August 13, 2015

Swimming Upstream – Trbo’s 2015 Mid-Year Market Report

Craig Trbovich Commercial Real Estate –

Swimming Upstream - BearThe economy began 2015 with a slow start but has picked up in the second quarter. However, 2015 is looking like another lackluster year with continued concerns about the possibility of a slowdown.  It feels like we are fish swimming upstream with a bear lurking!  (But who is the Bear?)

The Phoenix commercial real estate market has also been continuing in the right direction upstream.  Industrial has remained active while office and retail continue at a slower pace.

Here is a look at few economic indicators that are important to track:


US Unemployment Rate – US jobs for July increased 215,000 with unemployment holding steady at 5.3%.  Continuing lower, but real wage growth, wage dollars minus inflation, has disappointed.


Gross Domestic Product – The second quarter early results are in at 2.3%.  With 2.2% in the fourth quarter of 2014 and a negative 0.2% in the first quarter of 2015, the economy keeps slowly moving forward.  2015 is shaping up to be another lackluster but positive year for the GDP.


China – China’s economy is in trouble.  How much is yet to be seen, but their problems could have global repercussions.  And recent moves to devalue their currency have increased concerns.  (Is China the Bear?)


Greece/Europe – Can you say “kick the can”?  Stay tuned, there should be an agreement soon averting a Greek collapse…for now at least. (Not the Bear.)


Federal Debt – And the US debt is not to be forgotten, although we are not Greece’s, US debt, as a percentage of GDP, has steadily risen from a 30-40% range in the 1970’s and 1980’s to over 100% currently.  Surely to become a hot topic in Washington next year as the election heats up.  (The Grizzly Bear!)


Interest Rates – Earlier this spring, it appeared our first rate hike in years would happen this summer.  With China’s move creating more uncertainty in the economy, it may be further out than expected.



2015 Q2 Phoenix Leasing Statistics

The Phoenix commercial market and economy continue on a modest growth track.  The Fed’s most recent Economic Conditions Index reported a 5.9% average growth for Phoenix.  Arizona’s unemployment was at 5.9% in June, down from 6.8% a year ago.  And seasonally adjusted single family home permits issued for May 2015 was 1,785, compared to 1,371 in the prior May, a 30% increase.


Phoenix Industrial Warehouse

The Phoenix industrial market is showing a slight increase in vacancy in the second quarter.  Overall the market is maintaining steady activity and growth.  Combining Q1 and Q2 below is a better reflection of leasing activity for the industrial market this year as it continues to expand.  The drop in Square Feet Under Construction in the chart should also help with leasing absorption.

Blog - Industrial



Phoenix Office

The Phoenix office market is showing signs of breaking out of its anemic recovery of recent years.  Although vacancy has shown little improvement in previous quarters, a lot of that is due to an increase in construction shown in the chart below.  Positive net absorption and rising lease rates show promise for this sector.

Blog - Office



Phoenix Retail

Retail has also continued to improve with vacancy creeping lower as net absorption continues.  Lease rates have remained flat recently and retail lease rates can vary widely between sub-types.  Online retail continues to have an impact on brick and mortar businesses.  For example, Amazon’s recent Prime Day surpassed Black Friday sales, and its stock price continues to rise.

Blog - Retail



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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