R.O.I. Real State – Commercial Newsletter- October 2021
Posted on October 1, 2021
Led by the apartment and industrial sectors, sales of commercial real estate assets in the U.S. hit record-breaking highs in Q3 2021. A new report by PwC and the Urban Land Institute, “Emerging Trends in Real Estate,” reinforces what we’ve seen anecdotally in the Phoenix market: We’ve been the beneficiary of people and businesses fleeing big cities, and the opportunity for distressed sales hasn’t materialized compared to previous recessions. Even without bargains being available, the volume of investment deals in Phoenix has been strong and steady this year, not that different from before the pandemic. According to Vizzda, which tracks commercial real estate transactions, at least 14 deals exceeded $100 million in metro Phoenix between June 21 and September 21. Here’s a brief overview of overall trends in various sectors.
Industrial: Phoenix ranked #5 in the U.S. for industrial construction in Q3 2021—about 25 million SF under construction. E-commerce growth, warehouse space, and supply chain needs have continued to underscore the Valley’s increasing value as a regional hub. Leasing activity is tight enough that rents are on the rise and bidding wars have become more frequent. Notable sales have included the $186 million Park 303 Phase I in Glendale— which was the largest single property sale in Valley history—and $103 million Lincoln Logistics Center 40 in Goodyear.
Office: Perhaps one of the biggest surprises in Q3 2021 was the volume of office properties in Phoenix that traded: $858 million. For perspective, that’s 94% of the volume of investment deals posted through the first two quarters, and the YTD median price/SF is $185. Major deals included two buildings at the Rio 2100 campus near Tempe Town Lake (purchased for $132M) and the Fountainhead Office Plaza near I-10 and Fountainhead Parkway (purchased for $117.5 million).
Multifamily: The multifamily market has been active on the deal-making front in recent years, and the past few weeks have been no different. Recent high-dollar transactions have included Elliots Crossing Apartments ($136.1 million sales price, $274,949/unit); The Stewart ($124.5 million, $399,126/unit); Broadstone Grand ($106.5 million, $355,000/unit); Cyprus Apartments ($155 million, $282,846); and Oxford Apartments ($127.9 million, $296,006).
Retail: As noted in the R.O.I. Properties blog earlier this month, the retail real estate recovery keeps chugging along. An influx of new residents and businesses has driven surprising strength in retail, particularly demand for restaurants and grocery-anchored centers. A perfect example of the latter is the $18.25 million sale of Sunrise Promenade, a Peoria shopping center anchored by supermarket chain Aldi.