Metro Phoenix Industrial Trends
Presented By:
Leroy Breinholt
President/Designated BrokerIndustrial Sales & Leasing
Commercial Properties Incorporated
2323 W University Drive, Tempe, AZ 85281
480.966.2301 | www.cpiaz.com
Appraisal & Brokerage
What are your biggest Pain Points?– Collecting accurate data from brokers
– Getting brokers to respond – phone or email
What barriers do you have in working with brokers?
Commercial Properties IncorporatedINDUSTRIAL | OFFICE | MEDICAL | RETAIL | LAND | PROPERTY MANAGEMENT & BUILDING SERVICES
• Established in 1981, CPI has spent the last 37 years consistently growing
• Past 17 years – CPI awarded as a Top Leasing Firm & CoStar Power Broker
• Largest # of transactions in Arizona – Approximately 1,570
• Largest locally owned/ managed, full service brokerage firm
• Over 11.5 million SF of properties managed
• The only local member of CORFAC International
Commercial Properties Inc./ CORFAC International 60 offices in North America & 20 global offices. International markets include: Canada, Colombia, France, Germany,
Greece, India, Ireland, Israel, Italy, Mexico, Poland, Romania, Russia, South Korea, Spain & the United Kingdom
Looking To 2019 & BeyondPhoenix Population Growth Projections
Census 2010 2016 2018 Est. 2020 Est.
3,936,253 ppl 4,305,634 ppl 4,755,500 ppl 4,944,400 ppl
Source:
Office of Economic Opportunity, October 1st 2018
Looking To 2019 & BeyondIndustrial Construction, Absorption & Vacancy Rate
PHX Q3 Industrial Market Update
• Vacancy Rates Down: 7.0% from 8.9% during same time period last year.
• Net Absorption is positive: 790,484 SF
• Rental Rates Up: $7.24 NNN from $7.23 NNN
• CAP Rates Higher: Avg. 6.93% Compared to 6.88% during same time period last year
2018 Strengths
• 2018 is not a or a – It Keeps Getting Better
• Values, in SOME areas, have returned to previous levels
• Net Absorption is positive
• Vacancy rates dropping
• This means inventory is dwindling & prices are increasing
Threats to the MarketConstruction Worker Shortage
• Shortage of skilled workers in Arizona. At least 82 percent of Arizona contractors are struggling to fill jobs. That’s higher than national average of 80 percent. - Survey from the
Associated General Contractors of America.
• Construction costs are continuing on their upward trajectory, according to Turner Construction Co., whose Building Cost Index rose by 1.68% from Q1 to Q2, and 5.63% since a year ago. - www.bisnow.com/national/news
• Wages & Material Prices - expected to continue to rise nationwide
© Turner Construction Co.
Turner Constructions' Building Cost Index, which tracks nonresidential construction
costs in the U.S., as of Q2 2018.
Building Cost Index
Threats to the Market
If Housing Values Drop Again
Reduces consumers wealth often causes reduced spending lowering economic growth
One persons spending is another person’s salary
Current Residential Interest Rates:
• 30-Yr Fixed FHA = 4.875%
• 30-Yr Fixed VA = 4.75%
• 15-Yr Fixed = 4.50%
* As of 10/10/2018, presenter does not guarantee rates as these are subject
to approved credit and rates change daily.
Threats to the Market
If Commercial Values Drop Again
Harder for Businesses to obtain financing for equipment and expansion
May force some to close, vacancies will rise and values & rental rates will drop
Current Commercial Interest Rates:
• Conventional Fixed = 5.50% Avg
• SBA 504 (50% SBA + Bank) = 5.25% Avg
• 7A (100% SBA Loan with 10% Down) = 5.50% Avg
* As of 10/10/2018, presenter does not guarantee rates as these are subject to
approved credit and rates change daily.
Threats to the Market
Interest Rates Increase
– Financing & capital harder to obtain
– Business owners strapped for cash
– Economic growth diminished
Threats to the Market
Owners Turning to Online & Shared Space to Lease up Space
Benefits of a Broker
•Market Knowledge
•Professional Network
•Negotiations
•Time Savings
•Best Data & Systems toPromote your Property
Threats to the Market
Cyber Security – Increased technology use puts us at risk
• Smart Phones
• Tablets & Connected Devices
• Wireless Networks
• Cloud Based Software Data
OpportunitiesCompanies moving to Arizona:
Nikola Motor Company, Chewy.com, Creighton University, Anderson Corporation, Gorbel Cranes, Premier Paint Rollers, King Koil & More…
“We are excited to bring King Koil’s 120 year history of U.S. manufactured mattresses to Arizona. This new King Koil factory is a key component of our new direct-to-retail manufacturing strategy,” said David Binke, chief executive officer of King Koil. “Designed and outfitted with the latest machinery in the bedding industry, the Arizona factory will enhance our efficiency as wecontinue to implement our new platform. By controlling our own manufacturing base, we’ll be able to be respond faster to our retail partners’ needs.”
OpportunitiesCompanies moving to Arizona from California:
– Tax Incentives
– No Natural Disasters
– More employees moving to the Valley – Lower cost of living
Purchasing Housing
Buying Cars
Goods & Services
Current Sale Price Per SF
Northwest$87.00
Northeast$121.00
Southeast$103.00
Southwest$79.00
Airport$77.00
Current Rental Rates Per SF
Northwest$6.77
Northeast$11.49
Southeast$7.66
Southwest$5.20
Airport$7.17
Current Vacancy
Northwest6.4%
Northeast4.3%
Southeast6.5%
Southwest8.9%
Airport6.3%
Opportunities (cont.)
Southeast Valley Vacancy & Rental Rates
Industrial vacancy rates have decreased due to the tight inventory in the S.E. Valley, while rental rates continue to climb.
More multi-tenant projects are under construction to meet demand.
Opportunities (cont.)
Construction on the horizon to fill demand
• Q1–Q3 2018 Net Absorption = 4,991,732 SF
• Currently, 140 properties proposed/under construction for 2019 2,706,585 SF of which approx. 24.7% is already pre-leased.
Working Together
How do you alleviate Pain Points?– Add value to the broker – offer
reports, information, etc.
– Follow up with your offer/value/proposal.
Then, know the questions to ask.– Have a list of questions ready to
ask the broker.
– What influenced the price?
Adding Mutual ValueWe’ll send you our list of questions,
Things you should know to ask Brokers
Know the Market Trends:– We’ll give you our market data
Give me a call:
– I’ll help you understand the Industrial Market
Leroy Breinholt
[email protected]| 480.966.6593
Thank You
QUESTIONS?