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2012 Broker Forum September 12, 2012 Hosted by Larry Heath Paradise Valley Country Club.

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Presentation on theme: "2012 Broker Forum September 12, 2012 Hosted by Larry Heath Paradise Valley Country Club."— Presentation transcript:

1 2012 Broker Forum September 12, 2012 Hosted by Larry Heath Paradise Valley Country Club

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3 2012 Office Overview Prepared By: Michael R. McQuaid Principal

4 Y EAR A BSORPTION V ACANCY AZ U NEMPLOYMENT US U NEMPLOYMENT 2007 610,00016%4.1%5% 2008 24.4%8.0%7.3% 2009 26.1%10.8%9.9% 2010 216,00027%10%9.4% 2011 405,00026.5%9%8.5% 2012 - YTD 840,00025.6%8.3% Absorption, Vacancy & Unemployment Information collected from US Bureau of Labor Statistics and Co-Star

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9 B UILDING N AME B UILDING A DDRESS S ALES P RICE (P RICE PSF) C AP R ATE B UYER Hayden Ferry I 80 E. Rio Salado Parkway Tempe, AZ $39.4 Million ($194.00 PSF) 8.2%Parkway Properties Hayden Ferry II 60 E. Rio Salado Parkway Tempe, AZ $86 Million ($287 PSF) 7.0%Parkway Properties Max @ Kierland 16220 N. Scottsdale Road Scottsdale, AZ $79 Million ($306 PSF) 6.5% Artis Real Estate Investment Trust 2012 I NVESTMENT S ALES As reported by Co-Star

10 B UILDING N AME B UILDING A DDRESS B UILDING S IZE D ISTRESSED P RICE PSF T ODAY S O CCUPANCY T ENANT ( S ) 2700 Frye Road 2700 W. Frye Road Chandler, AZ 183,000 SF $31.00 PSF100%QBE Insurance Chandler Echelon 3000 W. One Payment Way Chandler, AZ 189,000 SF $62.00 PSF100%Pay Pal (eBay) 17600 Perimeter Drive 17600 N. Perimeter Drive Scottsdale, AZ 136,500 SF $73.00 PSF100%Fender Musical Four Gateway 444 N. 44 th Street Phoenix, AZ 138,000 SF $89.00 PSF100%To Be Announced As reported by Co-Star D ISTRESSED T O S UCCESS

11 T ENANT S IZE L OCATION QBE Insurance183,000 SF 2700 W. Frye Road Chandler, AZ Aetna160,000 SF Build To Suit Cotton Center State Farm Insurance140,000 SF 1500 N. Priest Drive Tempe, AZ U.S. Foods133,000 SF 8075 S. River Parkway Tempe, AZ Fender Musical Instrument120,000 SF 17600 N. Perimeter Drive Scottsdale, AZ CareMark100,000 SF 4121 E Cotton Center Blvd. Phoenix, AZ Infusion Soft90,000 SF 1260 S. Spectrum Chandler, AZ Mitel83,000 SF 1146 N Alma School Rd. Mesa, AZ iPower70,000 SF 1500 N. Priest Drive Tempe, AZ SXC Health Solutions66,000 SF 4805 E Thistle Landing Phoenix, AZ Allstate Insurance66,000 SF 222 S. Miller Tempe, AZ Ports America63,000 SF 55 N Arizona Place Chandler, AZ Silicon Valley Bank50,000 SF 80 E Rio Salado Tempe, AZ E NCOURAGING L EASES (P AST 12 M ONTHS )

12 Year End 2012 The Next 12 Months

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14 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Metropolitan Phoenix Industrial Market Overview Presented By Bo Mills SIOR, CCIM Executive Director 602-229-5970 bo.mills@cushwake.com September 2012

15 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Source: Moodys Analytics Metropolitan Phoenix Population Growth 1995-2014 Forecast In Thousands

16 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Metropolitan Phoenix Total Employment – Non-Farm Jobs Count from 1990 – 2012 In Thousands Source: Cushman & Wakefield Research, Arizona Department of Commerce

17 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD In Thousands Metropolitan Phoenix Annual Change 1995-2016 Projection with National Recessions Projection Source: Arizona Department of Commerce. 2012-2016 figures are projections based on data from Moodys Analytics as of June 2012

18 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Metropolitan Phoenix Area Employment – Total Non-Farm Jobs: 1,726,300 (June 2012) Federal State (incl Education) Local Durable Goods Non-Durable Goods Buildings Heavy Specialty Trades Retail and Wholesale Trade Transportation Warehousing Utilities Publishing Telecommunications Finance Insurance Real Estate Professional, Scientific and Technical Educational Services Health Care Services Social Assistance Arts, Entertainment and Recreation Accommodation Food Services Source: Cushman & Wakefield Research, Arizona Department of Commerce

19 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Metropolitan Phoenix TTM Employment Data: Month-over-Month January 1990 – June 2012 In Thousands Source: Cushman & Wakefield Research, Arizona Department of Commerce

20 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Metropolitan Phoenix Unemployment Rate 1996 - June 2012 Source: Cushman & Wakefield Research, Bureau of Labor Statistics

21 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Source: National Association of Realtors; U.S. Census Bureau; Bureau of Economic Analysis; Moody's Analytics 133.0% 50% - the Median Income can afford the Median priced home Metropolitan Phoenix Housing Affordability Pct of Families that can afford the Median Priced Resale Home

22 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Source: Cushman & Wakefield Research, Moodys Analytics Metropolitan Phoenix Housing Sales Median Home Price vs. Single Family Sales Market Peak - 52% +90% +8% - 19% +12%

23 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Metropolitan Phoenix Single Family Permits Issued 1975 – 2011 Source: Phoenix Metropolitan Housing Study Committee, Arizona Real Estate Center 25.1 Average

24 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Metropolitan Phoenix 2Q12 Industrial Statistics

25 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Source: Cushman & Wakefield Research, Moodys Analytics Square Feet in 000s Metropolitan Phoenix Industrial Market Overview Completions and Net Absorption vs. Market Vacancy and Annual Job Growth (1.6%) (6.2%) Projection Period 16.3% 9.9% 11.0% 7.3%

26 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Metropolitan Phoenix Industrial Market Overview Historical Industrial Asking Rents vs. Direct Vacancy – All Product Types Source: Cushman & Wakefield Research -11%+0% +3% +15%+10%+16%+12%+4%-10%+4%-2%+2%+13%+11%+10%-11%-16%+0%+2%

27 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Metropolitan Phoenix Industrial Market Overview and Projection Historical Vacancy and Overall Rental Rate Recovery Projection Period Aggressive Growth 10% Avg Conservative Growth 3% Avg 4-yr post- recession: 12% average annual rental rate increase 3-yr post- recession: 10% average annual rental rate increase Market Growth 7.3% Avg Source: Cushman & Wakefield Research

28 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Source: Cushman & Wakefield Research Metropolitan Phoenix Industrial Market Overview Industrial Sales Transactions 1990 – YTD 2012 ($5.0M+)

29 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Source: Cushman & Wakefield Research, CoStar *Includes transactions $5.0MM+ Metropolitan Phoenix Median Cap Rates

30 PHOENIX IINDUSTRIAL MARKET OVERVIEW CUSHMAN & WAKEFIELD Metropolitan Phoenix Current Trends Southwest bulk distribution: - Only 2 buildings larger than 300,000SF available in all of Phoenix. - Lease rates have nearly doubled in this size range over the last 24 months. - Spec Development is underway in SW Phoenix, 24 – 36 months for the rest of the Valley. - Four projects between 500,000 – 600,000SF will break ground by YE 2012 ProLogis, Seefried, Trammell Crow, and potentially Alter. - BTS are back: TJ Maxx @ 1.5MSF, Dicks Sporting Goods @ 700,000SF, Mitek @ 260,000SF Market as a whole: Leasing Activity is up for all tenant sizing which is the first time in 5 years weve seen tenants under 100,000 SF active in the market (mom & pops and regional companies are finally back looking for space). Vacancy rates are headed towards equilibrium. Investment Sales: Trophy or Trouble Cap rate compression for institutional product ($20M+, new, well located, well leased). Non traded REITS have an insatiable appetite: IIT just purchased 2 largest ind. deals ever done in Phoenix. Non institutional deals in terms of size and quality are not trading unless it is at a high cap rate (8 – 9%) Closing: The industrial market is recovering led by an increase in tenant demand of all sizes and no spec development for the last five years which will lead to space constraints, pushing lease rates up, cap rates down, and values up. This is a great time to buy, the best time to sell in the last five years, and if youre a tenant you better lock in a long term lease now because it is about to be a Landlords market.

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39 Estimated Population: Census 2010: 4,192,887 2011 Estimate: 4,263,236 Total Retail GLA: 2 nd Qtr. 2011: 215,689,308 s.f. 2 nd Qtr. 2012: 215,808,758 s.f. Retail Vacancy: 2 nd Qtr. 2011: 13.9% 2 nd Qtr. 2012: 11.8% Retail Market Rents: 2 nd Qtr. 2011: Specialty Centers: $15.52 p.s.f. Shopping Centers: $14.66 p.s.f. Power Centers: $20.31 p.s.f. Malls: $22.20 p.s.f. 2 nd Qtr. 2012: Specialty Centers: $16.27 p.s.f. Shopping Centers: $13.94 p.s.f. Power Centers: $19.62 p.s.f. Malls: $22.31 p.s.f.

40 Available Box Spaces (10,000 s.f. and larger): September 2011: 373 September 2012: 354 Absorption of Box Spaces (10,000 s.f. and larger) by Grade in Last Year: A: 36% B: 38% C: 26%

41 Retail Space Under Construction: 2 nd Qtr. 2011: 190,069 s.f. 2 nd Qtr. 2012: 480,146 s.f. Annual Absorption (year-to-date): 2 nd Qtr. 2011: - 397,446 s.f. 2 nd Qtr. 2012: + 1,210,879 s.f. Future New Construction: Estimated at 400,000 – 500,000 s.f. for 2013 - 2015

42 Town & Country (SEC 20 th St. & Camelback Rd.): Added a 22,000 s.f. multi-tenant shop pad on Camelback Road Added Nordstrom Rack as an anchor Whole Foods taking over former Linens-N-Things space on 20 th Street The Pavilions at Talking Stick (NWC & SWC Loop 101 & Indian Bend Rd.): Added two pylon signs on the freeway Re-developed the older theatre into a dine-in UltraStar Cinemas Gave the entire center a facelift Added multiple pad restaurant buildings along Pima Road and Indian Bend Road

43 Staples: Went from a prototype of 24,000 s.f. to 16,000 s.f. Kohls: Went from a prototype of 83,000 s.f. to 68,000 s.f. Best Buy: Prototype was 45,000 s.f. down to 30,000 s.f. ; trying to sublease a portion of all larger format stores

44 Apple: Apple has both strong internet sales and strong in-store sales The location at Scottsdale Quarter (SEC Scottsdale Rd. & Greenway-Hayden Loop) is doing approximately $47.0 million in sales out of 9,858 s.f. The location at Biltmore Fashion Park (NEC 24 th St. & Camelback Rd.) is doing approximately $25.5 million out of 7,739 s.f.

45 Trophy -vs- Trauma: Trophy: grocery-anchored, well-leased, market adjusted rents Trauma: Lender-owned (REO), Special Servicer, Lender-owned: broadly marketed -vs- note sales Special Servicer: fee-oriented, limited motivation, buying brokerage : Special Servicer owned, LNR, CIII Capital Markets: Debt Maturities: construction loans, technical defaults Cheap Money: refinance -vs- sale Single-Tenant Net-Leased Retail: Cap Rate Compression 1031 Market REIT Activity 2011 Investments: Total Dollar Volume: $308,037,658 Total GLA: 2,775,098 s.f. Average Price: $89.36 p.s.f. 2012 Investments: Total Dollar Volume: $637,995,331 Total GLA: 5,413,982 s.f. Average Price: $125.48 p.s.f.

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