It is amazing how fast the first quarter of each year always seems to fly by. It is a non-stop, press on the gas pedal type of quarter and 2018 was no different than 2017; well, maybe?
In looking back at total transaction velocity for Phoenix Metro in 2017, there was on average about 260 closings a month (office, retail, industrial, land, apartments, etc.). When you look at 1Q18, that number is about 192 closings a month; a net drop of almost 26% just in transaction velocity. This is before a deep dive into any one product class; just the macro look at transaction velocity.
There are several reasons that could go into the drop in transaction velocity with one of the main issues being tax reform and the debates leading up to the final product. The banter back and forth in Washington definitely had the investment markets captivated as to what would ultimately be passed.
After the passing of tax reform, it is taking sophisticated investors time to really see the positive or negative impacts on their commercial real estate decisions. So far, all comments have been extremely positive for commercial real estate ownership and as the year progresses, I believe that will bode well to get us back to average or exceed the monthly average in the near future.
The positive momentum of tax reform and still historic low interest rates will continue to allow for commercial real estate investors to acquire assets in the coming year. One of the trends that is starting to make itself apparent is the upgrade in asset quality. Investors are redoplying their capital into newer properties which is causing a lack of inventory for newer assets. With tempered development, this should continue to push pricing for newer properties the balance of the year.
Contributing Article provided by:
Nick Miner, CCIM | Senior Vice President
Orion Investment Real Estate
7328 E. Stetson Drive
Scottsdale, AZ 85251