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Industrial Leads CRE Investment Sales in Phx

Courtesy of Colliers International

Source: Colliers International in Great Phoenix

Sales of commercial properties in Greater Phoenix slowed down during Q1,  2017, according to a report released by Colliers International. Industrial activity ticked higher as other categories decreased in sales velocity.

In most cases, prices of commercial properties declined slightly during the first quarter. This was due in large part to the mix of assets that changed hands. Fewer trophy assets and grocery-anchored shopping centers were sold, which created transactions of lower priced properties.

Cap rates rose in the first quarter. Across most property sectors, cap rates average in the mid-seven percent to the low-eight percent range.

Industrial

Industrial building sales are leading the marketplace, spiking for the second quarter in a row at the beginning of this year. Sales velocity rose five percent from the end of last year, and transaction counts were 16 percent ahead of first quarter 2016. Prices inched up slightly with the median of $75/SF foot in the first quarter. This is $1 higher than the median in 2016. After dipping into the low-seven percent range in 2016, cap rates rose in the first quarter, reaching 7.7 percent.

Office

Office building transaction activity fell approximately 10 percent from the preceding quarter. Sales velocity for first quarter 2017 was 23 percent below first quarter 2016. Healthy gains in prices from 2013-2016 have been followed by a bit of price retreat at the start of 2017. The median price reached $136/SF, which is still 13 percent higher than a year ago, but lower than the previous quarter.

Shopping Centers

Shopping center sales remained consistent from the end of 2016 to early 2017, but fewer assets priced more than $10M changed hands. The median price during first quarter was $102/SF, down from $130 in 2016. The median price for properties more than $10M was $159/SF.

Conclusions

The Greater Phoenix investment market is off to a healthy start this year, though some uncertainty remains because of interest rate change speculation. The Federal Reserve raised interest rates during the first quarter, after a rate increase at the end of 2016. The Fed has indicated two or three additional increases could follow by the end of 2017.

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