Cassidy Turly Talks Condos, Office

Speaking of Cassidy Turley, members of the Phoenix office tell us all multifamily eyes are on condos right now. David Fogler cites Deco Community's plans for a surge in condo projects, including Envy in Scottsdale (pictured here). So far there are 23,000 apartment units in the pipeline for Metro Phoenix spread over a three- to five-year build-out, “which matches perfectly what we did from '03 to '07.” The difference: Developers are chasing high rents. At the peak of the housing market, ownership rates here were 70%. Now it's back down to 65%, David says. “We're seeing a lot of people renting by choice. That's why developers are trying to build this new high-end stuff.” 

Land, on the other hand, has cooled somewhat in the past year as new housing permits dropped in Metro Phoenix, says Brent Moser (with wife Jen and kids Savannah, Mason and Madison). Current permits are around 14,000, which is low by historical norms. “I think a lot of locals are waiting for it to hit 20,000 for psychological reasons,” Brent says. But the right parcel will command a lot of interest—and capital—from housing developers. Brent says he's working on a $17M deal in Downtown Tempe that is only two and a half acres. “That's being driven by State Farm building 2M SF of space,” he says. “This particular deal in Tempe will benefit from the freeways… and light rail right behind it.”

When it comes to office, absorption has returned to pre-recession levels, “but a lot of that is driven by build-to-suit activity,” says Michael Beall (here with wife Kim, and kids Max and Cameron). “We're kind of chewing away at the vacancy.” At it's peak, vacancies for Phoenix office landlords nearly topped 27%; today it's hovering above 23%. And rent growth is only just happening in the most choice properties in the prime of submarkets. 

Cassidy Turley is tracking 7M SF of industrial deals—the bulk of which is focused on the East Valley, says Will Strong (here inspecting The Great Wall of China—for a pending sale?). That's leading to rent growth for a change: “There's just not nearly enough [space] for the deals that are out there.” Most recently, Will helped sell a $13M distribution center to Exeter called Prologis Riverside Distribution Center.