Thomas Title Talk: April’s Commercial Real Estate Market Conditions
Title Talk: Exploring Arizona’s Commercial Real Estate Market
Hi, welcome to our first edition of Thomas Title Talk. My name is Dustin Gaskey, I’m the president of Thomas Title & Escrow, located here in Scottsdale, Arizona. We want to focus today on the Commercial Real Estate market here in Arizona.
Market Conditions
We just got back the notes from the Feds meeting last week. It’s very interesting to see they’ve changed their soft landing prediction to the expectation of a recession in 2023, moving into 2024. The big question that we’re definitely looking at right now is: How is this going to be affecting future rate increases? It’s been proven that the increases they’ve done have absolutely affected and are potentially causing this recession.
The expectation is that they shouldn’t go forward with interest rate hikes; but if the past tells the future, I think we absolutely expect that they will be doing at least one more hike as we move forward. It is important to pay attention, though, that not all sectors of Commercial Real Estate are being affected as heavily by the interest rate changes right now; although, office and retail are heavily being affected we’re seeing increases in transactional amounts on both industrial and Warehouse sectors.
Local Market Movements
The market’s local need for e-commerce, distribution centers and fulfillment is what’s continuing to drive this. We’ve got multiple projects under construction right now in both the East Valleys and the West Valleys. The push by investors and developers lately to adjust their financing mechanisms to offer Private Equity as well as Mezzanine Financing has really allowed different partners to come into the mix that are helping get these transactions done since traditional debt is not factored into how they’re able to move forward with their possibilities.
Tempe continues to be a hotbed. Anything in and around the lake, anything in the Novus Innovation Corridor continues to expand. Just last week Sam Fox announced he’s bringing three new restaurants down there really proving that this place is not just for students, it’s not just for the office, or the apartments that are down there. It is going to be full life cycle with the hotels, the apartments, the office, the entertainment venues as well as the ability to eat and shop down there. With the general consensus on office being that it’s a slowdown on transactions as well as development, it’s interesting to see that somebody like Wells Fargo is going to continue to put their foot down in their stamp in the in the Dallas Marketplace just north of it they’re building $455 million dollar project that’s going to house over 6,800 individuals working there, taking them from their bifurcated office spaces that they have right now and bring them all into one location because they’re finding more productivity out of their players being all in one place.
Looking Ahead
We’re continuing to expect interest rates to continue to rise and putting downward pressure on the actual count of commercial transactions going forward for 2023, but when you look at the fundamentals of what makes Arizona great: job growth, the openness to business, the climate and migration. We really expect to continue to have a great year here in ’23.
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