About $820 billion in CRE loans are coming due in 2024 according to MSCI—about 20% of that linked to office properties. As noted in last month’s coverage of commercial real estate trends in Greater Phoenix, concerns about defaults are rising, but we are not yet seeing them in any significant number. (Indeed, in highly amenitized properties in the Camelback Corridor, we are seeing price improvement—a stark contrast, for example, to the weakness in the Central Avenue corridor.) While loans are coming due, lenders seem to be frozen, reminiscent of the “extend and pretend” days of the Great Recess ..read more

The Greater Phoenix residential market continues its snail’s pace. We remain short on supply, and occasional downward blips in interest rates have not moved demand—as noted last month, the Phoenix housing market is stuck in a loop. The anticipated interest rate reductions projected by the Federal Reserve may help, although mortgage companies have already built some of that expectation into their current interest rates. In addition, there is some speculation that we will be see only two rate cuts rather than three during the remainder of 2024. With additional rate decreases, it should become ea ..read more

  As we head into the end of the first quarter, three CRE trends bear watching in the Phoenix market—offering examples of the ever-changing landscape to which landlords and investors need to adapt. CRE Trend #1: Default Concerns Rising Concerns about potential defaults on the multifamily side have been lingering for months, and we are finally seeing notices of trustee sales. While the One Camelback development in the fall was the highest-profile situation so far, we are closer to the beginning of this CRE trend than the end. Vacancies are up and average asking rents contracted 3.7% YOY th ..read more

Our country’s current economic situation features uncertainty in a variety of flavors, shapes and sizes, and the commercial real estate market feels the influence of all of them. Phoenix Business Journal asked the leaders of some of the Valley’s largest brokerages their thoughts inflation, remote work and subleasing in the market. Beth Jo Zeitzer, CEO and Designated Broker at R.O.I. Properties, shared her insight on the Phoenix-area subleasing market and Arizona’s upcoming election for governor. Read the original article on bizjournals.com. The post How Valley CRE Brokers Think Rising Interest ..read more

Particularly with the proliferation of short-term-rental platforms such as Airbnb and Vrbo, single-family homes for rent in Greater Phoenix are a prime example of the intersection of residential and commercial real estate. In fact, many strictly commercial investors have moved into the single-family space due to the value, and are successfully operating large portfolios of homes for rent. The success of the short-term-rental (STR) model hasn’t been without its detractors, however, due to noisy parties, trash, parking, and other more serious problems such as a recent shooting at a property in S ..read more

Interest rates have trended up, and the Federal Reserve is showing no signs of stopping in its efforts to curb inflation by making borrowing more costly. Fed officials are attempting to avoid a vicious circle, in which the current 9-plus-percent annual inflation rate feeds expectations for further inflation—which then causes prices and wages to spiral higher. Several more hikes are expected through the remainder of 2022, bringing the federal funds interest rate to 2.5%, the highest since 2018. How can we expect these changes to affect investing in commercial real estate property in Phoenix? Th ..read more

Home prices in Phoenix from March-April were historic, and the market likely saw a peak in mid-April, when rates hit 5%. The double whammy of higher mortgage rates and increased pricing for consumer/homebuyers meant that many buyers were really priced out of the market and the Greater Phoenix area was no longer affordable. Since then, rates have ticked up slightly higher—5.5% as of mid-July. At about this time last year, the question was when Phoenix home prices would start to stabilize. Now the question is: With interest rates projected to continue going up and supply soaring, where are we he ..read more

A triple-net lease deal (a.k.a., NNN) is a lease agreement in which the tenant is responsible for all expenses, including rent, real estate taxes, insurance, and maintenance. These types of deals are increasingly being sought out by investors who are 1031 investors and/or those who are seeking low management. A subset of triple net-lease deals is the sale-leaseback, which gives a commercial real property owner the ability to convert equity into liquid capital. In this type of transaction, the seller relinquishes ownership rights to an investor and then leases back the property when escrow clos ..read more

Multifamily has been scorching hot in the Phoenix market during the past few years, but the surge in build-to-rent communities has been the most astonishing performer of all. Also known as BTR or BFR (build for rent), this is a unique segment of the single-family rental (SFR) market: Entire communities of detached, single-family or attached townhouse-style dwelling units that are specifically built to be rented rather than purchased. While different developers have different operating models, most are gated communities with one-to-three-bedroom homes with small backyards and a wide range of up ..read more

For the fifth year in a row, the Phoenix metro area ranked as the fastest-growing city in the United States, according to the US Census Bureau. Over the past decade, Maricopa County’s population has increased by 15.8%. In the process, the growth rate for Phoenix investment properties has also created top opportunities in Arizona. Behind the growth is Phoenix’s appeal as a business-friendly destination, which has spurred local investment as well as out-of-state interest from pricier coastal markets in California, such as San Francisco, Los Angeles, and San Diego. There are several factors at pl ..read more