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Home » News » Commercial Sector Moves From Recovery To Expansion

Commercial Sector Moves From Recovery To Expansion

TEMPE, Arizona (April 8, 2015) — The professionals who are closest to commercial real estate in Phoenix say that the market is now in expansion and are confident that the expansion will continue, according to the fifth Commercial Real Estate Survey from the Center for Real Estate Theory and Practice at the W. P. Carey School of Business.

The Quarter 1, 2015 survey is an inflection point between a recovering market and one that is beginning to take off. “Last year I said 2015 will be more of the same, but better. Now I know it will be better in 2015. We are not killing it, but it is far better than it has been for the last four years,” said Pete Bolton, managing director at the Phoenix office of Newmark, Grubb, Knight, Frank. The firm co-sponsors the report.

Mark Stapp, director of the Master of Real Estate Development Program at W. P. Carey, commented that “we still have systemic problems to resolve, such as attracting more high-wage earning jobs, construction labor shortages and tight lending — which keeps a governor on new home construction.” Those factors produce a normal market that is different from the highly active markets for which Phoenix is known, but still one worth celebrating. “We’ve deviated from our historic norm in terms of development type and activity, but in the maturation of the Phoenix metro area, this is progress,” Stapp added.

For the first time since the forum first met in September 2013, 100 percent of those surveyed said the Phoenix market is moving upwards. When asked the question “Where are we in the cycle?” 58 percent said “Expansion,” up from 8 percent six months ago. The percentage saying “Recovery” dropped from 92 to 33 percent.

ldquo;The market is definitely gaining momentum at a steady and slightly increasing pace” Stapp said.

Below are highlights from the Quarter 1, 2015 results. For more detail, the forums are available for download at http://research.wpcarey.asu.edu/real-estate/commercial-reports under “Commercial Brokers Survey”.

  1. Where are we in the cycle?
    • 58 percent – Expansion, 33 percent – Recovery, 9 percent – Correction, 0 percent – Maturity, 0 percent – Recession
    • NOTE: 92 percent said the area was in recovery in Quarter 4, 2014.
  2. In what direction is the metro Phoenix market moving?
    • 100 percent – Up, 0 percent – Stationary, 0 percent – Down
  3. Where are apartment vacancy rates headed in the next 6 months (October 2014 – March 2015)?
    • 18% – Up, 10% – Down, 72% – Stationary
    • Perceptions have shifted since Q4 2014, when options were dived evenly over three responses.
  4. Where are apartment rents headed in the next 6 months (October 2014 – March 2015)?
    • 75% – Up, 8% – Down, 17% – Stationary
  5. Where are Big Box Industrial Vacancy Rates headed in the next 6 months (October 2014 – March 2015)?
    • Up – 0%, Down – 36%, Stationary – 64%
  6. Where are Office Vacancy Rates headed in the next 6 months (October 2014 – March 2015)?
    • Up – 0%, Down – 73%, Stationary – 27%
  7. Where are Retail Vacancy Rates headed in the next 6 months (October 2014 – March 2015)?
    • Up – 27%, Down – 46%, Stationary – 27%
  8. Where are Interest Rates for commercial loans headed in the next 6 months (October 2014 – March 2015)?
    • Up – 18%, Down – 0%, Stationary – 82%
  9. Where are Investor Returns headed in the next 6 months (October 2014 – March 2015)?
    • Up – 18%, Down – 0%, Stationary – 82%
  10. Is the tight inventory for homes on the market affecting the commercial side at all?
    • Yes – 45%, No – 10%, Not yet, biut it will – 45%
  11. Have land prices reached their peak?
    • Yes – 18%, No – 82%
  12. Have homebuilders stopped buying land?
    • Yes – 17%, No – 83%
  13. Are homebuilders backing out of land deals?
    • Yes – 33%, No – 67%


The W. P. Carey School of Business at Arizona State University is one of the top-ranked and largest business schools in the United States. The school is internationally regarded for its research productivity and its distinguished faculty members, including a Nobel Prize winner. Students come from about 100 countries and include about 50 National Merit Scholars. For more information, please visit wpcarey.asu.edu.

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