R.O.I. Real State – Commercial Newsletter- April 2020
Posted on April 30, 2020
With dramatic changes in the Greater Phoenix economy and commercial real estate space, many landlords and tenants alike will be heading to the negotiating table. Current owners may need to be more flexible on terms to prevent vacancies and retain viable long-term tenants, while tenants are seeking ways to decrease expenses, across most asset classes. How do they bridge the gap?… You can read all the details in the attached R.O.I. Properties “Real State – Commercial” newsletter, with additional statistics, market trends and information.
IMPORTANT: The outlooks for the following sectors may change rapidly. For the up-to-date information and analysis, please follow R.O.I. Properties on LinkedIn: https://www.linkedin.com/company/r-o-i-properties
- Office sector: Prior to the arrival of COVID-19, 2020 office construction was off to a great start, with more than 986,000 SF completed in Q1. 4,500 SF of office product has been completed so far in Q2. Sales are still overall healthy, with over $340.8M of office product sold year to date, and $50M so far in Q2 alone. R.O.I. Properties is keeping a close eye on the potential impacts to this market from remote work and other factors.
- Industrial sector: Developers have brought more than 4.3 million SF of industrial product to the market year to date, with another 14 million SF still under construction. According to CoStar, over $1B of industrial space has traded year to date. The average price per SF has risen to $129/SF in 2020, a record high in Phoenix. Cap rates have held steady around 6.4% the past three years, with vacancy rates at 7.3%.
- Retail sector: Construction in the Phoenix retail market has been gradually slowing during the past two years, with only 519,000 SF brought to market so far in 2020. Reporting indicated that year to date, $446M has been traded, and $33M so far in Q2. Vacancy rates are still being reported at 7%; clearly that will be subject to change as the coronavirus situation evolves and we gain clarity on Arizona’s ability to remove restrictions.
- Multifamily sector: Reports indicate that 2,204 units were brought to market in Q1 2020; so far in Q2, only 447 units have been completed. Reported vacancy rates remain very low, at 6.7% year-to-date. So far in 2020, $1.5B of multifamily product has traded hands, $195M at this point in the second quarter. At $169,955/unit, average price per unit showed an 11% increase year over year. At the last reported number of 5.0%, cap rates remain at a cyclical low, pending further post-COVID data.