Phoenix Commercial Real Estate

Nov. 2, 2016

Transcript:

TED SIMONS: A NEW STUDY SHOWS THAT THE SLOW AND STEADY RECOVERY IN THE VALLEY'S COMMERCIAL REAL ESTATE MARKET WILL LIKELY CONTINUE. HERE TO TALK ABOUT THE STUDY IS MARK STAPP, EXECUTIVE DIRECTOR OF THE MASTER OF REAL ESTATE DEVELOPMENT PROGRAM AT ASU'S W.P. CAREY SCHOOL OF BUSINESS. WHICH CONDUCTED THIS RESEARCH.
TED SIMONS: THIS WAS A SURVERY OF COMMERCIAL REAL ESTATE BROKERS AND WHAT DID YOU GET OUT OF IT?
MARK STAAP: WE CHANGED OUR SURVEY AND SENT IT TO MORE THAN 400 COMMERCIAL REAL ESTATE BROKERS, 116 RESPONDED. THIS IS A CONTINUATION OF WORK WE'VE BEEN DOING FOR THE LAST THREE YEARS, LOOKING FOR TRENDS AND IT SHOWED WHAT WE SENSED AND THAT IS THAT THERE'S A BIT OF HESITATION AND PESSIMISTIC FEELING CREEPING INTO THE MARKETPLACE.

TED: DO WE KNOW WHY?

MARK STAPP: I THINK IT'S UNCERTAINTY. THE ENTIRE MARKETPLACE IS A LITTLE UNCERTAIN ABOUT A VARIETY OF THINGS. SOME OF THEM THINGS WE HAVE NOTHING THAT WE CAN DO ABOUT IT. PRESIDENTIAL ELECTION. WHAT THE FED IS GOING TO DO, AND THEN, YOU KNOW, THERE'S OTHER THINGS THAT ARE IN THE MARKETPLACE, THAT MAKE IT TOUGHER. COMMERCIAL LENDING REGULATIONS. YOU START ADDING THINGS UP AND THERE'S NO SINGLE THING BUT THERE'S A LOT THAT'S GOING ON THAT IS CAUSING A LITTLE BIT OF A PAUSE. ONE OF THE QUESTIONS WE ASKED WAS DO YOU THINK THAT WE'RE IN AN EXPANSION MODE AND WE'VE HAD VERY GOOD RESPONSE. WE HAD HAD FOR THE THIRD STRAIGHT PERIOD A DECLINE IN THE PERCENTAGE OF PEOPLE WHO SAID, YES, WE'RE IN A EXPANSION.

TED: INTERESTING. AS WELL AS IF YOU FEEL THE MARKET IS ON THE UPSWING, USUALLY 100%, YOUR REPORT SAYS 100%, BUT IT'S ONLY 88%.

MARK STAPP: 88%.

TED: WHAT'S THE FUD FACTOR?

MARK STAPP: FEAR, UNCERTAINTY AND DOUBT. AND INVESTORS HATE UNCERTAINTY. IT'S RISK BECAUSE IT'S HARD TO PREDICT WHAT'S GOING TO HAPPEN AND ALTHOUGH PEOPLE MAY THINK THAT REAL ESTATE INVESTORS AND DEVELOPERS ARE WILD IN THEIR USE OF MONEY AND CARELESS, IT'S ALL ABOUT MANAGING RISK AND MITIGATING KNOWN RISK AND WHEN YOU HAVE UNKNOWNS YOU CAN'T MANAGE THEM AS WELL AND PEOPLE TEND TO PULL BACK.

TED: ARE THERE CERTAIN AREAS AROUND TOWN THAT FOLKS ARE MORE OPTIMISTIC ABOUT PERHAPS THAN OTHERS?

MARK STAPP: YEAH, SO -- BUT I THINK A COUPLE OF THINGS THAT WE SEE IN THIS MARKETPLACE. ONE OF THEM IS DIFFERENTIATION BY PRODUCT TYPE AND BY SUBMARKET. BUT EVEN -- BY SUBMARKET, SOME OF THE CONVERSATION CREPT FROM SUBMARKET TO MICROMARKET. SO IT'S NOT THAT THE DOWNTOWN TEMPE OR THE AREA AROUND ASU IS A GOOD SUBMARKET, YOU NOW HAVE TO BE REALLY PRECISE ABOUT IDENTIFYING SPECIFIC LOCATIONS WITHIN THAT SUBMARKET TO LOOK AT WHAT IS LIKELY TO BE SUCCESSFUL. BUT, YOU KNOW, WE SEE A LOT OF THE ACTIVITY IN THE WEST SIDE. DOWNTOWN PHOENIX, VERY ACTIVE AND CERTAINLY THE MULTIFAMILY MARKETPLACE CONTINUES TO DO WELL BUT EVEN WE SEE A LITTLE BIT OF -- I WOULDN'T CALL IT CONTRACTION, BUT WE SEE A FEW CHANGES IN THE UPWARD TRAJECTORY WE HAVE BEEN ON WITH MULTIFAMILY. RETAIL, VERY DIFFICULT EXCEPT FOR SMALL LOCAL OPPORTUNITY, A LOT AROUND FOOD. BUT THE RETAIL MARKET HAS BEEN TOUGH. SCOTTSDALE FASHION, KIERLAND, QUARTER, YOU KNOW, SOME OF THE OTHER BIGGER MALLS DOING OK.

TED: YOU MENTIONED THE WEST SIDE, HOW FAR WEST ARE WE TALKING ABOUT AND ARE THESE SUBMARKETS OR BIGGER PROJECTS.

MARK STAPP: SUBMARKETS, SO THE WEST SIDE WE SEE OPPORTUNITIES WITH INDUSTRIAL. INDUSTRIAL DONE FAIRLY WELL, I TALKED TO A COUPLE OF THE INDUSTRIAL BROKERS AND THEY'VE HAD THE BEST YEAR THEY'VE HAD.

TED: INTERESTING.

MARK STAPP: MANUFACTURING A LITTLE BIT, WE'VE HAD TALK IN THE POLITICAL ATMOSPHERE ABOUT MANUFACTURING GOING AWAY. AND, YOU KNOW, WE SEE THINGS HAPPENING IN THAT SEGMENT OF THE MARKET AND A LOT OF IT. AIRPORT, WEST VALLEY. OFFICE, MULTIFAMILY, AND SOME OF THE LIFESTYLE RETAIL THINGS, SCOTTSDALE, SOUTHEAST VALLEY.

TED: YEAH, YOUR REPORT ALSO MENTIONS THAT BILLIONS OF DOLLARS ON THE SIDELINES RIGHT NOW WAITING TO JUMP IN. WHAT GETS THEM IN THE GAME?

MARK STAPP: UM, I THINK WE HAVE TO SEE, IN THIS PARTICULAR METROPOLITAN AREA, A LITTLE BIT MORE ECONOMIC DEVELOPMENT. OCCURRING. I THINK WE'VE GOT SOME REALLY EXCELLENT ECONOMIC DEVELOPMENT IN THE CITY OF PHOENIX AND ORGANIZATIONS LIKE THAT. BUT IT'S TOUGH FOR US TO COMPETE WITH PLACES LIKE THE COASTAL AREAS. WE WERE IN DALLAS, ALL LAST WEEK AND IT'S BOOMING. BUT WE CAN'T COMPETE WITH CENTRAL TIME ZONES AND THE KIND OF AIRPORTS THEY HAVE AND OIL AND GAS AND SOME OF THE THINGS THAT GIVES THEM COMPETITIVE ADVANTAGE. IN -- AND THEY'VE GOT TO LIVE UP TO SOME LIFE SOMETIME REQUIREMENTS AS WELL. SO WE'VE GOT TO SEE MORE ECONOMIC DEVELOPMENT ACTIVITY TO DRIVE MORE REAL ESTATE DEVELOPMENT.

TED: SO BOTTOM LINE, NEAR-TERM ACTIVITY LIKELY TO BE SLOW, LONG TERM ACTIVITY MORE OPTIMISTIC?

MARK STAPP: I THINK EVERYBODY IS OPTIMISITC BUT THEYRE CAUTIOUS RIGHT NOW, END OF THE YEAR, PRESIDENTIAL ELECTION, UNCERTAINTY, WHERE EVERYBODY GOING, YEAH, IF I CAN PAUSE ON MY INVESTMENT DECISION FOR A LITTLE BIT, IF WE CAN WAIT IT SEE WHAT IS HAPPENING WE'LL FEEL MORE CONFIDENT.

TED: YOU MENTIONED BEING IN THE DALLAS AND THE PLACE A BOOMTOWN AND THERE ARE PLACES EXPERIENCES GROWTH. WE ARE EXPERIENCES GROWTH BUT IT DOESN'T HAVE - IS IT A GOOD THING? WE'VE GONE THROUGH BOOM AND BUST CYCLES SO OFTEN. HAVE WE MATURED A LITTLE BIT OF THE MARKET.

MARK STAPP: YEAH, IN THE REPORT, THIS IS, I THINK A REFLECTION OF HOW WE'VE CHANGED AS A METROPOLITAN AREA. WHEN YOU LOOK AT THE RESIDENTIAL GROWTH AND THE COMMERCIAL GROWTH IT FEEL LIKE WE'RE IN EQUILIBRIUM. BUILDING TO THE DEMAND THAT WE HAVE. WE'D LIKE TO SEE MORE DEMAND BUT I THINK THAT WILL REQUIRE A BETTER UNDERSTANDING OF OUR IMMIGRATION POLICY. THERE'S STILL SOME SYSTEMIC PROBLEMS THAT WE HAVE. LABOR SHORTAGES AND MATERIAL COSTS, BUT WE'VE GOT TO BE ABLE TO GET PEOPLE INTO THIS MARKETPLACE.

TED: ALL RIGHT. IT'S GOOD TO HAVE YOU HERE.

MARK STAPP: MY PLEASURE.