Sales of commercial properties in Greater Phoenix slowed down during first quarter of 2017, according to a report released by Colliers International. Industrial activity ticked higher as other categories decreased in sales velocity. To access the full Colliers report, click HERE.
In most cases, prices of commercial properties declined slightly during the first quarter. This was due in large part to the mix of assets that changed hands. Fewer trophy assets and grocery-anchored shopping centers were sold, which created transactions of lower priced properties.
Cap rates rose in the first quarter. The yield on the 10-year Treasury rose at the end of 2016 but has generally stayed flat in 2017. Across most property sectors, cap rates average in the mid-seven percent to the low-eight percent range.
Office building transaction activity fell approximately 10 percent from the preceding quarter. Sales velocity for first quarter 2017 was 23 percent below first quarter 2016. Healthy gains in prices from 2013-2016 have been followed by a bit of price retreat at the start of 2017. The median price reached $136 per square foot, which is 13 percent higher than a year ago, but lower than the previous quarter.
Shopping center sales remained consistent from the end of 2016 to early 2017, but fewer assets priced above $10 million changed hands. The median price during first quarter was $102 per square foot, down from $130 per square foot in 2016. The median price for properties over $10 million was $159 per square foot.
Industrial building sales are leading the marketplace, spiking for the second quarter in a row at the beginning of this year. Sales velocity rose five percent from the end of last year nd transaction counts were 16 percent ahead of first quarter 2016. Prices inched up slightly with the median of $75 per square foot in the first quarter. This is $1 higher than the median in 2016. After dipping into the low-seven percent range in 2016, cap rates rose in the first quarter, reaching 7.7 percent.
The Greater Phoenix investment market is off to a healthy start this year, though some uncertainty remains because of interest rate change speculation. The Federal Reserve raise interest rates during the first quarter, after a rate increase at the end of 2016. The Fed has indicated two or three additional increases could follow by the end of 2017.
