EXEC-DESK: PHOENIX MARKET UPDATES FROM RISE48 EQUITY CEO

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An analysis of Phoenix's job market, commercial and real estate market trends

Phoenix has been considered one of the top areas in the US to live and work. For May, the region saw some exciting trends and development in its commercial and real estate market, which are highlighted below:

How Real Estate Investing is an Ideal Cushion Against Inflation

Trevor Halpern of AZ Big Media says the annual inflation rate reached 8.54% this month, the highest since 1982. Halpern says that if we look at history, we can see that investing in income-producing real estate provides a hedge against inflation.

During periods of high inflation, the cash sitting in low yield savings, brokerage, or similar investment accounts will decrease in value over time rather than if the funds were moved to income-producing real estate. The concepts that support this include Appreciation, Increasing Rent, and Scarcity.

The Phoenix real estate market is seeing that supply is growing for single-family rentals, with a 34% increase in the new rental listings over the last four weeks.

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There is less demand for commercial office buildings, resulting in more supply available for commercial properties, and the scarcity effect decreases that investment class. Residential properties are scarcer than commercial properties, so the fundamentals of investment hint at favorable conditions for the residential properties.

The Increase in Metro Phoenix Home Prices is Causing More People to Rent

According to Sara Edwards of Phoenix Business Journal, the rents in Maricopa County had been climbing since before the pandemic. With the prices rising to record levels, more people have to rent apartments, houses, and condos, adding upward pressure on rents.

Housing experts say that there are few houses to rent or buy while too many people are moving into the Valley. While a building boom is expected, they believe it will take some years before enough houses and apartments are made to meet the demand in an area that is one of the fastest-growing metros in the United States.

Data indicates that more houses are being built to rent than buy. Doug Ressler from the real estate data company Yardi Matrix says persons who had planned to purchase homes have turned to rent instead because the prices homes are sold for have gone above salaries and wages.

The Phoenix area is among the top three places to relocate in the United States

According to Devonta Davis of the Phoenix Business Journal, many homebuyers are looking to relocate to more affordable places due to rising home prices and mortgage rates.

Based on new data provided by Redfin, a realty company, persons were on the move during the first quarter of this year. The company report reveals that 32.2% of its website users were looking to move to a different metropolitan area.

The Phoenix metro area was ranked second for people looking to relocate to a new location in the US. The report shows that most people relocating to Phoenix metro are from the Los Angeles area.

Some of the factors causing these moves this year include increasing home prices and fast-rising mortgage rates. However, the Valley is experiencing its own share of rent increases.

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Phoenix is number 1 in the West for year-over-year rent increases at 15.6%

AZ Big Media shares that a report by CBRE reveals the US multifamily sector witnessed a strong push at the beginning of the year, with strong demographic trends supported by record leasing activity, investment, and rent growth in the first quarter.

Phoenix was number 1 regarding year-over-year rent increases at 15.6% in the Mountain West Region. Multifamily investment has risen by 56% year-over-year. It has reached $63 billion in the first quarter of 2022, making it the strongest first quarter on record and causing the trailing 4-quarter to reach $374 billion. For Q1 2022, multifamily accounted for 37% of total commercial real estate, and office and industrial totaled 21% and 20%, respectively.

Metro Phoenix sees home prices rise, CAUSING more people to rent

AZ Big Media reports that home prices in Metro Phoenix are rising higher than ever, and people are forced to rent apartments, condos, and houses. This has added more upward pressure on rents.

Scott Wilken, a senior planning project manager at the Maricopa Association of Governments, explains that a section of the population is being priced out of owning a home and sees renting as their only choice. Furthermore, the families can rarely find apartments to fit in, so they rent houses.

 

 

Meta Mesa Data Center will increase to over 2.5 million square feet

According to AZ Big Media, Meta has revealed that it plans to add three new buildings to its Meta Mesa Data Center. This means it will now be comprised of five buildings that will equal over 2.5 million square feet.

As a result of this expansion, Meta’s investment in Arizona will rise to over $1 billion. The total number of its employees that fall within the skilled trade worker category will increase from 1,500 to 2,000. Additionally, once the data center is completed, it will support more than 200 operational jobs.

Phoenix is Expected to Experience more population growth, and affordability is a rising concern

Audrey Jensen of the Phoenix Business Journal explains that a forecast for Arizona and Phoenix metro reveals that Arizona will continue to see more residents, housing, and jobs while facing inflation, low supply of homes, and supply chain issues.

Lee McPheters, a research professor, said that for 2022 and 2023, the state is expected to see 110,000 new residents each, and net migration will be pretty intense. The state continues to increase housing and multifamily to support the population growth. But the pace of construction is not keeping up with the growth of the population.

In 2021, Arizona saw over 46,000 single-family permits; most were in the Phoenix metro. In the metro, home prices are going up, and people’s ability to afford mortgage payments has been down, says Professor Mark Stapp, the Fred E. Taylor professor of real estate.

Opendoor will add over 500 jobs through its new Tempe regional hub

Dani Birzer of Arizona’s Family says the digital platform, Opendoor, will open a new regional hub in Tempe. This will be in an over 100,000 square foot space and will provide more than 500 jobs.

Also, Opendoor says it has assisted more than 37,000 buyers and sellers in Arizona and has added over $225 million to Arizona’s economy.

The Metrocenter transformation

AZ Big Media reveals that plans are being implemented to transform the Metrocenter, one of Phoenix’s first major malls.

The Metrocenter Mall’s site plans by a development group include multifamily housing surrounding a town center with shops, restaurants, parks, and offices.

The timeline for the site’s transformation will include finishing real estate transactions this summer, demolition in fall and winter, and then construction will begin at the start of 2023. All four phases of the construction in the project will be finished in 2029 and will have 3200 housing units and nearly 400,000 square feet of restaurants, service companies, and retail stores. Additionally, there will be many parking garages.

Phoenix’s population is growing rapidly

Orion Investment Real Estate highlights data collected by the US Census Bureau that shows that Phoenix’s population increased by almost 80,000 last year, or 1.6% annually. This trend results from the residents being priced out of the expensive markets.

Net migration made up 90% of population growth simultaneously natural increase numbers decreased. Last year, net migration equaled 10,000 above the 2010-2020 average while natural was over 15000 beneath the average.

International migration also continued to slow. While population gains are slowing in the US, Phoenix is one of the few high-growth areas. It is important to note that Phoenix’s population gains are declining but not at the same rate as the US.

The West Valley is capitalizing on the development boom

According to Elinor Tutora of AZ Big Media, the industries in the West Valley are booming. 

Major industries such as KORE Energy, Taiwan Semiconductor Manufacturing Company, and several logistics companies are making investments while people move into the area quickly.

The Greater Phoenix area has seen more labor due to its good job market, low cost of living, and sunshine. With this level of development, it will become a place to not just commute to work but also to work and live.

For Maricopa County, 40% of the residents reside in the West Valley, and by 2030 the population is expected to be 2.1 million.

Phoenix is number 2 for industrial development

Stephen Matter-Chamber of AZ Big Media reports that for 2022 Phoenix has been placed number 2 for industrial development at a national level. This is based on a report by the commercial listing platform, CommercialSearch.

The firm created the state-by-state forecasted industrial property growth rates using industrial property figures from its extensive property data collection.

The report includes mixed-use properties, commercial real estate, retail, office space, and multifamily spaces larger than 25,000 square feet.

Dallas was number 1, Indianapolis third, and the Inland Empire and Chicago placed fourth and fifth, respectively.

 

 

Rise48 Equity has completed $1,262,586,000 in total transactions since 2019. We currently have $921,886,000 of Assets Under Management, all in the Phoenix MSA.