Business is booming! Commercial vacancies are lower in the Phoenix market than we’ve seen in recent years specifically for multi-family, office, and industrial spaces. The only exception has been retail, which continues to have plenty of available space.
Fewer available properties means higher rent and sale prices. Multi-family investors looking to build their portfolios have key factors to consider; primarily property type and whether or not to buy, hold or flip. Similarly, business owners looking for new or additional locations have lots of factors to contend with before they make a move.
It’s simply a case of supply and demand. More retail options available for lease and sale indicates that neither rates/prices should have risen in the last several years (they haven’t). In contrast industrial and office space are in high demand with rents rising and no significant increase in inventory. New construction medical buildings in emerging areas like Laveen and Surprise have little to no competition in their area. Therefore, they command solid rates. The multi-family sector is strong with A-class construction leading the segment all across the Phoenix metropolitan region with more to come in 2020.
Let’s look more closely at trends on a per category basis.
Office and Medical
Many office and medical building moves seem to be motivated by companies looking to better position themselves in their current market by making a move down the street to a new or recently remodeled space. This has many advantages, especially since the new space allows the company to keep its doors open. Although it’s a tight market, the options in this sector are more than what you will find in the industrial category.
Commercial real estate for the industrial sector is in high demand in Phoenix. Inventory remains thin. I’ve experienced first-hand the effects of ADOT’s proposed improvements with the Broadway Curve expansion on the I-10 freeway between the I-17 (Split) and Loop 202 (Santan Freeway). My own clients and long-term tenants of the area were forced to move their warehouse and equipment to a storage facility. Their previous location will be demolished to make way for new growth and progress.
E-commerce has undeniably caused a downturn in the retail market. This is more than a local issue, it’s a global one. Landlords must be forward-thinking and strategic in this space. As department stores and other large retail chains close their doors, opportunity and challenges abound. I foresee more warehouses and smaller retail facing stores that support e-commerce demand.
An interesting example of a change in retail space is Park Central Mall. They have adapted to combine retail offerings with office space. There is also a new multi-story apartment complex under construction in the parking lot right off Central Ave. This A-class complex will be able to command high rents due to its proximity to retail, office, light rail, hot nightspots as well as downtown. Downtown Phoenix is now a vibrant location with lots of unique experience-based bars, coffee houses, and restaurants. If you are interested in buying or leasing retail space just outside the downtown core, the market is in your favor. That is unless you are interested in Kierland or other top Scottsdale shopping destinations. The occupancy in these “in” spots remains very high. In fact, it’s downright difficult to find good options and that commands high rents.
Arizona remains a state looking to encourage small business development. It’s a favorable business environment to start a company, expand your brand, or make an investment in commercial property. It’s an amazing time to take advantage of our unique emerging market with the flood of people coming in from out of our market.
The Right Broker
Heather Binder Director Broker of TRU Commercial offers over 26 years in the Valley, 22 of which in the real estate market, both in Residential and now Commercial and multi-family focused business throughout the Valley. I am uniquely positioned with 26 years here from the Chicago area to give you the whole picture of everything from growing home communities to up and coming areas. I can also provide you with valuable information on what is happening from a small business perspective and or larger companies seeking sizable square footage.
Let’s talk and consider your goals, investor strategy and where your business is headed in 2020 and make it a reality! Email Heather@TRUcre.com to learn more.
Are you an agent? Referrals are more than welcome!
Heather Binder is an accomplished real estate professional with Tru Realty in her role as the Director of the Commercial Division. She is dedicated to providing her clients with an extraordinary real estate experience. Her expertise in working with clients made Heather a natural for her role as a certified instructor at the Arizona School of Real Estate and Business.