Category Archives: Current Real Estate Market

Office Vacancy Down, Office Asking Lease/Rental Rates Up!

Office vacancy in the Phoenix market dropped to an average of 17.8 percent from 18.8 percent at the end of the fourth quarter of 2013. According to CoStar Group, a Washington, D.C.-based research firm.

 

The average asking rental rate for all classes of office property in the Phoenix office market was $20.42 per square feet a .06 percent increase from the end of the fourth quarter of 2013.

 

Closer to home, here in Payson Arizona, Costar tracks the current Office vacancy rate in Payson, at 29.5 percent, up from 25 percent in the 4th quarter of 2013.

officecondos in payson near the Payson Reginal Hospital

Office Condos in Payson AZ

 

Office lease/rental asking rates in Payson for the current quarter of 2014 is $13.84, up just under 5 percent from the fourth quarter of 2013.

 

Let me know how I can help you with your commercial property management, sales and leasing needs.

 









The views and opinions expressed in this commentary are those of Richard D Chapin, PLLC as of the date of publication and are subject to change, and do not necessarily reflect the views of Arizona Elite Commercial and/or its affiliates.

 

 

This information is for informational purpose and not intended to be investment advice, and should be explained to you in detail. You should always seek legal and/or tax advice to obtain further information you deem necessary. I want you to be prepared.

 

Retail Vacancy Down, Retail Lease/Rental Rates Up!

Retail vacancy on a national basis dropped to an average of 6.7 percent from the fourth quarter of 2012 to the fourth quarter of 2013. That’s the lowest rate since 2008, according to CoStar Group, a Washington, D.C.-based research firm.

 

The most recent National Retailer Demand Monthly report from RBC Capital Markets stated that chain retailers feel enough optimism about consumer demand in 2014.

While the declines in retail vacancy from quarter to quarter have been slim, the dropping in vacancies since 2011 amounts to “pretty good improvement,”  “It’s enough that now we see rent growth. The market went from totally tenant-dominated to more balanced, and there’s better productivity in retail storefronts than in the past.” according to Ryan McCullough, a real estate economist with CoStar.

Closer to home, here in Payson Arizona, Costar tracks the current Retail vacancy rate in Payson, at 7.9% ,down from 9.3% in the 4th quarter of 2012. with positive net absorption for 2013 and the 1st qtr of 2014.

Payson Retail Vacancy rates Source: CoStar

Payson Retail Vacancy rates Source: CoStar

 

Retail lease/ rental rates while down significantly from the 2nd qtr of 2009 are higher than they were in the 4th qtr of 2012 as well.

 

Let me know how I can help you with your commercial real estate investment needs.









The views and opinions expressed in this commentary are those of Richard D Chapin, PLLC as of the date of publication and are subject to change, and do not necessarily reflect the views of Arizona Elite Commercial Properties and/or its affiliates.

This information is for informational purpose and not intended to be investment advice, and should be explained to you in detail. You should always seek legal and/or tax advice to obtain further information you deem necessary. I want you to be prepared.

 

2014 Should be a Strong Year for the Commercial Real Estate Industry.

The commercial real estate industry should have a strong 2014, if academic economists and former policy makers are right in their predicting that the U.S. economic growth will accelerate this year.

Payson office building near Payson Regional Hosptital

office condos in Payson Arizona

 

“2014 is going to be a better year,” Martin Feldstein, a professor at Harvard University and chairman of the Council of Economic Advisers under President Ronald Reagan, said yesterday in Philadelphia. “There is no reason for pessimism about our near future if we adopt appropriate policies.”

JPMorgan Chase & Co. (JPM) is among the Wall Street banks turning more optimistic, predicting this week the economy will expand 2.8 percent this year, an increase from its 2.5 percent estimate of a month ago and faster than the 1.9 percent it calculates for 2013.

 

Former U.S. Treasury Secretary Lawrence Summers and John Taylor of Stanford University agreed in interviews that stronger growth this year was possible even as they clashed over what more policy makers could do to speed expansion.

 

Federal Reserve Chairman Ben S. Bernanke told a recent conference that headwinds to growth may be abating, cited a healthier financial industry, greater balance in housing, less fiscal restraint and accommodative monetary policy as reasons for optimism in coming quarters.

Bernanke added, “Of course, if the experience of the past few years teaches us anything, it is that we should be cautious in our forecasts”.

 

Having paid down (or defaulted on) nearly $1 trillion of household debt, U.S. consumers have aggressively improved their balance sheets and are better-positioned to increase spending. According to Federal Reserve data, household debt-service burdens are at their lowest level in more than 30 years,. Also, according to the Fed, Household wealth relative to disposable income has surpassed its historical average. This should give consumers the confidence to spend more of their disposable income, which will result in job creation.

 

In terms of absorption of inventory, we have seen and likely will continue to see extremely low levels of new supply, 2013 essentially tied with 2011 and 2012 as the weakest year for commercial construction since the late-1970s, according to Census Bureau data.

 

Investment in commercial real estate should increase as total returns to commercial real estate have been quite strong for three consecutive years now. Those commercial real estate investors who may have felt as if they have missed the party may now conclude that it is safe to go back into the water, based on the analyst recommendations s in favor of commercial real estate we have regularly seen in both the mainstream and financial press.

 

Commercial real estate’s potential to hedge inflation and interest-rate risks may attract income-oriented investors. Commercial real estate stands out as an attractive alternative that can provide relatively high yields and some degree of inflation along with interest rate protection.

 

As U.S. economic growth accelerates this year, according to academic economists and former policy makers, the commercial real estate industry should have a strong 2014.









The views and opinions expressed in this commentary are those of Richard D Chapin, PLLC as of the date of publication and are subject to change, and do not necessarily reflect the views of Arizona Elite Commercial Properties and/or its affiliates.

This information is for informational purpose and not intended to be investment advice, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.

 

The Economic Recovery in Payson and It’s Impact on Tenants.

How Payson’s economic recovery will impact commercial real estate tenants.

As the town of Payson, state of Arizona and our nation pull out of the great recession and experience economic recovery, The era of retail tenants ruling the leasing market appears to have passed according to many retail real estate brokers.

Nationally it is certainly become a landlord’s market, concessions are definitely down this year and when it comes to renewals, more retailers are moving away from the trend over the past few years of signing for the short-term only (three to five years) and are more likely to renew for seven to 10 years, which is more in line with historical norms.

While there is currently ample inventory of retail space in Payson, we have to wonder how long that inventory will last since retail construction has been extremely little in the past few years.

Sales tax, Payson’s most important revenue source jumped about 15 percent compared to the same period last year, which outperformed the Arizona statewide figure of Sales taxes collected statewide and shared based on population rose 6 percent for the fiscal year.

As I have mentioned in previous post, Payson is making progress in becoming a destination point rather than just a pass-through area on the way to the cooler temperatures of the rim country, as it has been in years past.

Local businesses have for years longed for events within the town of Payson that would bring in tourism dollars from outside the area.

Success is evident, as a breakdown of the Payson sales tax figures by category showed hotel bookings showed a strong gain up 77 percent over the same period last year. Most other categories showed modest gains.

I think we all understand what will happen if these increases continue and commercial inventory continues to shrink. What none of us know is exactly when.

Let me know how I can help you with your commercial properties.









This information is for informational purpose and not intended to be investment advice, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.

 

Phx-East Valley Office Vacancy Rate and Lease Rates are Lower than Phoenix-area Overall.

With vacancy rates lower, how long do you expect lease rates to remain lower?

In addition to the Phx-East Valley’s office vacancy rate being lower than the Phoenix area n gilbert low rise office buildingoverall, the Phx-East Valley is experiencing it’s share of growth in the office market.

According the Mid Year Office Market report released by CoStar, the office vacancy rate decreased to 19.4% in the second quarter in the Phoenix area overall. With asking office lease rates increasing to $20.05 sf in the second quarter from $19.45 in the first quarter of 2013 on average.

 

By comparison the office vacancy rate in the Phx-East Valley area was 17.2% with a vacancy rate of 13.7% for class A office buildings, 18.7% for class B office buildings and 13.6% for class C office buildings.

 

Office lease rates in the Phx-East Valley were similar to the asking office lease rates in the Phoenix area overall at $19.08 sf with an asking lease rate of $23.46 sf for class A office buildings, $19.18 sf for class B office buildings and $14.66 for class C office buildings on average.

 

It should be noted that 2 of the 3 largest lease signings in 2013 in the Phoenix area office market have been in the Phx-East Valley.

 

The total office market in the Phoenix area saw a net absorption or 183,607 in the second quarter of 2013, 92,408 of which was in the Phx-East Valley.

 

Office buildings under construction at the end of the second quarter of 2013, were 68,867 RBA, 0% of which is preleased, all in the Phx-East Valley.

Let me know how I can help you with your commercial property needs.









 

This information is for informational purpose and not intended to be investment advice, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.

 

Retail Property Lease Rates in Payson Remain Flat – For Now!

 But as the retail inventory in Payson is absorbed, how long will the retail lease rate remain low?

The asking rental lease rates for retail property in Payson remained flat in the last quarterPayson Arizona in the Rim Country of Arizona (Mogollon Rim) and increased less than 1 % from the a year ago at $13.51 on average. By comparison the average asking rental lease rates for retail property in the greater Phoenix-area dropped to $14.23 on average in the last quarter.

One has to wonder how long we can expect these rental rates to remain flat as more businesses are attracted to opening up locations or relocate a business to Payson, as Payson grows from a struggling tourist town of 15,000 to a diverse college town of 40,000.

The proposed town’s General Plan revision anticipates major new projects in the four growth areas that will mingle commercial and residential and provide a setting for new industries to start up or relocate to Payson, providing year-round jobs.

Much of the new development is planned along the highway, around the proposed campus and in the planned industrial and high-density residential areas around the Payson Airport.

As Payson grows from 15,000 to a 40,000 college town, there will be a significant increase in the demand for additional retail.

How long will the retail rental rate remain low as the inventory is absorbed?









This information is for informational purpose and not intended to be investment advice, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.

 

Industrial Lease Rates Increase in Phx-East Valley and Greater Phoenix-area Overall.

While the Phx-East Valley’s Industrial property vacancy rate is higher than the Phoenix industrial buildings mesaarea overall, asking rental rates for industrial properties have increased in the Phoenix area overall, including the Phx-East Valley.

Despite the higher rental rates and higher vacancy rate in the Phx-East Valley than the Phoenix area at large, the Phx-East Valley is experiencing it’s share of growth in the industrial market.

The vacancy rate went from 11.9% in the previous quarter to 12.4% in the second quarter in the Phoenix area overall, 11.5% vacancy rate for warehouse space and 19.7% vacancy for Flex. The asking rental rates increased to $6.40 on average, with the warehouse rate at $5.52 and Flex rate at $11.34.

By comparison the vacancy rate of industrial property in the Phx-East Valley area for the second quarter of 2013 was 12.8%, 11.7% vacancy rate for warehouse property and 18.6% for Flex in the Phx-East Valley. The asking rental rates in the second quarter of 2013 were $7.52 on average, $6.46 for warehouse and $11.46 for Flex property in the Phx-East Valley.

The industrial market in the Phoenix area saw a net absorption of 471,635 in the second quarter of 2013 (372,306 of which was in the Phx-East Valley), compared to a positive absorption of 1,395,312 in the first quarter of 2013.

The Phx-East Valley also leads the entire Phoenix area in terms of industrial under construction RBA, with 1,641,234 RBA, 87.3% of which is pre leased.

 









This information is for informational purpose and not intended to be investment advice, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.

 

University in Payson Arizona Update

A university in Payson, would not only become a major source for employment, but with most of the students will coming from outside the immediate area the commercial market, including multi-family, should benefit as well.

This plan to build a 6,000-student university, a 500-room hotel, a incubation center, aPayson Arizona near Mogollon rim solar chip assembly plant, a research park and dorms in Payson will impact the the entire region, not the least of which will have a huge impact on commercial property in the Payson area.

 

Tonto National Forest Supervisor Neil Bosworth said last Thursday, “That Tonto National Forest has settled nearly all of the remaining questions to sell 253 acres for a university campus in Payson and expects to transfer title to the Rim Country Educational Alliance by January.”

 

Concluding the land sale guarantees the project will go forward. While Arizona State University remains the preferred partner, the Alliance and ASU have to revisit the terms they mostly agreed on late last year, if those talks once again falter, five other universities have expressed interest in operating a campus in Payson.

 

Payson Mayor Kenny Evans, “predicted construction on the site will start early next year and the first 600 students will enroll in 2015, starting with 600 students in 2015 and building up to 6,000 students in the course of the next decade”, he went on to say, “the gradual buildup will provide time for Payson to develop a workforce that could support such a major, year-round business. The university would have more than twice as many students as the Payson School District, which is currently the biggest employer in town.”

 

The university campus would likely offer six undergraduate degrees, Two will focus on degrees, like forest management, solar energy. Two will involve education. Two will involve more general education.

 

The university site should give the opportunity to have 4,000 students living on campus, with the remaining 2,000 students at university build-out living in the community. With an expected 90 percent of the students will coming from outside the immediate area the multifamily commercial market should benefit as well.

 

This information is for informational purpose and not intended to be investment advice, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.

 

Phoenix No. 1 for Economic Growth, Office Vacancy Rate was down over the Previous Quarter

The latest Metro Monitor Report from the Brookings Institute shows an output increase ofanother office building chandler az 1.2 percent in Phoenix during the first quarter strong according to the Phoenix Business Journal.

 

“If output continues to grow at the pace it did last quarter, it could reach a full recovery by the end of 2013,” Kenan Fikri from the Brookings Institute said, adding “Since output recovery typically precedes a job recovery, companies make more sales before they hire more people, the recent progress on the output front does point to a potentially accelerating jobs recovery, as well.”

 

In a separate report this week, CoStar reported that the Phoenix Office market ended the second quarter 2013 with a vacancy rate of 19.4%, which was down from the previous quarter.

 

Commercial office rental rates in the Phoenix metro area, ended the second quarter at $20.05, an increase over the previous quarter.

 

This information is for informational purpose and not intended to be investment advice, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.

 

Arizona’s Recession-Tattered Economy Improving, Strong Growth Expected in 2014-15

Arizona’s economy, commercial real estate and job markets, while at a slow pace are all office condo in payson arizonarecovering.

 

CNNMoney reports that the latest data from the ADP National Employment Report found that hiring picked up in the private sector hired 188,000 in June, according to the new report, up from 134,000 in May. The strongest pace of hiring since February and exceeded economists’ expectations of 150,000 jobs.

 

UA economist and EBR Center director George Hammond said “The Arizona economy continues to grow and improve in early 2013, but the pace overall is slow compared to historical standards,” “The outlook calls for the state to gather speed during the next two years, but only after another year of sluggish gains.”

 

While the tourism industry, call centers and healthcare industry have been hiring. The challenge for Arizona’s economy is securing more high-wage job growth.

 

Hammond expects more sustained economic growth in 2014 and 2015 both for jobs and the overall economic picture.

 

This information is for informational purpose and not intended to be investment advice, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.