R.O.I. Real State — Commercial Newsletter

According to the U.S. Census Bureau, Maricopa County’s population jumped by nearly 74,000 in 2017—the most of any county in the nation. Greater Phoenix’s transportation and infrastructure investments and tax-incentive programs appear to be paying off in attracting corporate relocations, expansions, and jobs. The high-tech big-box industrial space used by advanced manufacturing, ecommerce, and transportation companies—particularly in the West Valley—is a notable bright spot in commercial real estate… You can read all the details in the attached R.O.I. Properties “Real State – Commercial” newsletter, with additional statistics, market trends and information, but here’s a quick look at the highlights:

  • In the fourth quarter of 2017, the number of office buildings changing hands increased from last year in the Phoenix metro. The median price per square foot averaged $138/s.f., down slightly from 2016, while cap rates (7.89% at the end of 2017), are up slightly from the previous two years. Class A properties are currently trading at $231/s.f., B assets at $172/s.f., and C class assets at $147/s.f. The Galleria Corporate Center, a class A property in Scottsdale, was sold for $142.5 million ($264.82/s.f.) and was the largest office property sold in 2017.
  • Industrial property transactions in 2017 were up from the previous year. By the fourth quarter 2017, 128 buildings changed hands compared to 144 in 2016. The median price per square foot decreased slightly in 2017 to $67/s.f., and cap rates have decreased to 6.9% from 7.4% from last year at the same time. The 55,000 s.f. industrial property at 2500 W. Union Hills Dr. in Phoenix was sold for $58.5 million ($106.36/s.f.) in the fourth quarter and was the largest industrial property sold in 2017.
  • Retail sales activity decreased from 201 transactions in 2016 to 178 transactions in 2017. The median sales price was $172/s.f., a 14% increase from 2016, while cap rates rose 10 basis points to 6.9%. The Downtown Phoenix submarket had the largest transaction activity, with 53 transactions and a total of 233,400 s.f., while North Phoenix racked up 48 transactions with a total of 535,800 s.f. One of the largest retail sales in the Phoenix market was Palm Valley Marketplace in Goodyear, which sold for $22.5 million ($209/s.f.).
  • Multifamily investment activity has continued to outperform, although 2017’s 248 transactions was a slight drop from 2016’s 261. Cap rates are currently trending at 6.4%, down by 10 basis points from 2016. The average price per unit in 2017 was reported at $118,969, up from $114,008 per unit in 2016. On page 4 of the newsletter, our Multifamily Development Snapshot gives a glimpse into why R.O.I. Properties maintains its cautionary position on this market. Due to the amount of product under construction and proposed, significantly higher vacancy rates, a slowdown in new projects, construction, etc., and lower net absorption rates in apartments could lie ahead.
  • At R.O.I. Properties, we pride ourselves on continuously analyzing and keeping abreast of the market, to ensure that you can maximize your real estate Return On Investment (R.O.I.). I can personally be reached at bjz@roiproperties.com or 602-319-1326, should you need assistance in buying, selling, valuing or managing Arizona real estate assets.

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