By Luci Scott for Arizona Builder’s Exchange
Employment in greater Phoenix showed healthy growth in the fourth quarter, which fueled a drop in vacancy rates in multifamily housing, according to the Colliers International Q4 2014 reports.
At the same time, Colliers reported especially robust job gains in office-using sectors. For the third consecutive year, employers in office sectors added 20K jobs, for a growth of about 4.5% per year.
In multifamily, year over year, greater Phoenix added 50K jobs, expanding employment by 2.9%.
During the same quarter, multifamily vacancy fell to 6.2% in the fourth quarter; it was the fifth consecutive year in which vacancy trended lower because of robust absorption as new units were built. Net absorption surged 25% from 2013 to 2014, reaching more than 5,800 units for the year. Net absorption has been positive for the past 12 quarters.
At the same time, asking rents are soaring in response to demand, as rents increased 4.1% in 2014 to $819 per month, with the strongest gains shown in the fourth quarter.
South Scottsdale submarket strongest
The strongest annual increase was in the south Scottsdale submarket, which gained 12.9% in the year.
Sales activity rose in the fourth quarter, showing an increase for the year to 24%. Deals of $20M or more made up 40% of the activity in the market for the second straight year. The median price reached $69,700 per unit for the year, which is 10% higher than the median the year before.
In offices, net absorption in the fourth quarter totaled about 700KSF, following 930KSF in the third quarter. Net absorption for the year came to nearly 2.4MSF, up about 60% from 2013.
Vacancy in Class A buildings is down to 16.8% while asking rents have advanced for seven consecutive quarters, ending 2014 at $22.57 per SF. Asking rents increased by about $1 per square foot in 2014, with additional gains forecast for 2015.
Investment activity levels surged 30% in the fourth quarter, and sales velocity was up 11% from 2013 levels. With property fundamentals improving and transaction activity picking up, sales prices are increasing. The median price increased 15 percent in 2014, hitting $130 per square foot.