Pete's Report Card
Newmark Grubb Knight Frank managing director Pete Bolton is fresh from chairing a meeting with 15 fellow brokers at an ASU commercial brokers forum. Here are four major trends Pete sees going into Q2:
1) Investors are hot for industrial.
Throughout Maricopa County, pension funds, REITs, and high-net-worth individuals have been craving industrial. “But you really can’t find much industrial for sale,” Pete says. (We call this the Vanilla Pop Tart syndrome.) Assets that do hit the market are often earning more than the asking prices. One opportunity is in owner/user buildings. Phoenix has recently brought on roughly 6M SF of big-box industrial in the Southwest market. But companies with 300k SF to 1M SF requirements are mostly manufacturers doing build-to-suits vs. occupying existing structures, not boding well for big-box absorption. Overall, vacancies hover around 12%.
2) Class-A multifamily is overbuilt.
Developers may not want to admit this, but Pete sees Class-A multifamily as having a bit too much product coming online. There are "6,000 to 9,000 doors in the next 18 months," he says. However, Class-B and Class-C investment is still marginally tipped in the seller’s favor.
3) Office sees uptick in blend-and-extend.
National tenants have been renegotiating leases, and Pete has seen many of these blend-and-extend deals over the past 18 months. For one, Special Loan Servicing inked a 45k SF deal at 2900 S Diablo Way (above) and after 14 months, expanded by 65k SF. Terminex took 33k SF in Glendale, and Century Link signed four separate leases totaling 20k SF. Although it’s a buyer’s market, office investors “have to be gutsy” to make a deal, as many owners are holding on and refinancing because the sector’s slowly turning around.
4) Retail is hot, hot, hot.
Well-anchored retail is selling like crazy, attracting up to 15 buyers per transaction, Pete says. (If King Solomon were a broker, he'd threaten to subdivide every space 15 ways to reveal the true buyer.) It’s very submarket specific, however, with Camelback and Scottsdale as particularly favored areas.
