BBG continues its national expansion with a new office in Phoenix, where sustained economic recovery is driving demand for commercial real estate. Now with offices in 21 key markets from coast to coast, BBG welcomes the opportunity to grow along with Phoenix, the third-fastest growing metropolitan area in the U.S., according to Forbes.
From a CRE perspective, the city’s growth brings opportunities as well as challenges. On the positive side, the Urban Land Institute’s influential “Emerging Trends in Real Estate Report” for 2014 lists the Phoenix area as the 25th best place to invest in real estate, due in part to the city’s projected growth in population and employment. Phoenix ranked 33rd in last year’s report.
At the same time both large and small real estate investment funds are showing interest in Phoenix, the area has seen a substantial drop in distressed commercial real estate loans. By May, the delinquency rate on commercial mortgage-backed securities, which investors use to buy commercial properties, had dropped to 8.81 percent – down from nearly 16 percent roughly a year ago, though still higher than the 6.27 percent national average.
Several major employers have brought their operations to the area or expanded existing operations, including Apple, and suppliers are expected to follow along with office space development and rent increases. The industrial market has also drawn big tenants recently, including Amazon.com, and industrial properties are expected to increase in value.
Downtown Phoenix has branded itself “The Urban Heart of Arizona” and is striving to live up to the image with the addition in recent years of a light-rail line, luxury condos and an expanded convention center. Perhaps due in part to those efforts, the Emerging Trends report predicts that the number of Millennials living in Phoenix will increase by 11 percent over five years. Still, when it comes to attracting and retaining this coveted demographic, the city faces some challenges. Millennials prize dense, walkable urban places, and a new report ranks Phoenix second to last in walkability among the country’s top 30 metropolitan areas. There’s also some concern that metro Phoenix’s apartment market is approaching oversaturation.
Though it will take time, effort and cooperation between the private and public sectors, a prominent local planner tells the Arizona Republic that a downtown with “shaded sidewalks full of visitors and locals happily walking from venue to venue for hours” is achievable.
BBG’s outlook for Phoenix is positive, based on current trends and projected growth. For more information about BBG’s Phoenix team led by top-producing appraisal pros Jay Ramos and Anthony Venezuela, click here.