In 2008, Arizona was hit hard during the Great Recession, but the state has bounced back and is seeing a booming real estate market.
CBRE Group, a commercial real estate company, predicts that Arizona will have a positive economic outlook in 2019 due to employment growth, corporate expansions and a healthy housing market and wage growth.
“I’ve been studying the Arizona economy for quite some time and…I think that we’re going in the right direction,” said Rounds Consulting Group President Jim Rounds at the Valley Leadership 2019 mid-year review breakfast.
According to real estate company Zillow, the median home value in Phoenix is $242,800 and home values have gone up 5.5% over the past year. The market is predicted to rise another 2.6% by May 2020.
Demand for multifamily housing has outpaced new supply for eight-years, with the exception of 2016, partially because of employment growth, low vacancy and affordable rent, according to CBRE.
But it’s not just the housing market seeing growth, the commercial real estate sector is also heating up.
According to CBRE, net absorption has outpaced new supply since 2011, further pushing down the vacancy rates. In the recessionary peak, Phoenix saw 26.2% vacancy. In quarter four 2018, the state saw 15.2%.
“We’ve seen robust employment growth in different sectors like finance and tech. Those sectors are obviously office users,” Jessica Morin, director of market analytics at commercial property company CoStar Group, said. “So now there’s almost a new concern for Phoenix, it’s are we actually building enough space?’”
According to Morin, office occupiers are utilizing Tempe and Chandler for their space. CBRE echoes her sentiment reporting that companies sought spaces along the Loop 101 and Loop 202.
“In terms of our under construction, we’re seeing a lot of construction happening in pretty much two submarkets, Tempe and Chandler. Those account for about 50 percent of our new construction,” Morin said.
“Retail demand was driven by grocery, fitness and discount retailers who followed new rooftops in the Southeast Valley and Northwest Valley. Many of these retailers built new, rather than absorbing vacant and outdated space,” CBRE reported.
According to Rounds and Morin, the market could remain hot if public policy continues to attract individuals and businesses to the state.
“2019 has been very successful so far for the real estate and development industry. While the summer is only beginning in the Valley, smart investors are already finalizing their plans for the rest of the year and making decisions to prepare for 2020,” Cheryl Lombard, president & CEO of Valley Partnership, added.
To see the full CBRE report, click here.