Phoenix Hits Late Stages of Investment Expansion Cycle – Colliers

Real Estate Investment Remains Healthy But Slower than 2016

The Greater Phoenix commercial real estate market has experienced an upswing of investment activity for the past several years, but the expansion has shown signs of slowing during third quarter. This is according to a report released by Colliers International in Greater Phoenix. The full report can be accessed by clicking Here.

Sales of commercial properties were mixed during third quarter, with activity rising in some segments and declining in others. Declines outweighed increases, so the year-to-date sales velocity is trailing levels from the first three quarters of 2016.

Office property sales dipped three percent in third quarter and median prices were slightly lower than in second quarter. Larger buildings are selling at the high-end of the price spectrum with a median price of $195 per square foot for properties over 100,000 square feet. Cap rates rose to the mid- to high-seven percent range in third quarter.

Medical office condo sales slowed approximately 50 percent during third quarter after a big surge in second quarter. Total transaction volume for this year is down four percent from the same time in 2016. The bulk of sales in this category last quarter were located in the Southeast Valley.

Non-condo medical office buildings have had a mixed performance, rising by more than 75 percent in third quarter, but year-to-date sales are 25 percent below the same time last year. Prices for this product are on the rise with a median of $167 per square foot in third quarter. This is up from $132 per square foot in the preceding three months.

Sales of industrial properties have been gaining momentum this year with velocity rising by five percent in third quarter. Transaction activity for the first nine months of 2017 has outpaced 2016 by 10 percent. The median price for industrial buildings reached $90 per square foot in third quarter, up eight percent from the first half of the year. Cap rates are compressing as prices rise, dipping to approximately 6.8 percent in third quarter.

Activity spiked during the second quarter for shopping center sales, but decelerated in third quarter by more than 40 percent. Prices rose last quarter, despite the decline in transaction activity. The median price rose by more than 20 percent last quarter, reaching $146 per square foot.