Commercial Real Estate still Rebounding
There’s a slowdown in commercial real estate? Where? As of May 1, 2015, there were already $126.3 billion in total sales in office, retail, apartment and industrial sales in first quarter, according to CoStar. That's a 47% jump over the $86 billion in sales brought in year over year.
Office sales, according to Real Capital Analytics, led the way with $33.5 billion. Apartment sales saw $33 billion. Industrial sales were up 95% year over year.
Better yet, real estate firm DTZ just reported that demand for real estate is rebounding in 70% of the country during Q2 2015. Some of the top cities seeing big demand, include (per Atlanta Daily World):
San Jose, Calif., 3.8 million square feet Dallas, 1.5 million square feet Oakland, Calif., 1.4 million square feet Los Angeles, 1.2 million square feet Atlanta, 993,000 square feet Phoenix, 850,000 square feet Raleigh-Durham, N.C., 828,000 square feet Philadelphia, 723,000 square feet New York, 709,000 square feet Chicago, 525,000 square feet
I’m not shocked that Phoenix is still hot. I’ve long talked about the opportunity in the area. As I once noted, Phoenix became one of the most battered real estate regions in the country. Almost a quarter of the approximated 80 million sq. ft. of Phoenix commercial office space inventory sat empty at one point, allowing investors to pick up quality assets, often below the cost of construction.
It was understandable, though.
Investors became hesitant to reinvest, fearing a repeat of the financial crisis that crippled the region. That fear has became overdone, though, as Phoenix real estate became one of the most undervalued, under-appreciated markets in the country, with strong growth and a low interest rate environment.
Population growth prospects for the Phoenix region game me reason for excitement, too. According to the Urban Land Institute’s Emerging Trends in Real Estate 2014, the Phoenix population was projected to grow 2.6%. With that growth comes the potential for 2.4% jobs growth, driving an explosive need for office space.