Tag Archives: phoenix market

Phoenix-Market

Phoenix Market Is Affordable Again

The current state of the Phoenix commercial real estate market can be viewed from two sides. The reality is that we are still pushing through, so to speak, amidst a haze of foreclosures, bank take-backs and monetary defaults.  But through the fog, there is a silver lining in the form of good old-fashioned opportunity.

As REO properties flood the market, there is one truth that has emerged that brightens the hearts of real estate buyers:  The Phoenix market, already a fantastic place to live and do business, has become affordable again.

In This Ring: Investors vs. Owner-Users

Demand is on the rise for all distressed property types in the Phoenix market, based primarily on competitive pricing.  Buyers are ready to invest, and there is an enormous amount of money chasing opportunities in the Phoenix market.  This leads to a highly competitive buying pool where investors and owner-users duke it out over attractively priced distressed properties.

Recently, owner-users have thrown some of the proverbial winning punches, sometimes beating out investors in distressed sale opportunities.  On the other hand income-producing multi-tenant properties remain competitive amidst investors.  This competition is a good sign for the market as a whole, as it is pushing winning bidders into shorter due diligence and closing periods, which moves deals through the market faster.  This positive activity will continue for the next few years, as distressed properties move their way through the system.

The bottom line:  When the price is right, buyers are interested.

Local Businesses: Things Are Looking Up

The recent rise in demand has had a positive impact on the Phoenix business community.  Companies know that now is a good time to buy and lease, taking advantage of current low occupancy costs.  With that in mind, many companies are moving into the Phoenix market, while some other local businesses are absorbing customer base from failing competitors, resulting in local expansions.

In many cases, investors are making deals now which will help local businesses to lease space affordably moving forward.  In the past year, Voit’s Phoenix office has closed a number of large transactions for investors, encompassing all product types.  From land to retail centers to office properties, to a 57,000 square-foot multi-tenant flex project which was acquired as a value-add upon purchasing the distressed note from a special servicer.  In most cases, the investors will be able to deliver these properties to local tenants at competitive lease rates.

Other notable businesses that are taking advantage of today’s affordable Phoenix market include Dick’s Sporting Goods, which is developing a 600,000 square-foot build-to-suit, as well as Amazon.com, which expanded its footprint over the past 24 months in the region by leasing more than two million square feet.

Each of these transactions directly benefits companies throughout the Phoenix market, bringing business opportunities to local architects, engineers, contractors, brokers, and more.

But large corporations are not the only beneficiaries when it comes to the affordability of today’s market.  Local “Mom and Pop” owner/operators are buying buildings at low prices and renovating them.  In addition, SBA financing is readily available from many lenders, offering small business owners an opportunity they may not have had in prior markets:  the chance to own their own space and control future costs.

The Flip Side: Why Local Bank Failures Help The Market

One area of the market that has demonstrated immense improvement in the past few months is the ability to complete real estate transactions.  For a portion of the downturn many companies had difficulty closing deals, but the market has begun to move again, allowing local businesses to relocate and expand.

Some of this new movement may be attributed to the various mid-sized local and regional banks which are failing in the Phoenix market.  While bank failures may appear negative on the surface, these failings actually begin a ripple effect that helps the real estate market.  When a bank fails, it is marketed by the FDIC to be purchased by a healthier bank, which is in a better position to work through distressed assets and bad loans – actions which help move real estate deals forward.

In addition, banks are now able to complete loan-to-value assessments that are based on distressed pricing.  When the market was stagnant, there were very few transactions closing, so banks had no comparable sales to consider when completing appraisals.  Now that real estate transactions are moving again, banks can more easily create valid appraisals based on sales comps from recent deals.

At the same time, banks and life insurance companies are all starting to place more debt in the marketplace. As financing becomes more readily available, transaction activity in the local real estate market will flourish.

What’s Next For the Phoenix Market?

The outlook for the Phoenix commercial real estate market is positive.  There will be a continued supply of distressed properties which will hit the market over the next two to three years as CMBS loans come to maturity and banks work out the properties on their books.  Buyers and tenants will enjoy an affordable Phoenix market for the next few years.

Darren Tappen is Senior Vice President of Voit Real Estate Services.

medianpricenotfullstory

Median Price Not Full Story For Phoenix Market

The median price for resale homes in the Phoenix area has been edging up for several months. Does this signal that the market is approaching normalcy? Jay Butler, associate professor of real estate and author of the Realty Studies report from the W. P. Carey School of Business, talks about the factors affecting median price, including the still high number of foreclosure-related sales. It’s tempting to declare a market up-tilt based only on median price, he says, but because of that foreclosure activity, Phoenix is still far from a normal market. (13:09)

Housing Development

Shea Homes Again Ranks Highest In Customer Satisfaction Among New-Home Builders In Valley, Report Indicates

For the third straight year, Shea Homes ranks highest in customer satisfaction with new-home builders in the Phoenix market, according to the J.D. Power and Associates 2010 New-Home Builder Customer Satisfaction Study released today.

“The downturn of the housing market — along with intensified competition for a very limited pool of home buyers — has reinforced the importance of customer focus for new-home builders,” says Dale Haines, senior director of the real estate and construction industries practice at J.D. Power and Associates. “In this buyers’ market, builders that are attentive to customer needs and focus on relationship building stand the best chance of enduring through the market recovery.”

The study, now in its 14th year, includes satisfaction rankings for builders in 17 markets. Nine factors drive overall customer satisfaction with new-home builders: builder’s sales staff; builder’s warranty/customer service staff; workmanship/materials; price/value; home readiness; construction manager; recreational facilities provided by the builder; builder’s design center; and location.

Shea Homes achieved a score of 922 on a 1,000-point scale in 2010 — which represents an increase of 19 points from 903 in 2009 — and performs particularly well in the Phoenix market in six of the nine factors: builder’s sales staff; builder’s design center; construction manager; workmanship/materials; home readiness; and builder’s warranty/customer service staff.

The average customer satisfaction index score in the Phoenix market is 872 — 46 points above the 17-market average of 826. Satisfaction has improved substantially in the Phoenix market in 2010 — up 29 points from 2009.

Overall customer satisfaction across all 17 markets has improved for a third consecutive year, averaging 826 — the highest level since the inception of the study in 1997. Markets with the highest levels of overall satisfaction in 2010 include Phoenix, Las Vegas, southern California, Orlando, Fla., and Sacramento, Calif. Overall satisfaction has increased in 15 of the 17 individual markets that were also surveyed in 2009.

Centex Homes ranks highest in new-home quality in the Phoenix market. Home quality in the Phoenix market has improved considerably from 2009, averaging 856 in 2010 — up by 26 points from the previous year.

The problems reported most often in this market include: landscaping issues, exterior paint, and kitchen cabinet quality/finish.

Overall new-home quality across all 17 markets has increased notably to an average of 844 in 2010, reaching a record high. Home quality has improved from 2009 in 15 of the 17 markets. Overall, the most commonly reported quality problems include issues with landscaping; kitchen cabinet quality and finish; and heating and air conditioning.

New-home builders have improved from 2009 in raising awareness of the “green” features of their homes. Approximately 61 percent of new-home owners in the Phoenix market in 2010 perceive that their home is environmentally friendly, compared with just 31 percent in 2009. In addition, the proportion of new-home owners in the Phoenix market who indicate that their builder did not identify the home as green has declined to 51 percent in 2010 from 63 percent in 2009.

“In this hypercompetitive market, green features have become a crucial selling point, since new-home buyers are seeking to save on energy costs, as well as to increase the value of their home,” Haines says.

To be included in the studies, Phoenix-area builders must have closed 150 or more homes in the market in 2009. The new homes are located in Maricopa and Pinal counties.

The studies are based on responses from more than 16,400 buyers of newly built single-family homes that provided feedback after living in their home from 4 to 18 months, on average. There were 1,641 respondents in the Phoenix market.

For rankings for all 17 U.S. markets, visit www.jdpower.com/homes.

Ensemble DevMan

Ensemble DevMan Of Arizona Aims To Benefit Medical-Office Clients

Medical real estate developers Ensemble Real Estate Services and DevMan Company have joined forces to become Ensemble DevMan of Arizona. The union was official Nov. 1.

Ensemble DevMan specializes in medical office development, management, leasing and brokerage — a combination of each firm’s services before the merger. The new company has 110 employees and the combined portfolio includes 124 properties totaling more than 5.4 million square feet of space in four states. Since neither company’s location is big enough to house the new firm under one roof, the Ensemble building on 24th Street and Camelback has been dubbed the south office and the DevMan building a block away on East Missouri Avenue is the north office. Accounting, property management and development services are located in the south building and brokerage operations are in the north office.

Michael Moskowitz of Ensemble Real Estate Services says no money changed hands when the companies merged — they simply combined the two businesses. Ensemble was founded in 1989 by Moskowitz and partners Kambiz Babaoff and Randy McGrane. The company’s focus is developing, leasing and operating medical facilities on hospital campuses.Michael Moskowitz of Ensemble Real Estate Services

“This wasn’t a Wall Street-type merger,” says Moskowitz, Ensemble DevMan’s managing director. “Randy, Bill (Molloy) and I have known each other for a long time, so it was a decision that evolved from casual to serious over time. Earlier this year, we talked about doing a specific deal together and then we talked about it again over the summer and questioned whether we should put the businesses together. In the end, we all decided it made sense. Merging allows us to provide our clients with more talent and resources, a bigger knowledge base and more solutions.”

DevMan founder Bill Molloy described the merger as comfortable because both companies share the same culture and values. He also considers it a wonderful opportunity to enhance services for clients and explore new projects. Molloy started DevMan Company in 1981 to provide brokerage and management services to the medical real estate community and to develop physician-owned medical office buildings.

“As a result of the merger, we are now a stronger company with a bigger platform for projects,” Molloy says. “We also have a bigger resource team, so Randy, Michael and I can truly act as managing members and sponsor the business and identify new opportunities in Arizona and outside the states we currently work in.”

Sheila Gerry, senior vice president of John C. Lincoln Health Network, has done business with Ensemble and DevMan in the past and considers both outstanding organizations.

“Ensemble and DevMan have slightly different areas of strength, so this merger is going to bring a full array of diverse services to their clients,” she says. “It’s going to be great for physician-owners and tenants, as well as for our community.”

Tracy Altemus, a member of DevMan’s staff since 1987, admits that initially she was cautiously optimistic about the concept of a merger, but then quickly changed her mind.Bill Molloy

“There are always concerns with change, but I couldn’t have thought of a better fit for our two companies,” says Altemus, brokerage service manager for Ensemble DevMan. “I’ve known the principals of Ensemble for several years and always had a very high regard for them. I’ve also worked for years with their key brokerage employees, Sharon Cinadr, Marina Hammersmith and Murray Gares, and I always knew they were a class act. I also knew that their property-management philosophy was similar to ours: The tenant is ‘all important.’ In fact, when one of our clients moved from our building to theirs, I felt good knowing that they were in excellent hands and would be well taken care of.

“Ensemble and DevMan have similar cultures and are a natural fit,” she continues. “We all feel energized by the change and are looking forward to building a better mousetrap to provide excellent development, brokerage, asset and property management services to our clients, while having fun and feeling rewarded as part of a quality-centric organization.”

As a result of the merger, Ensemble DevMan has eight projects in the pipeline for development, totaling 369,000 square feet. The projected value of the projects is $170,537,000.

The projects include:

  • The Medical Plaza at THE CITY, a 104,400-square-foot medical office building in Surprise. Project cost is $26 million and it is scheduled to break ground this month.
  • Summit Medical Plaza, a 45,000-square-foot physician-owned medical office building on the campus of Summit Regional Medical Center in Show Low. The $11 million project is scheduled to break ground in either March or April.
  • A 42,000-square-foot medical office building on the campus of Auburn Regional Medical Center in Auburn, Wash.
  • Banner Gateway Medical Center, a 36,000-square-foot medical office building on the campus of Banner Ironwood Medical Center in Pinal County.
  • Canyon Crossings, a $9 million, 31,000-square-foot retail and professional plaza across from Banner Gateway Medical Center in Gilbert. Construction on this project kicks off in April and will be complete by the end of the year.
  • Phoenix Children’s Hospital’s West Valley Specialty & Urgent Care Center and an adjacent medical office building totaling 72,000 square feet in Avondale. The $19 million project will break ground sometime in February or March.

“The merger of Ensemble and DevMan will ultimately provide Phoenix Children’s Hospital with access to the expertise from both firms,” says Robert Meyer, president and CEO, Phoenix Children’s Hospital. “As a client, this merger will increase the number of important relationships needed in the medical real estate community and will give Phoenix Children’s Hospital a broader reach in the Greater Phoenix market. Having existing relationships with both companies, I see this merger as very positive.”

www.mayoclinic.org