Arizona’s Commercial Outlook
July 31, 2022
As the residential real estate market continues to boom, you might be surprised to learn that the commercial real estate market, while not booming, is still holding its own. And there’s positive outlook to be had when you look in the right places.
It is true that the commercial real estate market took a hit as the pandemic busted onto the scene over two years ago. Government mandates impacted the “where” and “how” people were able to leave their homes. Once high-trafficked restaurants, bars, fitness centers, shopping malls, and movie theaters struggled to survive, and some didn’t survive at all. Retail shopping moved even further online, and people found joy in looking forward to delivery day instead of an afternoon or day-long shopping adventures.
Taking a look today, certain aspects of the commercial market continue to find strength. In this article, we’ll take a look at three different segments of commercial real estate in Arizona and what the statistics tell us.
You are probably already thinking it. The words “work from home” have severely impacted the market for office space during the pandemic. There was a time when work from was necessary, even required, at the onset of the pandemic. And many companies found a higher level of productivity by sending their employees home. Not all, but certainly many. As we move further away from March 2020, companies are reviewing their work from home policies, and some are making the decision to send employees back to the office. Some on a full-time basis, and others for a few days a week. You can argue for both sides of the card, but that’s not what this article is about. Employees heading back to the office is good for the commercial real estate market. While it might seem like everyone is still working from home these days, the latest Household Pulse Survey census available says that 58.1% of Arizonans are back in the office. Recognizing that it’s a challenge to keep employees happy while returning to the office, many companies are looking for opportunities to expand the on-site amenities they offer. This is something to take into consideration for companies looking for a new space – the space for amenities matter!
I challenge you to find someone who isn’t delighted when a package from their favorite store arrives on their doorstep. It’s fun every single time. Therein lies the struggle for the retail division of commercial real estate. Shopping from the comfort of your own home has never been easier. However, now that we are getting closer to three years from the onset of the pandemic, more and more people are looking for the opportunity to explore the world beyond the confines of their home, especially if they work from home! The tip for retail real estate these days is really just more emphasis on the old tip – location, location, location! With less people venturing out, it’s more important to be in a location with a high volume of foot traffic and have a solid product. People are still spending: In May 2022, retail spending was up 8.1% compared to the same month in 2021. It’s up to the retail stores to drive consumers on-site and it’s on the commercial broker to find a desirable location. It’s worth noting that May 2022 saw the first month-over-month decline (.3%) in retail spending compared to the previous four months, but it’s still up overall compared to the previous year as we were heading into the summer.
If there’s one area of commercial real estate in Arizona where you can expect to see continued growth, it’s healthcare. As we look to the future, Phoenix is expected to gain a whopping 1.9 million residents over the next 20 years. Those new residents will need access to local healthcare and our current systems will continue to expand to support them. In May of this year alone, we learned about the expansion of Phoenix Children’s in Glendale. Don’t forget Dignity Health’s rehabilitation center in Gilbert recently opened their doors and the micro-hospital build in Cave Creek by Abrazo Health. We can expect to continue seeing a strong market for commercial real estate in the healthcare sector.
While commercial real estate has seen its fair share of pandemic challenges, many experts would agree that Arizona, especially the Phoenix-metro area, is more than capable of holding its own ground in the commercial world. This strong belief is also rooted in the fact that population growth and job growth remain on an upward trajectory, with no signs of slowing down. So, if you’re in the commercial real estate game, stay strong and determined! The light remains on.