
$14.23 |
$14.28 |
$14.32 |
Phoenix Warehouse
|
2013 Q2 |
2013 Q1 |
2012 Yr End |
|
| Lease vacancy rate |
11.5% |
11.0% |
11.4% |
| Lease SF net absorption |
512,919 |
1,250,004 |
2,143,152 |
| Average lease rate (net) |
$5.52 |
$5.50 |
$5.45 |
Phoenix Office
|
2013 Q2 |
2013 Q1 |
2012 Yr End |
|
| Lease vacancy rate |
19.4% |
19.2% |
19.4% |
| Lease SF net absorption |
165,061 |
329,651 |
1,610,615 |
| Average lease rate (gross) |
$20.05 |
$20.39 |
$19.95 |
(Source: CoStar Group, Inc.)
Later this month, I’ll take a closer look at investment sales for the first half of 2013 and discuss emerging trends. For a no obligation analysis of your property, please call me at (480) 522-2799 to “TrboCharge” your investment real estate today.