Trend report: Phoenix market will be hot in '08
23/10/2007 00:20 Filed in: Arizona Real
Estate
Trend report: Phoenix market will be hot in '08
Andrew Johnson The Arizona Republic Oct. 18, 2007 12:00 AM
If there's one thing that economists and real-estate analysts agree upon, it's that the housing market will not rebound from its free fall soon.
But beyond that, it gets pretty murky.
For example, many experts can't seem to agree on the effect the housing downturn will have on commercial real estate. Some believe the market has already weathered the storm; others believe the worst is still to come.
The picture grew even hazier Wednesday with the release of a new report ranking Phoenix as No. 9 on a list of 15 U.S. commercial real-estate markets to watch in 2008.
The list was part of the Urban Land Institute and PricewaterhouseCoopers' annual report, "Emerging Trends in Real Estate 2008," which gauges investment and development prospects in the U.S.
Phoenix's rampant population growth, proximity to California and burgeoning presence as a hub for warehouse space makes it market to watch next year, the report said.
The conclusions were based on interviews with more than 600 real-estate investors, developers and analysts.
Pete Bolton, a senior managing director of CB Richard Ellis' Phoenix office, agrees with the report's conclusion. He believes Phoenix's market fundamentals, including supply and demand, immigration and job creation, will help the commercial real-estate market stay strong through the next year.
"The huge driver . . . behind this is job creation," Bolton said.
The report says that the regions that will fare the best are those that are 24-hour cities with major export and import hubs.
As a result, the top commercial real estate markets, from an investment standpoint, are New York City, Seattle, Boston, San Francisco, and Los Angeles, among others.
Phoenix is not a "global pathway" like the ones listed above.
But it is in the midst of a transformation that includes a light-rail system and several developments in the downtown core that range from the addition of an Arizona State University campus to new office towers.
All of that could give it enough vibrancy to withstand the housing slowdown.
As a result, the ULI study predicts that while Phoenix's commercial real-estate market is likely headed for some kind of correction, it won't be as severe as the one that has hit the residential market.
Phoenix does have some factors working against it though, and it will need to aggressively plan for and manage existing and future growth.
"The region needs revamped infrastructure to keep pace with all the growth, including more roads, and improved sewage treatment and water systems," the report said.
Bolton, of CB Richard Ellis, is among those who believe that the much-talked- about commercial real estate correction has already started.
He says the big question is whether tighter standards as a result of the subprime-lending implosion will slow investing.
Tighter underwriting won't go away in the coming months, said Paul Boyle said, senior vice president with Grubb & Ellis/BRE Commercial LLC in Phoenix.
But Boyle doesn't think that will cause an overall slowing in investments on the industrial side next year.
"I just think the buyers may be more selective," he said.
Not everyone is as optimistic. Elliott Pollack, a Valley economist, said the housing downturn's impact on commercial real estate will really start to show in 2009.
"Things are going to be very strong through 2008 because of that which is already in the pile," he said. "But, beyond that, things are going to get weak. I would expect (2007-2008) is the peak in this cycle for commercial real estate."
Andrew Johnson The Arizona Republic Oct. 18, 2007 12:00 AM
If there's one thing that economists and real-estate analysts agree upon, it's that the housing market will not rebound from its free fall soon.
But beyond that, it gets pretty murky.
For example, many experts can't seem to agree on the effect the housing downturn will have on commercial real estate. Some believe the market has already weathered the storm; others believe the worst is still to come.
The picture grew even hazier Wednesday with the release of a new report ranking Phoenix as No. 9 on a list of 15 U.S. commercial real-estate markets to watch in 2008.
The list was part of the Urban Land Institute and PricewaterhouseCoopers' annual report, "Emerging Trends in Real Estate 2008," which gauges investment and development prospects in the U.S.
Phoenix's rampant population growth, proximity to California and burgeoning presence as a hub for warehouse space makes it market to watch next year, the report said.
The conclusions were based on interviews with more than 600 real-estate investors, developers and analysts.
Pete Bolton, a senior managing director of CB Richard Ellis' Phoenix office, agrees with the report's conclusion. He believes Phoenix's market fundamentals, including supply and demand, immigration and job creation, will help the commercial real-estate market stay strong through the next year.
"The huge driver . . . behind this is job creation," Bolton said.
The report says that the regions that will fare the best are those that are 24-hour cities with major export and import hubs.
As a result, the top commercial real estate markets, from an investment standpoint, are New York City, Seattle, Boston, San Francisco, and Los Angeles, among others.
Phoenix is not a "global pathway" like the ones listed above.
But it is in the midst of a transformation that includes a light-rail system and several developments in the downtown core that range from the addition of an Arizona State University campus to new office towers.
All of that could give it enough vibrancy to withstand the housing slowdown.
As a result, the ULI study predicts that while Phoenix's commercial real-estate market is likely headed for some kind of correction, it won't be as severe as the one that has hit the residential market.
Phoenix does have some factors working against it though, and it will need to aggressively plan for and manage existing and future growth.
"The region needs revamped infrastructure to keep pace with all the growth, including more roads, and improved sewage treatment and water systems," the report said.
Bolton, of CB Richard Ellis, is among those who believe that the much-talked- about commercial real estate correction has already started.
He says the big question is whether tighter standards as a result of the subprime-lending implosion will slow investing.
Tighter underwriting won't go away in the coming months, said Paul Boyle said, senior vice president with Grubb & Ellis/BRE Commercial LLC in Phoenix.
But Boyle doesn't think that will cause an overall slowing in investments on the industrial side next year.
"I just think the buyers may be more selective," he said.
Not everyone is as optimistic. Elliott Pollack, a Valley economist, said the housing downturn's impact on commercial real estate will really start to show in 2009.
"Things are going to be very strong through 2008 because of that which is already in the pile," he said. "But, beyond that, things are going to get weak. I would expect (2007-2008) is the peak in this cycle for commercial real estate."