February 14, 2018

Golden! – Trbo’s 2017 Market Report

Craig Trbovich Commercial Real Estate –

While the economy has been expanding at a Bronze medal pace in recent years, Gold is now within reach.  Tax reform should help move the economy from a Cross-Country crawl to Super-G speed in 2018.  And as I talk to business owners, the same positive attitude resonates, which is all good for Commercial Real Estate.

And the data below confirms those positive vibes.  Unemployment is at its lowest level in over a decade and, although wage growth has been disappointing in recent years, there are signs in 2017 pointing to better days in 2018 for wage earners.  Retail sales in 2017 also showed the highest gains since 2011.  Well, I may not know the difference between a Triple Salchow and a Triple Lutz, but I know a medal worthy economy when I see it, and ours is heading for the Podium!


Here are key economic indicators:

US Unemployment Rate –  4.1% in December, down from 4.7% a year ago, and is the lowest level since December 2001!  However, labor force participation has remained historically low, remaining at the lowest rates in the past 40 years.  Wage growth remained disappointing in 2017, increasing only 2.6%.   However, wages were up 2.9% last month compared with a year earlier, the best pace since June 2009.  Household spending is the true gold medal for economic growth.  Grow wages, go for Gold!

Gross Domestic Product – Real GDP for 2017 grew by 2.25% in 2017, which was in line with the lackluster, below 3% growth over past 7 years.  However, 2018 could be the year to break through the 3% mark as wage growth and tax legislation take effect.      

Consumer Price Index – The annual increase in the CPI has averaged less than 2% since the recession and 2017 was in line with recent years as December showed an increase of 2.1%, year over year.  Expect CPI to increase too as the economy improves and interest rates continue to increase.

Retail Sales – Retail sales improved during the year with December 2017 coming in at a solid 5.6% over a year ago.  Online sales continue to grow and pressure brick and mortar.



2017 was a good year for Phoenix business and commercial real estate.  Phoenix unemployment is at 3.7% and the Phoenix Economic Growth Index is 5.44%, its highest since 2006.  With growth in technology, financial services and healthcare, Phoenix is well positioned to continue adding higher paying jobs.  And Arizona State University, the largest public university in the country with 83,000 students, has been ranked the Most Innovative School by U.S. News & World Report three years running.  More good news for Commercial Real Estate in the Valley of the Sun.



Lease Rates have increased by 6% each of the past two years while Vacancies have continued lower as Net Absorption kept pace with Deliveries.  2017 rates, at $24.66, are closing in on the previous cycle’s 2007 peak of $25.74.  It doesn’t feel that the market is overheated or at its peak yet, considering new development (Deliveries) was well below previous highs of 8.7 million square feet in 2007 and the Average Sales Price per SF foot was well below 2008’s high of $226 per sf.



Vacancy and Rental Rates                                             Absorption and Deliveries


Sales Volume                                                              Average Price Per SF



Industrial Warehouse

While delivering 6.5 million square feet of new product, the highest since 2008, Net Absorption, at 10.2 million square feet, more than doubled 2016’s amount and was the highest year of Net Absorption on record!  That record activity pushed Vacancies down to 7.2% and Average Sales Prices up 17% for the year.  Both Rental Rates and Average Sales Price per SF approached record highs.



Vacancy and Rental Rates                                             Absorption and Deliveries


Sales Volume                                                              Average Price Per SF




Retail Vacancy was at 7.8% at the end of 2017, the lowest since 2007.  Net Absorption was a positive 3.3 million square feet, also the best since 2007.  Sales Volume and Average Price per SF were both down for the year, but overall, the market was positive.



Vacancy and Rental Rates                                             Absorption and Deliveries


Sales Volume                                                              Average Price Per SF



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.



In the News
About Craig