Justin Horwitz, Jonathan Levy & Richard Lewis provide an abstract on the Metro Phoenix Office & Office Condo Markets during the start of 2022. Click on the link below for the full Office & Office Condo Newsletter!
Justin Horwitz, Senior Advisor, National Product Council Chair Of Office Properties;
“The Q1 2022 Phoenix office data is offering signs of great momentum, but also major headwinds to consider. Sales volume is back to peak levels while CAP rates and prices continue to strengthen. That said, vacancies are continuing to increase every quarter and negative absorption continues to plague the leasing market. Parlay that with rising interest rates and record high sublease availability (with most of that space to likely be converted to additional future vacancy as leases expire) and one would have a very valid reason for questioning how much runway the otherwise strong Phoenix office market has. That all said, there is still great demand from users and investors alike looking to place capital in the Phoenix office market. With limited supply of true “value add” opportunities, stabilized investments and sale leasebacks are generating a large volume of activity. Similarly, users are driving high levels of competition for well maintained, well located office buildings.”
Jonathan Levy, Senior Advisor;
“Many of the office properties I focus on, in suburban markets, are still selling for premium values. The borrower requirements and rising interest rates may cause a dent, but the demand is still as omnipresent as ever.”
Richard Lewis, Advisor;
“The strength of the Phoenix market over the last quarter has seen an increasing adjustment from Q4 just before it. While we have seen a significant amount of momentum for both Owner User and Investor deals throughout the MSA, which has lead to increasingly compressed CAP rates and Owner User pricing being the highest blended average we have seen in this cycle. However, while we are optimistic for future growth it is important to note that there are indicators on the horizon that any investor should be aware of. The combination of increasing office lease vacancies, a well documented increasing interest rate market (for at least the next few quarters) and signs of adjustments in the stock market some investors may just be wary of how much more room for growth we have.”