By Roland Murphy for Arizona Builder’s Exchange
While pricing trends have been mixed, Phoenix area land sales in the first half of 2017 have accelerated, according to a Colliers International in Greater Phoenix report.
Land parcel sales rose 11 percent from the second half of 2016, and transactions jumped 50 percent from the first half of last year.
Residential land sales got off to the fastest annual start since 2013 and count for more than half of total transactions so far this year. Commercial and residential land saw the biggest price gains, and the median price is up 12 percent from last year, coming in at $4.10/SF.
Due to a decrease in infill and an increase in outlying area totals, residential land prices have dipped in the first half, down to $2.72/SF, a decrease of 12 percent from last year’s median price.
Total commercial sales increased 32 percent from first half 2016, hitting $5.18/SF. “If market rents continue to push higher, there could be room for commercial land prices to rise,” the report states.
Industrial was also hot to start the year, surging almost 50 percent from second half 2016. Hitting $4.30/SF put industrial at 31 percent more than the 2016 median price.
Home prices in the Phoenix area continue to rise, just as they have for the last three years. The region has kept largely on pace with national trends, with both rising approximately 5.7 percent. The median new home price locally is $310K. From 2014-2016 home prices generally held steady, but the first half increase is up roughly 3 percent from the first half of 2016. New home sales are up 25 percent year-over-year.
Multifamily saw a slight vacancy increase in Q2, ending the first half the same as last year at 5.9 percent. Construction, however, keeps churning along, with 3,300 units delivered in the first six months and more than 12,000 currently under construction.
Multifamily permitting dipped around 10 percent from the second half. Permits issued in the first half were approximately 4,000, while last year’s second half was 4,500. Colliers’ projections call for 7,000 multifamily permits overall for 2017, but the average has been 7,250 for the last four years.
Still, rents in the first half have gone up 5 percent, and vacancy will likely stay less than 6 percent.
Industrial demand continues to be high. First half net absorption was 4.2MSF, on par with the 2016 second half total. Nearly 5MSF is currently under construction, and 2.4MSF was delivered in the first half. Interestingly, 2MSF of industrial space in the pipeline is wrapped up in spec projects.
On the office side rents have increased to more than $24/SF generally, with Class A going up to $28/SF, a year-over-year increase of 2.5 percent.
Absorption in the first half was more than 1.5MSF, on par with second half 2016 and on pace to maintain the 3MSF average the area has seen each of the past three years.
Retail is also doing well, but, as expected, not as well as industrial and office. While much of the current 5MSF of vacant big box space is being repurposed, it still stands as a major contributor to the 9.3 percent vacancy rate.
Net first half absorption for retail was 858KSF, a decrease from last year. With the relatively high remaining vacancy and its attendant redevelopment efforts, new construction has only been averaging around 1.1MSF a year for the past four years, a trend that is expected to continue.
The Big Picture
Colliers anticipates no major surprises in the second half. Maricopa County saw the largest population growth of any in the nation last year, and the Phoenix area contributed to that bump with 93,000 new arrivals. Over the next few years, that’s expected to start exceeding 100,000.
The drive for housing by both new and existing residents is expected to keep both single- and multifamily strong. The population growth, combined with good employment numbers, should continue to fuel gains across all sectors through the end of the year.