October 23, 2015

Looking Ahead – Trbo’s 2015 Q3 Phoenix Market Report

Craig Trbovich Commercial Real Estate –

Crystal Ball CREThe Phoenix commercial real estate market has continued picking up steam as vacancies move lower and rental rates rise higher. Looking ahead, the industrial market should continue with strong performance as the office and retail markets to gain momentum.

The overall economy began slowly in 2015 but has improved in spite of the precarious strength of the recovery. Slow growth is better than no growth, and may be more sustainable over the long term as 2015 shapes up to be another year of slow and steady growth. Looking ahead, 2016 could be the year we see inflation come back as job growth continues and the Fed begins raising interest rates.


Here are a few economic indicators to keep an eye on:


US Unemployment Rate – Currently at 5.1%, down from 5.3% in the second quarter and 5.9% a year ago.  Average monthly job growth for 2015 is 198,000.  Looking ahead, according to the Bureau of Labor Statistics, business sectors seeing job growth included health care, professional and business services, retail trade, and leisure and hospitality. Job losses continue in mining, while employment in construction, manufacturing, wholesale trade, transportation and warehousing, financial services and government remains steady.

Gross Domestic Product – The latest results show GDP increasing at 3.9% in the second quarter compared to 0.6% in the first. Looking ahead, it will be interesting to see how the U.S. fares in the coming quarters and if global pressures become a drag on us.

China – China’s economy is in trouble which was brought to the headlines since the devaluing of their currency in August.  Looking ahead, those troubles may start to filter through the European Union.

Europe – Europe has been showing signs of improvement, also slowly, but jobs and GDP data continue in the right direction in the Union. Looking ahead, see China above.

Inflation – Consumer prices have fallen two months in a row as inflation continues to be nonexistent.  Can the improving economy and unemployment finally put upward pressure on wages? Looking ahead, maybe next year.

Interest Rates – Likely nothing happening this year.  Also looking ahead to next year.



2015 Q3 Phoenix Leasing Statistics

Phoenix commercial real estate is continuing to improve and 2015 has been an active year.  Positive absorption continues and lease rates are rising.  New construction is spotty, but overall, 2015 is shaping up to be one of the best since the current recovery began.

The Fed’s most recent Economic Conditions Index reported a 5.9% average growth for Phoenix.  Arizona’s unemployment rate was at 6.3% in August, down from 7.4% a year ago.  And seasonally adjusted single family home permits issued for August was 2,040, the highest since the recession began!



Phoenix Industrial Warehouse

The industrial market is maintaining steady activity and expansion.  Vacancy and lease rates have been consistently, gradually improving.  Looking ahead, the drop in Square Feet Under Construction in the chart should help keep the market on a healthy path in the coming quarters.

Blog - Industrial



Phoenix Office

The Phoenix office market is picking up steam as shown by the vacancies and rental rates lines separating in the chart below.  Vacancies have dropped from 17.6% a year ago to 16.6% currently and lease rates have increased from $20.88 a year ago to $21.73.  Office construction is continuing at a steady, and what appears to be healthy, pace for now.  Looking ahead for more improvement and growth for the office market.

Blog - Office



Phoenix Retail

Retail has also continued to improve as net absorption continues higher.  Vacancies have decreased from 9.8% a year ago to 9.3% currently, and lease rates have increased from $14.13 a year ago to $14.49 today. It’s interesting to note that since 2012 lease rates have bounced around between the $13.50 and $14.50 psf; maybe rates are ready to break through the$14.50 mark in the near future.  Looking ahead, online sales continue to have an impact on brick and mortar businesses but economic expansion appears to finally be pushing retail towards an expanding market, and the flat construction activity in that chart below may start to climb in 2016.

Blog - Retail




In the next couple of weeks, 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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