Recap – Summer Doldrums or the new normal? ASU Real Estate Council Breakfast Meeting

I attended the ASU Real Estate Council hosted event yesterday that Mark Strapp moderated. Pete Bolton at NGKF and Chris Toci at Cushman & Wakefield were the panelists. Here are some interesting points that I walked away with:

Apartments/Single Family Market:
-There are approx. 240,000 single family rental (SFR) homes in the metro – estimated occupancy is 98% (there is no real way to track the occupancy rate for this rental stock)
-There are another +/- 100,000 of townhome/condos for rent
-rental rates on the SFR are rising
-Concern is the number of high end/luxury apartments being built
-comment made about new luxury apartments – majority, if not all, is east of I-17.

Industrial Market:
-more opportunities are coming from CA to AZ
-big box industrial has very little product on the market for sale
-Core buyers are looking for the leased opportunities
-belief is there was a re-allocation by the core buyers for this product type

Office Market:
-2015 will be the start of the next construction wave
-over half a dozen of the spec offices planned/being developed are in the East Valley
-Submarkets matter!
-Value add buyer is actively looking (value add being defined as 75-85% occupied)
-stabilized assets are less attractive right now

Retail Market:
-It was stated that +/- 17% of the retail sales occurred via mobile or online
-There was not a lot said about this market because this was not a focus of this group. However, I believe the previous comment is incorrect and closer to 6% per a recent ISCS publication. Further, I would like to state that occupancy rates are trending up and so are lease rates.

Interest Rates:
-They have to go up and cap rates will follow
-challenge for a seller/buyer is that the gains made in the NOI will be eroded by the cap rate increases

Overall, the panel and the attendees were optimistic about Arizona and the long-term viability of commercial properties.