Many of you may be wondering where the market is headed as we move forward, away from the locked down pandemic state we were in last year. We’ve done some research and are going to report on various areas of the economy over the up-coming weeks to assist with this ever-increasing question.
Real estate production slowed last year during the pandemic causing a surge in construction after the new year. This upsurge created a domino effect as material costs escalated to all-time highs. But will this snowball effect continue to ensue? Recent articles from WSJ and Globe St state that lumber prices have begun to decline and with the fall in pricing on lumber, other materials should follow.
So, what does this mean to the commercial real estate community? According to other brokerage reports, they are seeing a boom in construction in 2021 despite material costs. The majority of these projects are multifamily but warehouse projects aren’t far behind in the percentage range at 36%. Office projects make up about 17% and retail is only at around 2% of construction projects going up. With that said, if material costs continue to decline, I would imagine we could see an uptick in commercial new builds as many developers have put projects on hold.
According to the latest count from the U.S. Census Bureau, Arizona added 759,485 residents from 2010 to 2020. That is a, 11.9% increase during the decade and ranked the state 10th in the nation. AZ residents experienced a loss of 331,500 jobs from February to April, 2020 but has regenerated 236,700 new jobs through April, 2021 which was a replacement of 71.4% in the job market.
Leisure and hospitality jobs remain the hardest hit followed by government, professional, business services, education and health services. However, the trade, transportation and utility jobs have climbed since February of last year. Most of the growth has occurred in transportation and warehousing. Not too much of a surprise considering this is where the developers tend to be looking as well.
Overall Arizona is projected to add approximately 643,000 new jobs over the next decade with the majority of that growth being in the Phoenix Metro area. As we pull out of the pandemic and move toward normalcy, it’s looking positive for Arizona and its economic growth.
It appears that the remainder of 2021 is looking positive as jobs continue to return and construction progresses. While not all commercial fields are thriving, we are heading in the right direction and businesses are continuing to grow and prosper. If you have any questions about the economy or the commercial real estate market, please do not hesitate to contact me.