As we move into 2013, the second quarter will give great insight about how the rest of the year will unfold. With Q1 starting off slower than anticipated in terms of completed deals, the next three months will tell the story of the year as the market takes shape in Phoenix.
While the market seems to be heavy with interest and businesses looking for the right fit, there is still hesitancy to pull the trigger; owners know they have the freedom to be more thorough in their choices and weigh all options before taking the plunge. Rents seem to have stabilized across the board while landlord concessions have shown signs of tightening.
Despite Phoenix’s bumpy housing market history, the metro area continues to grow at remarkable rates. Based on updated population change percentages from 2000 through 2012, Metro Phoenix ranked 7th in the U.S., beating Houston, San Antonio and Dallas Fort Worth as Texas has become direct competition as the other hot spot for businesses fleeing the West Coast.
The Metro Phoenix population increased 32% from 2000-2012, and increased 2.3% from mid-2011 to mid-2012, roughly twice the national average. With that, interest has been coming back to Arizona from companies who may have skipped over Metro Phoenix during the peak in our market in 2003 and 2004. With the wealth of possibilities in our market now, it is a prime alternative to the west coast.
The unemployment rate in Greater Phoenix as of February is 6.7%, down from 7.2% in January of this year and 7.7% in February 2012, according to the Department of Administration. For comparison, Arizona added 22,900 jobs in February of this year; from 2004 through 2007, the state added between 31,000 and 44,000 jobs in the months of February, before the recession hit.
Nationally, the unemployment rate fell slightly to 6.7% as of March, but only due to the 496,000 people who left the labor force. March posted the lowest job count in nine months, at only 88,000 jobs created. While these figures may be partly due to a wintery March and the increased taxes that began in 2013, the disappointing numbers could start to set the tone for the new American workforce.
Just 63% of American adults are now working or looking for work, the lowest percentage since 1979. Economic factors affecting businesses continue to shift the make-up of our work force, redefining part time and full time employment mixes and changing the way the average American earns a living and spends those earnings.
Nationally, a mild housing rebound and steady employment gains continue to support moderate economic growth. In the commercial real estate sector, U.S. properties showed a 24% increase in sales volume over last year, and rent growth in the office, industrial, multi-family and retail sectors is projected to continue through 2014.
The nation seems to be settling into a “new normal” with slight but steady improvements. Secondary markets such as Seattle, Austin, Baltimore and Phoenix cited significant year over year investment gains illustrating the regrowth of areas hit hard by the recession.
George Ratiu, Manager of Quantitative and Commercial Research for the National Association of Realtrors, who hosted the CCIM Institute’s Feb. 27 webinar, “The 2013 Economy and Its Effect on Commercial Real Estate,” shared that his projections included a continuing momentum for the economic recovery:
“I feel more optimistic about the economy’s direction than I did even just a few months ago.”
Such optimism gives hope that we are leaving recovery mode and getting back to a new kind of business as usual.