2012 broker forum september 12, 2012 hosted by larry heath paradise valley country club
TRANSCRIPT
2012 Broker Forum
September 12, 2012Hosted by Larry Heath
Paradise Valley Country Club
2012 Office Overview
Prepared By:
Michael R. McQuaidPrincipal
YEAR ABSORPTION VACANCY AZ UNEMPLOYMENT
US
UNEMPLOYMENT
2007
610,000 16% 4.1% 5%
2008
<817,000> 24.4% 8.0% 7.3%
2009
<1,300,000> 26.1% 10.8% 9.9%
2010
216,000 27% 10% 9.4%
2011
405,000 26.5% 9% 8.5%
2012 - YTD
840,000 25.6% 8.3% 8.3%
Absorption, Vacancy & Unemployment
Information collected from US Bureau of Labor Statistics and Co-Star
* Year to Date 2012
* Year to Date 2012
* Year to Date 2012
BUILDING NAME
BUILDING ADDRESS SALES PRICE (PRICE
PSF) CAP RATE BUYER
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 INVESTMENT SALES
As reported by Co-Star
BUILDING NAME
BUILDING ADDRESS BUILDING SIZE DISTRESSED
PRICE PSFTODAY’S
OCCUPANCY TENANT(S)
2700 Frye Road
2700 W. Frye RoadChandler, AZ
183,000 SF
$31.00 PSF 100% QBE Insurance
Chandler Echelon
3000 W. One Payment WayChandler, AZ
189,000 SF
$62.00 PSF 100% Pay Pal (eBay)
17600 Perimeter
Drive
17600 N. Perimeter Drive
Scottsdale, AZ
136,500 SF
$73.00 PSF 100% Fender Musical
Four Gateway
444 N. 44th StreetPhoenix, AZ
138,000 SF
$89.00 PSF 100% To Be Announced
As reported by Co-Star
DISTRESSED TO SUCCESS
TENANT
SIZE LOCATION
QBE Insurance 183,000 SF2700 W. Frye Road
Chandler, AZ
Aetna 160,000 SFBuild To Suit
Cotton Center
State Farm Insurance 140,000 SF1500 N. Priest Drive
Tempe, AZ
U.S. Foods 133,000 SF8075 S. River Parkway
Tempe, AZ
Fender Musical Instrument 120,000 SF17600 N. Perimeter Drive
Scottsdale, AZ
CareMark 100,000 SF4121 E Cotton Center Blvd.
Phoenix, AZ
Infusion Soft 90,000 SF1260 S. Spectrum
Chandler, AZ
Mitel 83,000 SF1146 N Alma School Rd.
Mesa, AZ
iPower 70,000 SF1500 N. Priest Drive
Tempe, AZ
SXC Health Solutions 66,000 SF4805 E Thistle Landing
Phoenix, AZ
Allstate Insurance 66,000 SF222 S. MillerTempe, AZ
Ports America 63,000 SF55 N Arizona Place
Chandler, AZ
Silicon Valley Bank 50,000 SF80 E Rio Salado
Tempe, AZ
ENCOURAGING LEASES(PAST 12 MONTHS)
Year End 2012The Next 12 Months
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
Metropolitan PhoenixIndustrial Market Overview
Presented By
Bo Mills SIOR, CCIMExecutive [email protected]
September 2012
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F
2013F
2014F
Population
2744.04614257814
2855.71093750001
2963.71411132813
3074.53173828128
3178.34887695313
3273.47705078126
3363.73608398438
3452.46997070313
3536.38793945313
3637.33203125001
3774.69604492186
3914.21191406251
4018.1279296875
4106.3720703125
4153.60888671875
4209.06982421878
4263.23583984375
4304.60986328128
4418.94482421875
4537.7958984375
Annual Growth
0 111.664794921875
108.003173828125
110.817626953125
103.817138671875
95.1281738281242
90.259033203125
88.7338867187499
83.9179687500002
100.944091796875
137.364013671875
139.515869140625
103.916015625001
88.2441406250008
47.23681640625
55.4609375
54.1660156250002
41.3740234374998
114.3349609375
118.85107421875
Growth
0% 4% 4% 4% 3% 3% 3% 3% 2% 3% 4% 4% 3% 2% 1% 1% 1% 1% 3% 3%
2,750
3,250
3,750
4,250
4,750
0%4% 4%
4% 3% 3% 3% 3% 2%3%
4%4% 3% 2% 1% 1% 1% 1%
3%3%
Source: Moody’s Analytics
Metropolitan PhoenixPopulation Growth 1995-2014 Forecast
In Thousands
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
Metropolitan PhoenixTotal Employment – Non-Farm Jobs Count from 1990 – 2012
199019911992199319941995199619971998199920002001200220032004200520062007200820092010201141072
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
1,0321,0311,048
1,125
1,201
1,288
1,372
1,448
1,515
1,577
1,6321,606
1,6311,668
1,757
1,861
1,9301,944
1,826
1,7141,7141,750
1,726
In Thousands
Source: Cushman & Wakefield Research, Arizona Department of Commerce
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
757677787980818283848586878889909192939495969798990001020304050607080910111213141516 (125.0)
(100.0)
(75.0)
(50.0)
(25.0)
-
25.0
50.0
75.0
100.0
125.0 -1
6.5
20
.7
38
.6
69
.7
51
.2
12
.4
11
.2
-2.2
73
.8
73
.5
61
.4
34
.3
38
.9
47
.2
23
.9
10
.0
-1.8
17
.6
76
.6
76
.3
87
.4
83
.3
76
.3
66
.9
62
.0
55
.0
-25
.9
25
.3
36
.5
88
.9
10
3.8
69
.1
14
.1
-11
7.6
-11
2.1
-0.1
36
.2
37
.5
36
.4
51
.1
62
.5
52
.5
In Thousands
Metropolitan PhoenixAnnual Change 1995-2016 Projection with National Recessions
Projection
Source: Arizona Department of Commerce. 2012-2016 figures are projections based on data from Moody’s Analytics as of June 2012
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
Metropolitan PhoenixArea Employment – Total Non-Farm Jobs: 1,726,300 (June 2012)
Manufacturing 6.6%
Natural Resources & Min-ing
0.2%
Construction5.2%
Trade, Transportation & Utilities20.6%
Information1.6%
Financial Activities8.3%
Professional & Business Svcs16.1%
Educational & Health Svcs14.8%
Leisure & Hospitality10.6%
Other Services3.8%
Government12.2%
FederalState (incl Education)Local
Durable GoodsNon-Durable Goods
BuildingsHeavy Specialty Trades
Retail and Wholesale TradeTransportationWarehousingUtilities
PublishingTelecommunications
FinanceInsuranceReal Estate
Professional, Scientific and Technical
Educational ServicesHealth Care ServicesSocial Assistance
Arts, Entertainment and RecreationAccommodationFood Services
Source: Cushman & Wakefield Research, Arizona Department of Commerce
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
Metropolitan Phoenix TTM Employment Data: Month-over-Month January 1990 – June 2012
1/1/
90
9/1/
90
5/1/
91
1/1/
92
9/1/
92
5/1/
93
1/1/
94
9/1/
94
5/1/
95
1/1/
96
9/1/
96
5/1/
97
1/1/
98
9/1/
98
5/1/
99
1/1/
00
9/1/
00
5/1/
01
1/1/
02
9/1/
02
5/1/
03
1/1/
04
9/1/
04
5/1/
05
1/1/
06
9/1/
06
5/1/
07
1/1/
08
9/1/
08
5/1/
09
1/1/
10
9/1/
10
5/1/
11
1/1/
12(200.0)
(175.0)
(150.0)
(125.0)
(100.0)
(75.0)
(50.0)
(25.0)
0.0
25.0
50.0
75.0
100.0
125.0
150.0 In Thousands
Source: Cushman & Wakefield Research, Arizona Department of Commerce
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
6/12
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
4.00%
6.10%5.70%
4.50%
3.70%
3.20%3.30%
2.60%2.80%2.70%
3.00%
5.30%5.30%
4.60%
3.80%3.60%
3.10%
3.80%
6.10%
8.30%8.40%
7.80%7.50%
6.30%
7.30%7.40%
6.50%
5.50%5.60%5.40%
4.70%4.40%
4.00%3.90%
5.70%6.00%
5.70%5.40%
4.80%4.40%
4.90%
7.20%
9.70%9.40%
8.50%8.20%
Metro Phoenix National
Metropolitan Phoenix Unemployment Rate 1996 - June 2012
Source: Cushman & Wakefield Research, Bureau of Labor Statistics
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
4Q95
2Q96
4Q96
2Q97
4Q97
2Q98
4Q98
2Q99
4Q99
2Q00
4Q00
2Q01
4Q01
2Q02
4Q02
2Q03
4Q03
2Q04
4Q04
2Q05
4Q05
2Q06
4Q06
2Q07
4Q07
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
130%
140%
150%
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
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELDSource: Cushman & Wakefield Research, Moody’s Analytics
Metropolitan Phoenix • Housing SalesMedian Home Price vs. Single Family Sales
YE'02
YE'03
YE'04
YE'05
1Q'06
YE'06
YE'07
1Q'08
2Q'08
3Q'08
4Q'08
1Q'09
2Q'09
3Q'09
4Q'09
1Q'10
2Q'10
3Q'10
4Q'10
1Q'11
2Q'11
3Q'11
4Q'11
1Q'12
2Q'12
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
-
8.0
16.0
24.0
32.0
40.0
48.0 $144,0
30
$152,1
40
$168,4
80
$243,1
10
$273,8
35
$267,1
60
$256,0
30
$222,3
90
$202,5
90
$181,9
70
$162,3
50
$146,1
30
$135,2
40
$131,4
20
$133,9
30
$138,9
50
$142,4
80
$140,8
70
$133,7
80
$124,7
10
$117,2
90
$114,7
90
$117,7
50
$123,3
90
$128,6
70
26.5
30.9
38.5 39.9
33.0
28.3
21.5 20.4 21.2
23.0
25.6
28.2
30.2 30.8 30.1 29.0 28.4 29.0
30.9
33.2 35.1 35.8
34.9 33.1
31.0
Sale
s in
000’s
Market Peak
- 52%
+90%+8%
- 19% +12%
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012F
5.0
12.5
20.0
27.5
35.0
42.5
50.0
57.5
65.0
13.0 12.7 13.8
21.4 21.1 23.1 23.8
18.4
15.3
12.1 11.3
14.3
19.4
23.2
28.2 28.6 29.5
32.2
36.6 38.4
34.2
37.2
40.0
47.3
57.4
60.9
38.8
28.9
12.7
8.6 7.2 7.3
10.7
Perm
its in 0
00’s
Metropolitan Phoenix Single Family Permits Issued 1975 – 2011
Source: Phoenix Metropolitan Housing Study Committee, Arizona Real Estate Center
25.1Average
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
Metropolitan Phoenix • 2Q12 Industrial Statistics
Direct Overall Direct YTD YTDDirect Vacancy Vacancy Wtd. Avg. 2Q YTD Trailing 2Q YTD Trailing Leasing SF Under
Market Inventory Vacancy Rate Rate Net Rent 4 Quarters 4 Quarters Activity Delivered Const.
Black Canyon/NW Phx 28,477,270 4,118,300 14.5% 14.6% $0.75 286,030 733,852 804,221 283,580 728,336 760,515 584,953 194,262 0
1 Deer Valley 13,497,563 2,390,450 17.7% 17.8% $0.83 133,149 541,815 498,213 133,149 541,815 458,823 426,698 194,262 0
2 Black Canyon 8,901,900 755,875 8.5% 8.8% $0.65 20,303 63,778 154,444 17,853 58,262 150,128 93,399 0 0
13 Northwest Phoenix 6,077,807 971,975 16.0% 16.0% $0.63 132,578 128,259 151,564 132,578 128,259 151,564 64,856 0 0
Scottsdale/NE Phoenix 12,384,089 1,605,740 13.0% 14.2% $0.94 125,030 107,473 120,663 125,656 107,599 101,709 315,172 0 0
11 Scottsdale Airpark 8,144,498 1,224,365 15.0% 16.8% $0.87 175,852 201,561 254,514 176,478 201,687 235,560 299,198 0 0
12 Northeast Phoenix 4,239,591 381,375 9.0% 9.3% $1.16 (50,822) (94,088) (133,851) (50,822) (94,088) (133,851) 15,974 0 0
Sky Harbor/Cent. Phx 33,403,061 4,111,409 12.3% 13.2% $0.63 177,778 125,697 285,188 157,585 108,287 241,431 545,199 0 80,000
6 Sky Harbor Airport 14,019,019 1,776,781 12.7% 14.5% $0.64 31,039 22,679 85,321 21,759 13,399 76,041 158,562 0 0
15 South Mountain 19,384,042 2,334,628 12.0% 12.3% $0.63 146,739 103,018 199,867 135,826 94,888 165,390 386,637 0 80,000
Southeast Valley 36,868,411 4,684,467 12.7% 13.0% $0.67 239,608 211,071 446,483 323,208 286,391 508,753 821,286 0 0
8 Chandler 19,374,404 1,969,591 10.2% 10.3% $0.74 234,216 203,358 365,116 234,216 203,358 352,066 287,320 0 0
9 Gilbert 5,107,434 1,009,816 19.8% 21.8% $0.75 4,399 (5,581) (52,404) 87,999 61,926 15,103 110,770 0 0
10 Mesa 12,386,573 1,705,060 13.8% 13.8% $0.54 993 13,294 133,771 993 21,107 141,584 423,196 0 0
Southwest Valley 112,260,565 12,421,725 11.1% 11.4% $0.37 1,010,105 955,724 4,531,826 1,059,556 1,012,025 4,476,227 1,876,476 259,200 0
4 Far Southwest Phoenix 8,532,931 862,986 10.1% 10.2% $0.42 40,000 33,535 165,914 34,167 27,702 160,081 204,073 0 0
14 Southwest Phoenix 59,266,121 7,623,304 12.9% 13.3% $0.35 832,120 530,054 3,773,765 832,120 500,054 3,631,865 1,244,315 259,200 0
5 South Central Phoenix 20,738,524 2,201,884 10.6% 11.1% $0.47 6,780 199,559 256,106 62,064 291,693 348,240 204,692 0 0
3 West Phoenix 23,722,989 1,733,551 7.3% 7.3% $0.34 131,205 192,576 336,041 131,205 192,576 336,041 223,396 0 0
Tempe 39,905,007 3,758,103 9.4% 10.3% $0.61 20,843 276,022 383,497 (7,345) 285,484 365,142 1,089,976 0 157,992
7 North Tempe 27,435,483 2,394,855 8.7% 9.4% $0.60 46,154 75,407 254,377 46,154 113,057 163,186 515,257 0 0
16 South Tempe 12,469,524 1,363,248 10.9% 12.1% $0.63 (25,311) 200,615 129,120 (53,499) 172,427 201,956 574,719 0 157,992
TOTAL 263,298,403 30,699,744 11.7% 12.2% $0.58 1,859,394 2,409,839 6,571,878 1,942,240 2,528,122 6,453,777 5,233,062 453,462 237,992
DIRECT NET ABSORPTION OVERALL NET ABSORPTION
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Construction
1483
1076
283
1628
5455
5695
7835
7621
8333
7510
7093
6588
2863
1447
1598
1813
5608
6611
11567
3637
1189
631
194.262
1000
2500
4000
3500
3000
Absorption
0 0 1390
7394
8843
4590
9537
6862
8281
8969
6113
1320
2969
1409
2770
9002
6010
4406
-2251
-2813
3782
6134
4500
4750
5000
4500
3500
3000
Vacancy
0.152
0.163
0.152
0.116
0.071
0.063
0.072
0.048
0.072
0.0590000000000002
0.066
0.097
0.0990000000000001
0.091
0.086
0.0490000000000001
0.052
0.06
0.111
0.159000000000001
0.152
0.123
0.11189825344281
0.0934979409328001
0.0738759926817587
0.056162700167381
0.0426828423574415
0.031399581038951
Job Growth
0.021
-0.00200000000000001
0.017
0.073
0.068
0.073
0.065
0.056
0.046
0.041
0.035
-0.016
0.016
0.022
0.053
0.0590000000000002
0.037
0.00700000000000001
-0.061
-0.062
0 0.02
0.0198532011510761
0.01887766358387
0.0255837668798502
0.0303414888117324
0.0248207013351228
0.0132404058561858
-3,750
-1,250
1,250
3,750
6,250
8,750
11,250
-6.0%
-2.0%
2.0%
6.0%
10.0%
14.0%
18.0%
Source: Cushman & Wakefield Research, Moody’s Analytics
Sq
uare
Feet
in 0
00
’s
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%
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2Q12
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2Q12
Beginning
Period
0.36
0.320000000000001
0.320000000000001
0.320000000000001
0.320000000000001
0.330000000000001
0.34
0.390000000000001
0.43
0.5 0.56
0.52
0.52
0.53
0.53
0.54
0.610000000000001
0.68
0.670000000000003
0.56
0.56
0.56
0.57
Incr.
Growth
NaN
-0.04
0 0 0.01
0.01
0.05
0.04
0.07
0.0600000000000001
0.0199999999999999
-0.06
0.02
-0.01
0.01
0.07
0.0700000000000001
0.07
-0.08
-0.11
0 0.0099999999999999
7
0.01
Direct Asking
Rates
$0.36
$0.32
$0.32
$0.32
$0.33
$0.34
$0.39
$0.43
$0.50
$0.56
$0.58
$0.52
$0.54
$0.53
$0.54
$0.61
$0.68
$0.75
$0.67
$0.56
$0.56
$0.57
$0.58
Direct Vacancy
0.141940553041539
0.141531245634289
0.125200743485446
0.0962631619587528
0.0599580976011583
0.0907947345836355
0.0731733566377628
0.0778492223232711
0.0749857589430704
0.0586429165124206
0.0655337569511866
0.0972314963079054
0.0994627359116343
0.0909684207591028
0.0864580983945184
0.0487610087745885
0.0516959328894424
0.0596863673024304
0.106030253873659
0.151755759987334
0.146
0.123
0.117
$0.05
$0.15
$0.25
$0.35
$0.45
$0.55
$0.65
$0.75
1.0%
3.0%
5.0%
7.0%
9.0%
11.0%
13.0%
15.0%
$0.36 $0.32 $0.32 $0.32 $0.33 $0.34
$0.39 $0.43
$0.50 $0.56 $0.58
$0.52 $0.54 $0.53 $0.54 $0.61
$0.68 $0.75
$0.67
$0.56 $0.56 $0.57 $0.58
Metropolitan Phoenix • Industrial Market Overview Historical Industrial Asking Rents vs. Direct Vacancy – All Product Types
Source: Cushman & Wakefield Research
-11
%
+0
%
+0
%
+3
%
+3
%
+1
5%
+1
0%
+1
6%
+1
2%
+4
%
-10
%
+4
%
-2%
+2
%
+1
3%
+1
1%
+1
0%
-11
%
-16
%
+0
%
+2
%
+2
%
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
0.0%
5.0%
10.0%
15.0%
20.0%
$0.00
$0.30
$0.60
$0.90
$1.20
14.2
%
14.2
%
12.5
%
9.6
%
6.0
%
9.1
%
7.3
%
7.8
%
7.5
%
5.9
%
6.6
%
9.7
%
9.9
%
9.1
%
8.6
%
4.9
%
5.2
%
6.0
%
11.1
%
15.9
%
15.2
%
12.9
%
11.2
%
9.3
%
7.4
%
5.6
%
4.3
%
3.1
%
Vacancy Rate Direct Overall Asking Rents Aggressive GrowthConservative Growth Market Growth
Metropolitan Phoenix • Industrial Market Overview and ProjectionHistorical Vacancy and Overall Rental Rate Recovery
Projection Period
Aggressive Growth
10% Avg
ConservativeGrowth3% 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
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
1 0 3 2 7 12
18
18
24
29
26
18
20
23
32
41
49
74
41
9 14
26
8
$74
$0
$36
$27
$40
$46
$54
$63
$47$44
$74
$68
$62
$53
$66
$79$83
$99
$83
$61
$39
$58 $60
Total Transactions Median Price Per SF Total $ Volume (in Mil.)
Source: Cushman & Wakefield Research
Metropolitan Phoenix • Industrial Market Overview Industrial Sales Transactions 1990 – YTD 2012 ($5.0M+)
PHOENIX IINDUSTRIAL MARKET OVERVIEW
CUSHMAN & WAKEFIELD
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Retail
0.103 0.103 0.11 0.1013
0.0969
0.0987000000000003
0.0986000000000005
0.0926
0.0955000000000003
0.085 0.08 0.07 0.0683
0.07 0.07 0.09 0.0763
0.0721
Industrial
0.1131
0.1072
0.0968
0.0951
0.0906
0.0954
0.095 0.0975
0.0925
0.0912
0.0863
0.075 0.07 0.0706
0.0705
0.0815
0.0868
0.0813
Office
0.0882
0.0874
0.094 0.0941
0.0915
0.0953
0.095 0.0930000000000002
0.0976
0.094 0.085 0.078 0.068 0.07 0.0711
0.0845000000000002
0.0682
0.0764
Multi-Family
0.0934
0.0937000000000002
0.0957000000000001
0.0939000000000001
0.0913
0.0943
0.0898000000000001
0.0868
0.0828
0.0791
0.065 0.0614
0.0575
0.0575
0.0565
0.0685
0.0641
0.06
Average
0.0993
0.0978
0.0993
0.096 0.0928
0.0958
0.0934513962337367
0.0903728244243012
0.0913253963311777
0.0862535558235902
0.0765985207207249
0.0687687088920076
0.0633295265464864
0.0650035117674661
0.0676467039134655
0.0772372016710378
0.0682593993953558
0.0700133131017723
6.0%
8.0%
10.0%
12.0%
14.0%
Source: Cushman & Wakefield Research, CoStar
*Includes transactions $5.0MM+
Metropolitan Phoenix Median Cap Rates
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 we’ve 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 you’re a tenant you better lock in a long term lease now because it is about to be a Landlord’s market.
Metro Phoenix Market OverviewEstimated Population:• Census 2010: 4,192,887• 2011 Estimate: 4,263,236
Total Retail GLA:• 2nd Qtr. 2011: 215,689,308 s.f.• 2nd Qtr. 2012: 215,808,758 s.f.
Retail Vacancy:• 2nd Qtr. 2011: 13.9%• 2nd Qtr. 2012: 11.8%
Retail Market Rents:
2nd 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.
2nd 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.
Metro Phoenix Box VacancyAvailable 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%
Metro Phoenix New ConstructionRetail Space Under Construction:• 2nd Qtr. 2011: 190,069 s.f.• 2nd Qtr. 2012: 480,146 s.f.
Annual Absorption (year-to-date):• 2nd Qtr. 2011: - 397,446 s.f.• 2nd Qtr. 2012: + 1,210,879 s.f.
Future New Construction:• Estimated at 400,000 – 500,000 s.f. for 2013 - 2015
Metro Phoenix Re-DevelopmentTown & Country (SEC 20th 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 20th 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
Metro Phoenix Downsizing RetailersStaples:• Went from a prototype of 24,000 s.f. to 16,000 s.f.
Kohl’s:• 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
Brick & Mortar -vs- Internet SalesApple:• 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 24th St. & Camelback Rd.) is doing
approximately $25.5 million out of 7,739 s.f.
-vs-
Metro Phoenix Investment Market
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.
