October 9, 2014

Slow and Steady Wins the Race – Trbo’s 3rd Quarter Leasing Market Report

Craig Trbovich Commercial Real Estate –

After three quarters, the story of 2014 is taking shape.  Our economic recovery stalled early in the year when US Gross Domestic Product experienced negative growth for the first quarter and unemployment increased in February.  Those poor economic results also had a negative impact on the commercial real estate recovery as shown in the tables and charts below.  However, GDP bounced back in the second quarter with the best performance in two and a half years and unemployment is currently at its lowest level since the recession began.

In my previous report, I wished for a Hot Sauce to fire up our economy.  Well strong GDP and employment numbers are two key ingredients to a Red Hot Chili Peppers recovery.  And depending on your political views, the election results next month could light a little fire under our economy too.  But one quarter does not an economy make, good or bad.  Consistent stronger results is what this economy needs to heat up.  Slow and steady wins the race, as they say, and our recovery has certainly been slow and mostly steady, so eventually it will to turn into noteworthy expansion.  Now pass the Tabasco please!


US Unemployment Rate

5.9% (was 6.7% in March).  Lowest level in 6 years!


Gross Domestic Product

4.6% (second quarter).  Recently revised government statistics show a strong 4.6% increase after a rough first quarter that was down 2.1%.  Advance estimate of Q3 GDP will come out on Thursday, October 30.



2.7% (second quarter) Net Savings as a Percentage of Gross National Income is at its highest point since the recession.


Stock Market

Even though the Dow has set a number of record highs this year, it is up only 5-6% so far this year.

UPDATE:  After October 10, Close – Dow is down 0.2% for the year; S&P 500 is up 3.1% and the NASDAQ is up 2.4% for the year.


Housing Market

Housing has continued an up and down year with recent positive reports.  Many young people who would like to buy, are strapped with college debt, but as the jobs market continues improving, so will their ability to enter the housing market.


 2014 Q3 Phoenix Leasing Statistics

The Phoenix commercial market and economy has mirrored the national level in many ways.  Unemployment in Phoenix rose slightly earlier this year, but the economy is generally improving and businesses are more positive than in recent years.  Early 2014 is looking more like a small bump in the recovery road, as is reflected in the results below.



Phoenix Industrial Warehouse

Positive absorption continues to push vacancies lower in 2014 as the Industrial market continues to expand and absorb new product.   Lease rates have leveled off in 2014 after strong increases in recent years when the market rebounded from Great Recession lows.

Phx Office w Table



Phoenix Office

Slow and steady wins the race may also be the mantra for the office market.  Boring, but improving is not such a bad thing.

Phx Ind w Table



Phoenix Retail

Retail has also continued to improve with vacancy creeping lower.  Similar to the industrial market, lease rates have also levelled off but retail is achieving positive net absorption for the year.

Phx Ret w Table



Later this month, I’ll take a closer look at year-to-date investment sales and discuss emerging trends.  For a no obligation analysis of your property, please call me at (408) 522-2799 to “TrboCharge” your investment real estate today.



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