February 1, 2016

Better Check Yourself – Trbo’s 2015 Phoenix Commercial Market Report

Craig Trbovich Commercial Real Estate –

As we entered 2015, cautious optimism had become the norm.  After Check Yourself XXall, even five years of nominal economic growth was still growth.  So why shouldn’t we have believed that 2% growth was more desirable and sustainable than boom and bust cycles?

Well, 2016 has arrived with a big wave of “Better Check Yourself.”  China’s economic troubles surfaced months ago and are not going away, oil’s decline is having far-reaching effects throughout the economy, jobless claims increased recently and promised interest rate hikes for 2016 have been put on hold as the Fed reevaluates.

Could a recession be in store for 2016?  It’s possible, but if it happens, it will likely be a minor one.  The markets appear to be stabilizing and hopefully recession fears will be alleviated in the coming months.  Here is a look at a few key economic indicators:


US Unemployment Rate –  5.0%.  Lowest level since December 2007.  However, recent jobless claims have been rising.


Gross Domestic Product – Early results are in showing an anemic 0.7% growth for the fourth quarter and 1.8 % seasonally adjusted growth for 2015.  As a comparison, average annual growth during the previous five years (2010-2014) was 2.1%.


Oil – Remains the lowest in years.  Disagreement in the Mideast is nothing new and OPEC is certainly not immune.  In the past, OPEC would cut production to stabilize prices; however, as the US and other countries have cut into OPEC’s market, OPEC continued to increase production to show its staying power with hopes of exposing the weak. Low prices will likely stick around in the near term.


China – The world’s second largest economy experienced its lowest GDP growth in 25 years at 6.9% and imports declined by 14.1% for the year.  2016 will likely be more of the same as China works to reinvent its economy.


Interest Rates – December saw the first Fed interest rate hike in nearly a decade, with a projections of a series of more to come.  However, economic concerns have forced the Fed to hold off on future hikes for the time being.


Retail Sales – A paltry 1.4% increase in 2015, compared to an average 5.1% over the previous five years.


Housing Starts – A respectable 10.6% increase in 2015, compared to an average 12.9% over the previous 5 years.


How did the commercial market fare in Phoenix in 2015?  It continued to recover and expand in each of the major sectors below.  With all of the economic concerns, it will be interesting to see what 2016 holds for Phoenix  and U.S. commercial real estate.


Phoenix Office

The Phoenix office market had its best year since the Great Recession.  Total sales volume was up 69% and values increased 19%.  And net absorption was up 36% to its highest level since 2006 as vacancy rates continued to decrease.


Office Table

Office Vacancy Rates 

Office Vacancy


Office Sales Volume

 Office Sales 


 Phoenix Industrial Warehouse

The industrial warehouse market continued to be a strong sector here and nationally in 2015.  New product has continued to be added and absorbed in the market as rates and values steadily increase, a sign of a healthy expanding cycle.


Industrial Table

Industrial Vacancy Rates

Industrial Vacancy


Industrial Sales Volume

 Industrial Sales



Phoenix Retail

Retail average sales price per square foot climbed 30% in 2015 while total sales volume rose 35%.  Vacancies have continued to push lower.  However, construction deliveries remained historically low in 2015, about 10% of new deliveries during the 2006-2008 peak period.  Amazon and online shopping continue to put pressure on brick and mortar shopping. And as mentioned above, retail sales in the US economy were relatively flat in 2015.


Retail Table

Retail Vacancy Rates

Retail Vacancy


Retail Sales Volume

Retail Sales

(Source: CoStar Group, Inc.)


2015 was a good year for commercial real estate in Phoenix.  2016 will be an interesting one with the presidential elections upon us and the current pressures on the economy.  So get out and make the most of it – Before You Wreck Yourself!



In the past four years, we have completed over 5,000 transactions at CPI.  That is an average of over 120 transactions per month!  Valley-wide, no other commercial real estate firm negotiates, prepares, and completes more transactions then CPI.  For a no obligation analysis of your property, please call me at (480) 522-2799 to “TrboCharge” your investment real estate today.



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