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Phoenix, AZ

Apartment
Rising construction totals have had no significant impact on metro Phoenix’s apartment market’s overall high occupancy profile. With minimal change, the vacancy rate has remained below 5.0% since the fourth quarter of 2014. The rate closed the third quarter of 2017 at 4.5%, up 30 basis points for the period and up 10 year-to-date following a decline by 20 through all of 2016. By the end of October, the rate had increased to 4.6%. Rent growth, running at about 6.0% in both 2015 and 2016, has slowed in 2017. Rates, meanwhile, are modest by national norms for major markets. At $955 and $895 per month, respective asking and effective averages for the third quarter were up 2.1% and 3.1% year-to-date following last year’s gains of 5.9% and 6.1%. Gains for the third quarter alone, however, were just 0.1% and 0.2%. It seems that October made up for some of the third quarter’s sluggishness with increases of 0.5% for both rates. VIEW APARTMENT LISTINGS >
Industrial
The Phoenix warehouse/distribution space sector accounted for 144.7 million as of the third quarter of 2017. Vacancy in the warehouse/distribution market, Phoenix’s most dynamic industrial real estate sector, has been declining more or less steadily from the near-20.0% high recorded for year-end 2010. Indeed, the decline accelerated in 2016 and 2017. By the end of the third quarter of 2017, the rate had fallen to 13.2%, a loss of fully 70 basis points for the period alone and a loss of 140 year-to-date after 2016’s 130-basis-points drop. Vacancy remained flat through October. At $5.79 psf and $5.29 psf, third quarter 2017 asking and effective average rents for space in this sector were up 1.9% and 2.3% year-to-date following increases in 2016 at 3.3% and 3.2%. Gains for the third quarter alone were 0.3% and 0.6%. October added gains of 0.2% to both averages. Phoenix’s large high-tech industry base, rooted in the East Valley (in Tempe and Chandler in particular), has given rise to a substantial Flex/R&D real estate sector. Reis counts total inventory at 31.6 million square feet. Vacancy in the Flex/R&D space market, also elevated, also has been declining. The third quarter rate was 16.1%, same as a quarter earlier but down 50 basis points year-to-date following 2016’s loss of fully 330 basis points. The rate fell an additional 10 basis points through October, with no new additions and 30,000 square feet absorbed net. The Flex/R&D market also does well. At $10.73 psf and $9.57 psf, third quarter average asking and effective rents as reported by Reis were up 1.2% and 1.4% year-to-date on the heels of gains at 1.6% and 1.9% through 2016. Increases for the third quarter alone were 0.3% and 0.4%. Gains of 0.1% followed for both averages in October. VIEW INDUSTRIAL LISTINGS >
Office
Phoenix’s high overall general purpose, multi-tenant office market vacancy rate seems at odds with the generally good health of the market otherwise through the recent period. Indeed, in some areas—Tempe and Scottsdale in particular—large blocks of quality space are in relatively short supply. Reis put overall metrowide third quarter 2017 vacancy at 23.5%, up 10 basis points for the period but the same as reported for year-end 2016—after that year’s loss of 80 points. The overall vacancy rate increased 10 basis points during October. The $25.21 psf and $19.68 psf asking and effective rental rate averages reported by Reis for the third quarter represented respective year-to-date increases of 1.7% and 1.9% on the heels of the gains of 3.8% and 4.0% recorded by the firm for all of 2016. Gains for the latest quarter alone were 0.4% and 0.5%. October followed with increases of 0.1% for both rates. VIEW OFFICE LISTINGS >
Retail
The vacancy rate in the Phoenix community-neighborhood shopping center market has shown little movement since the second quarter of 2016. It closed the third quarter of 2017 at 10.1%, unchanged for the period and up 10 basis points year-to-date following a decline by 60 through 2016. October 2017 brought no change. At $20.09 psf and $17.25 psf, asking and effective averages for the third quarter were up just 0.6% and 0.7% year-to-date following 2016’s gains of 1.2% and 1.3%. Growth rates for the third quarter, following losses the quarter before, were 0.5% and 0.6%. October alone followed with increases of 0.5% for both rates. VIEW RETAIL LISTINGS >

Source: Data provided by Reis, inc.

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