Updated August 1, 2017

Based on Data Available Second Quarter, 2017

Greater Phoenix Real Estate Market Shows Stability

By Elliott Pollack
Greater Phoenix Blue Chip
Second Quarter, 2017

    The Greater Phoenix Blue Chip real estate panel continues to believe that the forecast for both 2017 and 2018 will remain in the same general range that they have been forecasting for the last several quarters. This suggests that real estate markets in the Greater Phoenix area are displaying a high degree of stability and that no new major factors, either positive or negative, are affecting the market. For example, the forecast for single family permits for 2017 and 2018 is now 21,400 and 24,100 respectively. Last quarter, it was 21,900 and 24,700. The range of forecasts is narrow. For 2017, the range is 19,000 on the low side and 23,200 on the high side with all but two panelists in the 21,000-23,200 range. For 2018, the range is wide-19,500 to 28,000. As for apartments, about 7,200 multifamily permits are expected this year and 6,800 next. This compares to 6,600 and 6,500 permits forecasted last quarter. Absorption is expected to be 6,100 units and 5,700 units respectively. Vacancy rates are expected to rise to 5.9% at year-end 2017 and to 6.2% at year-end 2018. This is still a relatively modest level of vacancy by historic standards.

    The results expected for the office market are also about the same as the last several forecasts. For 2017, about 1.5 million square feet of spec construction is expected and for 2018, about 2 million square feet are expected. This is about the same as the first quarter results of 1.7 and 2.1 million square feet respectively. As for absorption, 3.0 million square feet is expected this year and 2.9 million next. This is about the same as in the first quarter. Year-end vacancy rates should be about 15.8% and 15.4%, respectively. This means that 2019 will likely be the year when vacancy rates move below 15%.

    While the retail market is likely to continue to struggle, overall movement is in a positive direction. Vacancy rates, which were 8.9% at year-end 2016, are expected to remain at about 9.0% at year-end 2017 and then decline slightly to 8.8% at year-end 2018. At least some modest level of spec construction in retail is expected in 2017 and 2018. This compares to virtually no spec construction in 2015 and 2016. Absorption of retail space is projected to increase in 2017 and 2018 from 2016 levels. But, the level of absorption will remain anemic by historic standards.

    The retail market is expected to see very little new spec construction in 2017 and 2018 with less than 1.0 million square feet expected each year. Absorption is expected to be higher than new spec construction. Thus, vacancy rates should modestly decline.

    The industrial market is expected to remain strong with about 4.6 million square feet of new spec construction in 2017 and 4.8 million in 2018. Absorption is anticipated to remain strong as well.

    Overall, the outlook is for a continued strong (in post-2007 terms) single family market, a continued strong apartment market and for continued improvement in commercial markets.


Residential Forecast
Organization Single-family permits Multi-family permits Apartment Vacancy (Q4 %) Apartment Absorption (Units)
Arizona Public Service2320069006.26,200.0
Belfiore Real Estate Consulting21200
CBRE2200088005.06,500.0
Colliers International2200070006.06,000.0
CRA LLC2200060006.07,500.0
Cromford Report195008200
Cushman & Wakefield1900068005.28,000.0
Elliott D. Pollack & Co.2050080005.47,000.0
Griffin Consulting2200066756.16,075.0
ROI Properties2100050007.52,500.0
Southwest Growth Partners2250065005.95,500.0
U of A Eller College218548803
CONSENSUS2139671535.96,142.0
Residential Forecast
Organization Single-family permits Multi-family permits Apartment Vacancy (Q4 %) Apartment Absorption (Units)
Arizona Public Service2742173006.86,300.0
Belfiore Real Estate Consulting25300
CBRE2350086004.86,000.0
Colliers International2800065006.55,500.0
CRA LLC2600065006.06,000.0
Cromford Report215007000
Cushman & Wakefield1950060005.07,500.0
Elliott D. Pollack & Co.2250080005.68,000.0
Griffin Consulting2470064756.25,525.0
ROI Properties2300037008.22,200.0
Southwest Growth Partners2400058006.54,200.0
U of A Eller College236408698
CONSENSUS2408867796.25,692.0
Residential Forecast
2017 2018
Organization Single-family permits Multi-family permits Apartment Vacancy (Q4 %) Apartment Absorption (Units) Single-family permits Multi-family permits Apartment Vacancy (Q4 %) Apartment Absorption (Units)
Arizona Public Service2320069006.26,200.02742173006.86,300.0
Belfiore Real Estate Consulting2120000.00.02530000.00.0
CBRE2200088005.06,500.02350086004.86,000.0
Colliers International2200070006.06,000.02800065006.55,500.0
CRA LLC2200060006.07,500.02600065006.06,000.0
Cromford Report1950082000.00.02150070000.00.0
Cushman & Wakefield1900068005.28,000.01950060005.07,500.0
Elliott D. Pollack & Co.2050080005.47,000.02250080005.68,000.0
Griffin Consulting2200066756.16,075.02470064756.25,525.0
ROI Properties2100050007.52,500.02300037008.22,200.0
Southwest Growth Partners2250065005.95,500.02400058006.54,200.0
U of A Eller College2185488030.00.02364086980.00.0
CONSENSUS2139671535.96,142.02408867796.25,692.0
Actuals From Phoenix Housing Market Letter and CBRE
Organization Single-family permits Multi-family permits Apartment Vacancy (Q4 %) Apartment Absorption (Units)
2016 Actuals1801580225.25,731.0
2015 Actuals1590227065.38,730.0



Office Forecast (Millions of Sq. Ft.)
Organization Construction Vacancy (Year End %) Absorption
Arizona Public Service*1.5014.503.50
CBRE0.6814.503.00
Colliers International*1.9015.303.00
Cushman & Wakefield*1.4017.202.80
Elliott D. Pollack & Co.1.8016.003.00
Lee & Associates2.2018.002.80
ROI Properties*1.2015.002.80
CONSENSUS1.5315.802.99
Office Forecast (Millions of Sq. Ft.)
Organization Construction Vacancy (Year End %) Absorption
Arizona Public Service*3.0013.803.90
CBRE0.8615.602.80
Colliers International*3.0014.703.40
Cushman & Wakefield*1.0017.001.80
Elliott D. Pollack & Co.2.5015.003.20
Lee & Associates1.5016.702.50
ROI Properties*2.5014.703.00
CONSENSUS2.0515.402.94
Office Forecast (Millions of Sq. Ft.)
2017 2018
Organization Construction Vacancy (Year End %) Absorption Construction Vacancy (Year End %) Absorption
Arizona Public Service*1.5014.503.503.0013.803.90
CBRE0.6814.503.000.8615.602.80
Colliers International*1.9015.303.003.0014.703.40
Cushman & Wakefield*1.4017.202.801.0017.001.80
Elliott D. Pollack & Co.1.8016.003.002.5015.003.20
Lee & Associates2.2018.002.801.5016.702.50
ROI Properties*1.2015.002.802.5014.703.00
CONSENSUS1.5315.802.992.0515.402.94
Actuals From CBRE (Millions of Sq. Ft.)
Organization Construction Vacancy (Year End %) Absorption

* All space over 10,000 sq. ft.

** All space over 20,000 sq. ft.

2016 Actuals0.6817.403.22
2015 Actuals2.1519.403.70


Retail Forecast (Millions of Sq. Ft.)
Organization Construction Vacancy (Year End %) Absorption (Units)
Arizona Public Service1.208.702.20
CBRE0.158.201.10
Colliers International1.409.101.80
Cusham & Wakefield0.6010.201.20
ROI Properties0.709.501.80
CONSENSUS0.819.101.62
Retail Forecast (Millions of Sq. Ft.)
Organization Construction Vacancy (Year End %) Absorption (Units)
Arizona Public Service1.308.502.80
CBRE0.188.301.00
Colliers International1.608.702.20
Cusham & Wakefield0.4010.200.40
ROI Properties0.2010.301.50
CONSENSUS0.749.201.58
Retail Forecast (Millions of Sq. Ft.)
2017 2018
Organization Construction Vacancy (Year End %) Absorption Construction Vacancy (Year End %) Absorption
Arizona Public Service1.208.702.201.308.502.80
CBRE0.158.201.100.188.301.00
Colliers International1.409.101.801.608.702.20
Cusham & Wakefield0.6010.201.200.4010.200.40
ROI Properties0.709.501.800.2010.301.50
CONSENSUS0.819.101.620.749.201.58
Actuals From CBRE (Millions of Sq. Ft.)
Organization Construction Vacancy (Year End %) Absorption (Units)
2016 Actuals0.008.901.32
2015 Actuals0.009.101.15


Industrial Forecast (Millions of Sq. Ft.)
Organization Construction Vacancy (Year End %) Absorption
Arizona Public Service**4.508.306.00
CBRE*5.107.207.00
Colliers International**6.709.508.00
Cusham & Wakefield**3.008.607.20
Lee & Associates**4.008.107.00
ROI Properties**4.209.004.80
CONSENSUS4.588.506.67
Industrial Forecast (Millions of Sq. Ft.)
Organization Construction Vacancy (Year End %) Absorption
Arizona Public Service**5.807.806.70
CBRE*4.808.607.00
Colliers International**7.508.908.50
Cusham & Wakefield**2.708.507.10
Lee & Associates**4.407.507.30
ROI Properties**3.408.805.00
CONSENSUS4.778.306.93
Industrial Forecast (Millions of Sq. Ft.)
2017 2018
Organization Construction Vacancy (Year End %) Absorption (Millions Of Sq.Ft.) Construction Vacancy (Year End %) Absorption
Arizona Public Service**4.508.306.005.807.806.70
CBRE*5.107.207.004.808.607.00
Colliers International**6.709.508.007.508.908.50
Cusham & Wakefield**3.008.607.202.708.507.10
Lee & Associates**4.008.107.004.407.507.30
ROI Properties**4.209.004.803.408.805.00
CONSENSUS4.588.506.674.778.306.93
Actuals From CBRE (Millions of Sq. Ft.)
Organization Construction Vacancy (Year End %) Absorption

* All space over 5,000 sq. ft.

** All space over 10,000 sq. ft.

2016 Actuals3.328.009.50
2015 Actuals3.3510.107.05