Commercial Slow & Steady Wins The Race
February 22, 2016
Vice President, Development Ryan Companies US, Inc.
Some believe there are global and domestic issues to be concerned about in 2016 and the not so distant future: the pending presidential election, historically low oil prices, an unstable Chinese economy, rising interest rates and so on. These concerns may keep you awake at night.
Why do I feel optimistic – specifically for Arizona? Because with all of the concerns circulating throughout the globe, Arizona continues to experience solid growth – slow and steady growth.
The recession recovery has been both weaker and slower for the nation than past recoveries – for Arizona that’s not necessarily a bad thing. The recovery for our state has not been led by the housing market like in years past; it’s been grounded in something much more substantial. An increase in quality employment opportunities due to businesses expansion and new companies locating in Arizona has been very positive. Arizona has seen solid growth in jobs in financial services, professional and technical services fields; industries offering a measure of higher incomes and greater diversity to the state’s economy – leisure and hospitality also continue to thrive. Typically the primary driver in an economic uptick, the Arizona housing market, is recently starting to contribute in a meaningful way. Arizona’s housing market arguably entered 2016 with one of the largest backlogs ever – a double digit increase from 2015 in permits pulled is projected. A diverse foundation of growth means a continued and more stable recovery.
Is this just a stable recovery? Yes, and that’s ok by me.
The Arizona commercial real estate industry continues to experience positive net absorption in the office market, declining vacancy and rent appreciation. Bifurcated growth albeit, with urban markets like Tempe, South Scottsdale, Chandler and Metropolitan Phoenix are performing far better than (suburban/rural) areas – definitely a positive trend. The underlying economic fundamentals continue to help our commercial property market to a slow, sustainable growth. This is not the quick recoveries we have been accustomed to, but I believe this will lead to a stronger foundation moving forward with a decreased risk of a sharp, future economic dip.
For the next few years, projections show Arizona to have one of our nation’s fastest rates of job growth. The state continues to improve in attracting firms rooted in technology and innovation. ASU was named the number 1 school in the United States for innovation; its no wonder company’s like Go Daddy, Avnet, Amkor and Intel continue to invest in Arizona – our brand is stronger than ever. This Arizona’s time to flourish – I encourage all of you in the commercial market, as well as other markets, to keep the positive momentum going: Arizona is on its way to win the race.