Metro Phoenix commercial real estate vacancies up, sales down

Posted By Mike Padgett

July 16, 2008

There are few smiles in metro Phoenix’s commercial real estate market these days, thanks to economic broadsides from soaring fuel prices, rising food prices, depressed home prices and a stumbling stock market.

Second quarter 2008 reports from Colliers International‘s Greater Phoenix office show significant shifts into negative territory.

The office vacancy rate is 16.4 percent, up from 12.8 percent a year ago. Office rental rates are at $26.52 per square foot per month, up from $25.52 in second quarter 2007.

Second-quarter office sales volume totaled $160.4 million, a major slide from $583 million in the first quarter. Average sales price per square foot was nearly $209, down from about $268 last quarter.

A major office deal in the second quarter was the June sale of Tower II at 60 E. Rio Salado Parkway in Tempe. SunCor Development Co. sold the building to Sumitomo Corp. of America for $92.5 million, or nearly $309 per square foot.

Two significant office leases signed during the second quarter of 2008 include the U.S. Census Bureau and Computer Sciences Corp. leasing 210,000 square feet at 4417 and 4427 W. Buckeye Road in Phoenix; and Avnet Inc. leasing 132,070 square feet at 8700 S. Price Road in Tempe.

The Colliers second-quarter report also shows that in the industrial market, overall vacancies were at 13.2 percent, up from 11.7 percent in the first quarter.

Industrial sales totaled $147.3 million, less than half the $314.6 million posted in first quarter 2008. The average square foot price was more than $79, down from more than $98 per square foot in the first quarter.

Industrial rental rates were at 79 cents per square foot per month, up from 75 cents a foot in the first quarter.

Key industrial leases signed in the second quarter include leasing nearly 605,000 square feet at 6835 W. Buckeye Road in Phoenix; and Furniture Values leasing more than 323,300 square feet at 601 N. 75th Ave., Phoenix.

Despite its numbers showing a downturn in the local economy, the new Colliers report offers some optimism.

“If smart investors in the Phoenix market can turn down the background chatter and focus on market fundamentals, they may discover the tremendous benefits of approaching the market more clearly,” according to the new report.

It added that a review of the history of the Phoenix commercial real estate market shows that “downturns are generally short in duration.”

Jul 16th, 2008

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