ASU report shows Phoenix commercial real estate sector is improving

Commercial real estate, though highly discounted, is experiencing a healthy rebound, according to a study prepared by Arizona State University real estate Professor Karl Guntermann. “It appears that things are on an upward trajectory even considering volatility in the data,” Guntermann said. Guntermann analyzes data from such sources as CoStar, Real Capital Analytics and IonData to measure repeat sales. The commercial Arizona State University-Repeat Sales Index looks at price changes on the same property at different times rather than comparing similar properties. “There are enough samples to make it meaningful,” Guntermann said. He started the commercial repeat sales index four quarters ago after providing the same information for many years on home sales in the Valley. The commercial data base includes office, industrial, retail and multi-family property types. The key to the uptick in sales is pricing at 2004 “pre-bubble” levels. Large institutional investors, he said, are taking advantage of pricing that is 50 to 60 cents on the dollar from peak levels. Since developers are not building new supply, vacancies are bound to drop in time. “When the market turns around, it will take two to three years for new projects to go through the approval and construction process, so properties bought at today’s prices should be good investments,” Guntermann said. He said that as long as economic basics continue to improve, albeit slowly, there should be ongoing improvement in the commercial market.

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