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Sales Velocity Is Ahead of 2015 With Sales Volume Varying by Property Type
Phoenix, August 10, 2016 — Sales of commercial properties in Greater Phoenix were uneven in the second quarter of 2016 with a surge in industrial buildings and shopping centers, while office properties and medical office condos dropped in volume. This finding is part of the mid-year report from Colliers International in Greater Phoenix.
Sales velocity, in most cases is ahead of the 2015 pace. Fundamentals are improving across all property sectors and sales prices are trending higher.
Industrial building sales spiked more than 35% in the second quarter and total activity at mid-year 2016 is up nearly 20% from the first half of 2015. The median price dropped slightly during the second quarter and year-to-date median prices are $74 per square foot. This is nearly identical to the median price in 2015. Cap rates ticked higher in the second quarter following a dip in the first three months of the year. The average cap rate this year has been 7.3 percent, representing 30 basis points below the same time in 2015.
Shopping center sales started the year slow, but surged by more than 30% in the second quarter. Year-to-date sales velocity is 35% ahead of the 2015 pace. The retail market was the slowest property sector to enter the recovery, but cap rates are now compressing as the retail fundamentals improve. Cap rates in shopping centers have dropped approximately 50 basis points year-to-date to the low 7% range The median price of a shopping center in the second quarter was $137 per square foot. The median price for the first half of this year was $135 per square foot, 22% higher than the 2015 median price. Rents are rising and interest rates are low, which will keep cap rates near current ranges for the remainder of 2016.
Sales of office buildings slowed by nearly 20% in the second quarter, but transaction activity is ahead of mid-year 2015 levels. Prices rose in the office sector, despite the slower activity, with a median price of $143 per square foot that was 20% higher than the first quarter. The median price for the first half of this year was $133 per square foot, a slight increase over mid-year 2015. Cap rates are generally unchanged, averaging approximately 7.5% over both quarters of this year.
Medical office condo sales have been uneven, rising in the first quarter and dropping approximately 30 percent in the second quarter. Total transaction activity during the first half of this year was down 4% from the same time last year. Median prices in medical office condos rose nearly 10% from 2015, reaching $174 per square foot. Sales of traditional, non-condo medical office buildings rose 20% in the second quarter following a slight dip in the first quarter. Sales velocity in this type of building is up 10% compared to mid-year 2015. The median price for traditional medical office buildings rose to $136 per square foot and cap rates have averaged in the low 8% range.
The investment climate for Greater Phoenix is favorable and the overall sentiment is positive. Rents are rising, vacancies are dropping and interest rates remain low, which all fuel positive movement in the investment market. Activity levels remain strong and are on pace to reach their highest totals since 2007.
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About Colliers International Group Inc.
Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is an industry leading global real estate services company with more than 16,000 skilled professionals operating in 66 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting.
Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice that help clients accelerate their success. Colliers has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals’ Global Outsourcing for 11 consecutive years, more than any other real estate services firm.
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Colliers International in Greater Phoenix has served clients locally and globally for more than 35 years
