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June 20, 2014
Schmoozing, Phoenix Style
Last night, our debut Phoenix Schmoozarama drew quite a mix of networkers—brokers, developers, investors. As the drinks poured at the Omni Montelucia Scottsdale, we even learned something about North Dakota multifamily.
Phoenix commercial real estate investor Augustine Gomez and Artemis Realty Capital's Greg Nelson and Ben McRae. The guys tell us Artemis has funded more than 6,000 apartment units in the past three years, including more than $20M in the Peace Garden State. (That would be North Dakota. Who wouldn't want to live in such a serene sounding place?)
Many in the crowd of 200 expressed optimism. And why not? According to Colliers International, office vacancies have dropped from 20% to little more than 18% in a year, prompting investors to get more aggressive on pricing. (Imagine how they'll behave if we hit single digits.) And despite a leasing slowdown, vacancy rates improved in the Northwest and Northeast Valley and Airport industrial submarkets.
Bury's Aaron Parenica and Kelly Bell are part of the company's expansion into Arizona. It just opened Phoenix ops here in January, and Kelly tells us she sees Phoenix as primed for commercial real estate growth.
Office Landlords Rule
We spoke with CBRE office services EVP Jim Fijan about the office investment market in Phoenix and how “the market continues to get better.” (Investment is like chicken soup for an asset class.) It's a good time to be an office landlord; rents are finally pushing up with positive absorption for the past three years averaging 2M SF leased. “Everybody is getting a lift in value in their property whether they've had a significant increase in occupancy or not.” (What better way to celebrate than fly fishing in Utah.)
Last year, Jim sold some $350M in a dozen transactions, the largest of which was Scottsdale Galleria, at $68M. But with the market tightening, developers are getting spec ready—and already a handful of office projects are coming out of the ground. (Every few years they rise from the ground like cicadas.) Could the industry kill the golden goose? “It's not going to be a runaway spec development like it was,” Jim says. “I can't foresee that happening.”
CBRE's Parcland Punch
CBRE is also seeing rising prices in multifamily. Case in point: CBRE's Tyler Anderson, Asher Gunter and Sean Cunningham (snapped) and Matt Pesch just helped a JV between Scottsdale-based Mark-Taylor and Phoenix-based Kitchell Development sell Parcland Crossing, a 383-unit Class-A apartment complex in Chandler for $65M, or nearly $170k/unit. PrivatePortfolio Group out of Seattle was the buyer. That's a healthy sum, given that the current median per unit price going in Phoenix is $43k, according to Colliers International research.
The property has virtues that commanded the pricing, aside from being 93% leased and being built in 2013. “Population growth for the one-mile radius… has averaged 5.5% in the past three years and is projected to increase by almost 9% in the next five years,” Sean tells us. It also helps that Chandler is a major employment hub, with such companies as eBay/PayPal, Verizon, Wells Fargo, and the Chandler Regional Medical Center nearby, he says. The gas grills in the apartment's park also helps.
Ascent
This coming November, Bisnow will be hosting our first-ever national "Ascent" retreat in Miami for the Under 40 new generation of commercial real estate leaders. In preparation, we're hosting a series of small cocktail parties around the country for participants. This was the one this week high above downtown LA in the offices of leading California real estate law firm Allen Matkins. Yes, there are a number of women in the group, but evidently they had the good sense to back away from our lens. We shall coax them to the front the next time. Check out www.escape.bisnow.com to learn more and apply to be considered. And feel free to email us at escape@bisnow.com with any questions.
YOU TELL US: Should Real Estate Drones Be Regulated?
While the FAA has yet to decide how to regulate drones for commercial use, the remote-controlled, unmanned aerial vehicles are already being put to work in commercial real estate. Developers and construction managers are using them to keep track of a development's progress, while owners and brokers are using them to show space from an entirely new perspective. While many folks in the industry are embracing the new technology, it's also been met with some reservations, with naysayers citing “huge invasions of privacy” and safety concerns. Should regulations be put in place for drone use in commercial real estate? Read our story in Real Estate Bisnow National and tell us your thoughts by clicking the survey to the left.
We'll also keep those cocktail umbrellas for the next time. Send your news to Jarred@Bisnow.com.
