By Chris Keeley
with Phoenix Commercial Brokers
Predicting the future in real estate is almost as hard as forecasting the weather. The amount of variables that affect the real estate market is beyond calculable. We can look back and see some very obvious indications of where the market was heading but hindsight is always so much clearer. Looking forward has always been the trick.
The industrial market in Deer Valley Airpark has been very good lately. There have been many new developments over the last few years and much absorption of space. Vacancy rates are historically low currently. So where are we headed from here?
If you’re asking me to predict the future, I can’t. One of my developers told me recently that it is near impossible to budget any new construction projects with any confidence. The cost of materials and labor are changing so fast it makes it very risky to start any new development today. Southwest Property Ventures developed SPV Pinnacle Peak 1 in 2014. Less than 2 years later SPV Pinnacle Peak 2 cost almost 20 percent more to develop the same product. Today that uncertainty is even higher with world tariffs and labor shortages. It has become much harder for contractors to lock in pricing of subcontractors for extended periods of time due to the cost of goods and labor. What used to be a firm price on steel, concrete or any other construction material has now become a moving target. It near impossible now to lock in a budget on a new project. So much of what is happening today is dependent on national or world events that are certainly out of our control here.
One thing I can predict today is that pricing is going up in the near future. What Southwest Property Ventures experienced with their two Pinnacle Peak projects is sure to continue with construction costs continuing to go up.
Smart money will look to lock in their pricing today, meaning if there is a property currently on the market, it makes good financial sense to invest today and not wait to see where pricing goes tomorrow.
Inventory for industrial buildings for purchase in Deer Valley Airpark is way down right now. There are now only about a half dozen properties between 2,000 and 5,000 square feet. There are three or four between 5,000 to 15,000 square feet, and most are older, second-generation properties. There are actually more buildings for sale between 20,000 and 100,000 square feet than smaller buildings. Pickings are slim and with pricing going up, buyers’ options will remain limited for a while.
The economy is buzzing along and Phoenix is currently in a growth spurt with new projects all over town. We haven’t seen this number of cranes over the Phoenix skyline in many, many years. The future continues to look bright and I can see no reason to expect a slow down. Now may be as good a time as any to invest in real estate, especially if you’re a user with a requirement.