480-900-8484
Facebook Twitter Instagram Linkedin

Stats

April 2024 – Knowing The Numbers in Commercial Real Estate

April 17, 2024

Office Market

Despite being more than four years removed from the onset of COVID, pandemic-catalyzedshifts in demand continue to drive uncertainty in the Phoenix office market. Users arescrutinizing the efficiency and sizing of their space amid these shifting workplace strategies.Some tenants have opted to shrink and consolidate their footprints, while others are no longerleasing bigger blocks in anticipation of future headcount growth. The structural lowering ofdemand has led to a more than 50% increase in vacant space since 19Q4, with 2023 markingan acceleration of the move-out trend compared to the prior two years.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 196M 16.2% $29.49 -201K 1M
4 & 5 STAR 72M 25.2% $34.98 -26K 844K
3 STAR 85M 12.8% $27.28 -85K 173K
1 & 2 STAR 39M 7.1% $23.18 -89K 0

INDUSTRIAL MARKET

The Phoenix industrial market is navigating a period of dislocation as record supplyoverwhelms tenant demand. Builders delivered more than 23 million SF in thesecond half of 2023, outpacing the cumulative completion total from 2017 to 2019.The substantial supply injection, much of which was built on spec, caused vacancyto spike from the low 4% range in 23Q2 to 9.8% today.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 461M 9.8% $13.58 -93K 37M
LOGISTICS 334M 11.5% $13.12 99K 31M
SPECIALIZED 93M 3.8% $13.56 -127K 6M
FLEX 34M 9.0% $18.48 -66K 773K

MULTI-FAMILY MARKET

Though renter demand has rebounded over the past 12 to 18 months, Phoenix’s aggressive deliveryschedule continues to overwhelm sturdy leasing activity, causing market conditions to weaken. Vacancyhas been on a steady upward trend over the past eight quarters and now stands at the highest level inover a decade at 10.3% as of early 2024. Amid increased competition, local operators have shifted theirfocus to maintaining occupancy at the expense of revenue gains, keeping rent growth decidedly negativeat -1.8% and concession usage elevated. This persistent imbalance between supply and demand isexpected to continue in the coming quarters as the full effect of the construction pipeline is felt.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION UNITS UNDER CONSTRUCT UNITS
TOTAL: 386K 10.3% $1,556 313 38K
4 & 5 STAR 182K 11.1% $1,794 255 25K
3 STAR 144K 10.2% $1,408 56 13K
1 & 2 STAR 60K 8.3% $1,145 2 136

RETAIL MARKET

The Phoenix retail market is firing on cylinders in early 2024, with vacancy, space availability,and rent growth at multi-decade bests. Powerful demographics, healthy consumptiongrowth, and the expanding local economy underpin robust retail demand. Additionally, a lackof construction and limited store closures further contribute to tight market conditions. Thesedynamics are expected to continue over the near term, setting Phoenix up for another year ofoutperformance.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 242M 4.7% $24.86 21K 3M
POWER CENTER 32M 4.0% $27.66 -5K 38K
NEIGHBORHOOD CENTER 91M 5.5% $24.21 -9K 287K
GENERAL RETAIL 85M 3.0% $23.78 20K 2.3M

MARCH 2024 – Knowing the Numbers in Commercial Real Estate

April 17, 2024

Office Market

Despite being more than four years removed from the onset of COVID, pandemic-catalyzed shiftsin demand continue to drive uncertainty in the Phoenix office market. Users are scrutinizing theefficiency and sizing of their existing office space amid these shifting workplace strategies. Sometenants have opted to shrink and consolidate their footprints while others are no longer leasingbigger blocks of space in anticipation of future headcount growth. The structural lowering ofdemand has led to a more than 50% increase in the amount of vacant office space since 19Q4with 2023 marking an acceleration of the move-out trend compared to the prior two years.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 196M 16.1% $29.61 -680k 810K
4 & 5 STAR 72M 25.3% $34.94 -429K 623K
3 STAR 85M 12.8% $28.04 -48K 187K
1 & 2 STAR 39M 6.9% $23.17 -202K 0

INDUSTRIAL MARKET

The Phoenix industrial market is navigating a period of dislocation as recordsupply overwhelms tenant demand. Builders delivered more than 23 million SF inthe second half of 2023, outpacing the cumulative completion total from 2017 to2019. The substantial supply injection,much of which was built on spec, causedvacancy to spike from the low 4% range in 23Q2 to 9.1% today.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 453M 9.1% $13.57 408K 43M
LOGISTICS 326M 10.6% $13.11 1.1M 37M
SPECIALIZED 93M 3.6% $13.54 -219K 5M
FLEX 34M 9.2% $18.51 -516K 794K

MULTI-FAMILY MARKET

Though renter demand rebounded in 2023, Phoenix’s aggressive delivery schedule overwhelmed sturdyleasing activity, causing market conditions to weaken for back-to-back years. Vacancy has been on asteady upward trend over the past eight quarters and now stands at the highest level in over a decadeat 10.6% as of early 2024. Amid increased competition, local operators have shifted their focus tomaintaining occupancy at the expense of revenue gains, keeping rent growth decidedly negative at -1.9%and concession usage elevated. This persistent imbalance between supply and demand is expected tocontinue in the coming quarters as the full effect of the construction pipeline is felt.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION UNITS UNDER CONSTRUCT UNITS
TOTAL: 384K 10.7% $1.563 2K 35K
4 & 5 STAR 181K 11.4% $1,792 2K 24K
3 STAR 143K 10.8% $1,407 528 11K
1 & 2 STAR 60K 8.5% $1,142 19 0

RETAIL MARKET

The Phoenix retail market is firing on cylinders in early 2024, with vacancy, space availability,and rent growth at multi-decade bests. Powerful demographics, healthy consumptiongrowth, and the expanding local economy underpin robust retail demand. Additionally, a lackof construction and limited store closures further contribute to tight market conditions. Thesedynamics are expected to continue over the near term, setting Phoenix up for another year ofoutperformance.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 242M 4.6% $24.88 369K 2.7M
POWER CENTER 32M 4.1% $27.63 -88K 43K
NEIGHBORHOOD CENTER 92M 5.5% $24.25 93K 230K
GENERAL RETAIL 85M 3.0% $23.90 0K 2M

February 2024 – Knowing the Numbers in Commercial Real Estate

April 17, 2024

Office Market

Even though over four years have passed since the start of the COVID pandemic, changes indemand caused by it still generate uncertainty in the Phoenix office market. Users are carefullyevaluating the effectiveness and size of their current office spaces in light of evolving workplacestrategies. Some tenants are choosing to reduce and centralize their space while others arerefraining from leasing larger areas, anticipating future staff expansions. The persistent decreasein demand has resulted in a more than 50% rise in vacant office space since the fourth quarter of2019, with 2023 witnessing a faster pace of moving out compared to the previous two years.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 196M 15.9% $29.69 -199K 990K
4 & 5 STAR 70M 24.8% $35.02 -178K 803K
3 STAR 87M 13.0% $28.27 114K 187K
1 & 2 STAR 40M 6.8% $23.39 -135K 0

INDUSTRIAL MARKET

The Phoenix industrial market is in flux as an abundance of supply overwhelmstenant demand. In the latter half of 2023, builders delivered over 23 million SF,exceeding the total completed from 2017 to 2019. This surge, much speculative,spiked vacancy from around 4% in 23Q2 to 8.5% today.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 450M 8.5% $13.30 -573K 44M
LOGISTICS 323M 10% $12.86 -8K 39M
SPECIALIZED 93M 3.5% $13.10 -76K 5M
FLEX 34M 8.9% $18.44 -489K 659K

MULTI-FAMILY MARKET

Although renter demand saw a resurgence in 2023, Phoenix faced an aggressive delivery schedule thatoutpaced robust leasing activity, resulting in weakening market conditions for consecutive years. Vacancyhas steadily risen over the last eight quarters, reaching its highest level in over a decade at 10.9% inearly 2024. Faced with heightened competition, local operators have shifted their focus to maintainingoccupancy, leading to negative rent growth at -2.0% and increased concession usage. This ongoingimbalance between supply and demand is anticipated to persist in the upcoming quarters as the fullimpact of the construction pipeline is realized.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION UNITS UNDER CONSTRUCT UNITS
TOTAL: 382K 10.9% $1.557 891 35K
4 & 5 STAR 180K 11.6% $1,786 614 24K
3 STAR 143K 10.8% $1,399 294 11K
1 & 2 STAR 60K 8.5% $1,146 -17 0

RETAIL MARKET

In early 2024, the Phoenix retail market is firing on all cylinders, boasting multi-decadebests in vacancy rates, space availability, and rent growth. Strong demographic trends,steady consumption growth, and the burgeoning local economy provide a solid foundationfor robust retail demand. Furthermore, the relatively low amount of new construction andminimal store closures add to the tight market conditions. These factors are anticipated topersist in the near term, positioning Phoenix for another year of exceptional performance.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 242M 4.5% $24.85 159K 2.6M
POWER CENTER 32M 3.8% $27.49 13K 51K
NEIGHBORHOOD CENTER 92M 5.6% $24.24 15K 181K
GENERAL RETAIL 85M 2.8% $23.91 -122K 2.1M

January 2024 – Knowing the Numbers in Commercial Real Estate

January 15, 2024

Office Market

Phoenix witnessed a surge of 42,000 SF of new vacant office space entering the market, amplifying the challenges posed by sluggish demand and widespread economic uncertainty. The cumulative unoccupied space has escalated by almost 50% since late 2019, propelling the metro-wide vacancy rate from 11.0% in 19Q4 to its current 16.0%, mirroring levels recorded back in 2015.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 195M 16% $29.44 -197K 1M
4 & 5 STAR 70M 24.6% $34.92 -64K 938K
3 STAR 86M 13.4% $27.79 -87K 150K
1 & 2 STAR 40M 6.7% $23.23 -46K 0

Industrial Market

The Phoenix industrial scene undergoes a transformation as robust leasing encounters a tidal wave of new construction. Developers wrapped up an unprecedented 8.9 million SF, surpassing the second-strongest quarter of gross deliveries by several million SF. This influx propelled the current vacancy rate to 8.4%, wiping out a significant portion of the occupancy gains achieved during the pandemic era.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 447M 8.3% $13.39 -2.5M 45M
LOGISTICS 321M 9.7% $12.90 -1.6M 39M
SPECIALIZED 92M 3.5% $13.37 -387K 5M
FLEX 34M 8.8% $18.46 -485K 659K

Multi-Family Market

The Phoenix multi-family market grapples with an ongoing imbalance between supply and demand. Despite a potential leasing rebound this year, it couldn’t offset the record-breaking influx of new constructions, resulting in a surge in the Phoenix vacancy rate. Intensified competition from these new properties has sustained negative rent growth since last year’s end, leading operators to lower rental rates and heighten concessions to entice and retain tenants. Projections indicate a continued lukewarm landscape in the near future as the market copes with its most substantial supply pipeline in four decades.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT UNITS
TOTAL: 380K 10.8% $1,550 60 34K
4 & 5 STAR 179K 11.5% $1,777 40 23K
3 STAR 142K 10.7% $1,394 22 10K
1 & 2 STAR 60K 8.6% $1,136 -2 828

Retail Market

After yet another quarter of consistent progress, the Phoenix retail domain showcases some of its most stringent market conditions in recent history as the year nears its end. A blend of strong population growth, thriving consumption patterns, minimal store closures, and restricted new supply has concocted an ideal scenario for sustained exceptional performance.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 242M 4.5% $24.54 105K 2.6M
POWER CENTER 32M 3.8% $27.06 3K 51K
NEIGHBORHOOD CENTER 92M 5.7% $23.92 -31K 205K
GENERAL RETAIL 85M 2.7% $23.70 -65K 2M

September 2023 – Knowing the Numbers in Commercial Real Estate

September 30, 2023

Office Market

In 23Q2, the Phoenix office market exhibits approximately 1 million square feet of negative net absorption, reflecting an extended period of demand disturbance. This culminates in a total of -1.7 million over the past year. The retreat has resulted in a surge in vacancy, rising from 11.2% prior to the pandemic to 15.8% currently, marking the highest level since 2015. Moving forward, we anticipate further increases in vacancy due to subdued demand and the potential for an economic downturn affecting the sector.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 197M 15.8% $29.24 577K 1M
4 & 5 STAR 70M 24.2% $34.86 -506K 670K
3 STAR 87M 13.2% $27.52 50K 350K
1 & 2 STAR 40M 6.9% $23.13 -3K 0

Industrial Market

The Phoenix industrial market is currently in a phase of transition, moving from the rapid growth experienced in the years immediately following the onset of the pandemic to a more typical pattern. Vacancy rates have increased from a historic low of 4.1% in mid-2022 to 4.4% in 23Q2, with further upticks anticipated in the latter part of the year. Although leasing activity has slowed down since its peak in 22Q1, the main catalyst for the recent rise in vacancy is the substantial construction pipeline in the metro area, which is starting to outpace demand.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 435M 6.5% $13.10 3.3M 49M
LOGISTICS 309M 7.3% $12.61 3.6M 43M
SPECIALIZED 92M 3.1% $13.16 -281K 14K
FLEX 34M 7.6% $17.81 -14K 422K

Multi-Family Market

The Phoenix multi-family market is currently experiencing a phase of disruption. Apartment demand has shifted gears from the record-breaking levels observed in the two years following the pandemic’s onset to a considerably slower pace due to high inflation and economic uncertainty, which has hindered the formation of new renter households. Simultaneously, the substantial construction pipeline is delivering thousands of new units each quarter, overwhelming the existing demand. This imbalance has led to an increase in vacancy rates and a decline in rent growth. The outlook suggests a further deterioration in multi-family fundamentals as supply continues to outstrip demand, a situation that could be exacerbated by a potential recession.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION UNITS UNDER CONSTRUCT UNITS
TOTAL: 375K 10.2% $1,564 3,329 32K
4 & 5 STAR 179K 11% $1,798 2,992 22K
3 STAR 137K 10% $1,411 465 10K
1 & 2 STAR 60K 8.1% $1,105 -128 783

Retail Market

The Phoenix retail market continues to thrive, supported by strong demographics, resilient consumer spending, and steady job creation, all of which contribute to heightened demand for local retailers. These favorable conditions have propelled the Valley to achieve its eighth consecutive quarter of positive net absorption in 23Q2, resulting in a historically low vacancy rate of 4.6%. Key contributors to this growth have been quick-service restaurants, grocery stores, medical tenants, and fitness establishments.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 241M 4.6% $24.13 495K 2.1M
POWER CENTER 32M 3.3% $26.65 52K 74K
NEIGHBORHOOD CENTER 91M 5.9% $23.37 54K 223K
GENERAL RETAIL 85M 2.9% $23.36 232K 1.6M

August 2023 – Knowing the Numbers in Commercial Real Estate

August 29, 2023

If you want to succeed in any business, then it’s important to know your numbers.  In my chosen field of commercial real estate, we have no shortage of opportunities to analyze data, statistics, graphs and charts.  The market is constantly changing and it’s crucial to stay apprised of all the factors affecting the industry.

One of the questions I am asked daily is “How is Commercial Real Estate Doing?”  The answer is never straightforward, and I am commonly giving the most predictable of answers: “It Depends!”

If you are a landlord or seller, your experience in the market is far different than if you are a tenant or buyer.  If you are a cash investor then you may be looking forward to the next couple years, but if you are an office building owner with a loan coming due next year, you may be experiencing some sleepless nights.  Retail spaces are at record low vacancy rates in Arizona.  Office dynamics are just the opposite.  Industrial and multi-family are both proving to be resilient but not bulletproof.  Commercial real estate is a broad field and depending on your perspective, the market can be good, bad or somewhere in the middle.

We represent clients in all asset classes, conditions, markets, and price points, not to mention that each client has their own individual goals and motivations.  For us to serve our clients at the highest level, it’s a must to study and understand the market on a consistent basis.

Look below at the numbers that we compile and track to help us understand what is happening in the market so that we can make informed decisions and better serve our clients.  (Data courtesy of Costar)

Office Market

The Phoenix office market is currently facing an extended phase of demand disruption. This is highlighted by a negative net absorption of around 1 million square feet in the second quarter of 2023. As a result, the total negative absorption over the past year has reached 2.9 million square feet across 12 quarters. This decrease in demand has led to an escalation in vacancy rates, rising from 11.4% before the pandemic to the current rate of 15.6%, marking the highest level since 2015. Looking ahead, it is anticipated that vacancy rates will continue to rise over the next few quarters due to subdued demand and the potential onset of an economic recession impacting the sector.
SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 195M 15.6% $29.20 42K 1.2M
4 & 5 STAR 69M 23.6% $34.95 121K 649K
3 STAR 87M 13.5% $27.46 -75K 537K
1 & 2 STAR 40M 6.6% $23.01 -3K 0

Industrial Market

The Phoenix industrial market is gradually returning to a more balanced state, moving away from the rapid expansion observed in the years following the initial pandemic impact. Vacancy rates have risen from their record low of 4.1% in the middle of 2022 to 4.4% in the second quarter of 2023, and additional increases are anticipated for the latter part of the year. While leasing activities have displayed some signs of easing since the peak in the first quarter of 2022, the primary driver behind the recent rise in vacancy is the significant increase in construction projects across the metro area. This surge in construction is beginning to outpace the current level of demand.
SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 424M 6.1% $12.78 1.5M 48M
LOGISTICS 305M 7.0% $12.31 1.7M 43M
SPECIALIZED 95M 2.9% $12.80 -150K 6M
FLEX 34M 7.6% $17.44 -64K 322K

Multi-Family Market

The Phoenix multi-family real estate sector is currently undergoing a phase of disruption. The demand for apartments has shifted down from the remarkable levels witnessed in the initial two years following the pandemic’s onset, due to elevated inflation and economic uncertainties, which have hindered the formation of new renting households. Simultaneously, a substantial influx of new units from ongoing construction projects are being introduced into the market each quarter, surpassing the existing demand. This disparity has led to an increase in vacancy rates and a decline in rental growth. Forecasts suggest that the multi-family market fundamentals will continue to weaken in the upcoming period, given the ongoing situation where supply continues to outstrip demand. This scenario could be exacerbated by the potential occurrence of a recession.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION UNITS UNDER CONSTRUCT UNITS
TOTAL: 372K 9.9% $1,575 1,194 35K
4 & 5 STAR 173K 10.8% $1,812 1,093 24K
3 STAR 140K 9.7% $1,434 160 10K
1 & 2 STAR 60K 7.8% $1,100 -59 783

Retail Market

The Phoenix retail market continued to outperform in 23Q2 as strong demographics, resilient consumer spending, and steady job creation supported demand at local retailers. Thanks to these tailwinds, The Valley recorded its eighth-consecutive quarter of positive net absorption, compressing vacancy to an all-time low of 4.7%. Quick-service restaurants, grocery stores, medical tenants, and fitness users have been the primary source of growth.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 241M 4.7% $23.78 5K 2.3M
POWER CENTER 32M 3.4% $26.32 22K 63K
NEIGHBORHOOD CENTER 91M 5.9% $22.88 -4K 310K
GENERAL RETAIL 84M 3.0% $22.96 -40K 1.6M

As always, if you have questions about your business and investing goals, I am happy to meet and help you build a strategy for your long-term success.

Hani Aldulaimi, CCIM
Managing Director

Copyright © 2020 Infinity Group Commercial Real Estate

2077 E. Warner Rd. #110
Tempe, AZ 85284

Contact Us