Buzz words long used to describe the envisaged energy of a bustling real estate market in the Valley of the Sun may finally be ringing true.
Substantial gains across the board can be found in real estate data --- both in single-family and multifamily projects found across the state --- but on the commercial side of things, office and retail designations, a steady hand of calculated growth and risk are ruling the day.
But as new desires from consumers emerge in the Digital Age, a new build in the commercial sector --- office, retail, restaurant or resort --- trumps all other sales metrics.
Scottsdale-based Realtor, Andrew Bloom, who founded the BVO Luxury Group, which is a part of Keller Williams Arizona Realty, contends business is booming.
Others in the Phoenix residential housing marketplace agree.
“We have a very vibrant real estate market with a lot of movement and velocity,” he said. “The location’s proximity, the metro Phoenix area, from the west coast makes it extremely attractive. The influx of California buyers is certainly a big positive for us due to the proximity.”
--- Andrew Bloom
For Paradise Valley Realtor Chris Karas, the No. 1 impact on the bustling Phoenix housing market --- including the communities of Scottsdale and the Town of Paradise Valley --- is the amount of available inventory.
“The options are not there, but the demand is just incredible,” he said of what he is seeing from the macroeconomic perspective. “Our inventory is short --- no matter what the price point is. Whether it is a million-dollar home or not, there is a limited amount of homes. There is just a lack of inventory.”
Mr. Karas is co-founder of Launch Real Estate and president of The Karas Group, a leading broker of luxury real estate throughout the Phoenix metropolitan area.
Housing Data provided by The Karas Group continues to show strong gains in all economic indicators of the housing marketplace, specific to single-family homes.
• From 2018 to March 1, 2020, within the bounds of the City of Phoenix, the housing marketplace saw a $46 million gain in overall sales volume --- going from $392 million to $428 million --- as price per square foot sits at $182, which is up from $163 two years prior. The average price sold of a single-family home in Phoenix is $351,336, which is up from $303,982 two years prior.
• From 2018 to March 1, 2020, within the bounds of the Town of Paradise Valley, the housing marketplace saw a $58 million gain in overall sales volume --- going from $53 million to $111 million --- as price per square foot sits at $437, which is up from $362 two years prior. The average price sold of a single-family home in the Town of Paradise Valley is $2,390,071, which is up from $1,789,561 two years prior.
• From 2018 to March 1 2020, within the bounds of the City of Scottsdale, the housing marketplace saw a $122 million gain in overall sales volume --- from $279 million to $401 million --- as price per square foot sits at $291, which is up from $243 two years prior. The average price sold of a single-family home in Scottsdale is $908,319, which is up from $657,256 two years prior.
One insight gleaned from the housing marketplace in real-time, Mr. Bloom says, is movement within the subsets of the marketplace --- primarily homes priced less than $600,000.
“We are seeing that certain types of homes are selling better than others in the Phoenix market. There is a lot of that going on and there is a lot of segmentation in the market,” he said explaining the differences between the conforming and non-conforming marketplaces.
“Anything under the $600,000 market as the current Phoenix metro, conforming low-limit is currently set at $510,000,” he said of a price point separating the single-family house market. “Over 35% of conforming purchases are going into the Phoenix rental pool. We are seeing a shortage of inventory that is rather epidemic.”
Mr. Bloom points out in all of the Phoenix metropolitan area there are only 6,000 active listings --- an issue he says is shaping the numbers of the market statewide.
“It is very competitive and it really puts the squeeze on the buyers --- there is just not a lot of homes available to buy,” he explained. “But the luxury home market is performing very well. We have a nice balance of inventory that is both beneficial to both buyers and sellers at the portion of the market.”
Mr. Karas offers a similar sentiment on general inventory but contends million-dollar homes options are available.
“When you look at your actives and look at your actives two years ago --- our inventory is down in the luxury portions of the market,” he pointed out. “Our inventory is down, but our sales are at par or exceeding where we were at the same point in time. However, the monthly supply is going down every month.”
--- Chris Karas
Mr. Karas explains population growth is playing a role in the scarcity of homes available for purchase no matter the price point.
“We are experiencing a lot of great growth in Arizona,” he said.
“Companies are getting re-located here and they know now that they can find quality employees. The growth is serious and that is why Arizona is on the news and is on the radar everywhere. That has played into our inventory, our sales volume and the healthiness of our market.”
The dirty little secret of Arizona real estate sales? The short-term rental.
“We are still seeing them and we saw that over the last two years and a lot of people are renting out vacation homes --- especially in Old Town Scottsdale,” Mr. Karas said.
“In the Old Town area, they are trying to create that resort lifestyle in close proximity to Scottsdale. It will be interesting to see how all of this unfolds.”
For Mr. Bloom, the short-term-rental approach is having an impact on Phoenix metropolitan real estate.
“What you are seeing is the short-term rental market is having an impact on what people are doing with their homes --- it is contributing but not the same as long-term rentals,” he said. “We are probably turning a corner on that.”
A symbiotic relationship exists between residential housing and commercial real estate as population growth fuels new energy around established brick and mortar.
“The runway is long in Phoenix and there is still a lot of opportunities as we still have a lot of things ahead of us,” said Chris Marchildon, first vice president at Los Angeles-based CBRE: United States Commercial Real Estate Services.
“Phoenix is a great place for investors to plant their flag as there is still a tremendous opportunity here.”
Mr. Marchildon says the Phoenix real estate market is more active today than recent memory.
“It is a very attractive market from all investment types,” he said explaining established metro areas throughout the country don’t offer the same building value as the Phoenix market does.
“We have seen a good amount of foreign capital come to Phoenix and plant a flag. For buildings that have a story, those that are priced right and have some upward movement in them are being sold. Those buildings that check off all the boxes, they sell.”
But from a data perspective, both office and retail sales data illustrate a very consistent marketplace. CBRE data shows:
One company spearheading a major north Phoenix development says more things change, the more they stay the same. But one thing is for sure: new builds are all the rage.
“Commercial real estate is evolving where new matters more than ever,” said Rick Carpinelli, senior vice president at Crown Realty & Development.
“New means, walkable, modern and clean, efficient and geared to the current work and lifestyles of corporate users and their employees. It means mixed-use to drive efficiency from all vantages, such as parking, transportation, energy and function. Design is important; it makes people feel good when it looks good, and happy people work harder and stay longer.”
--- Rick Carpinelli
Crown Realty & Development is playing an unprecedented role in how the future of economic development will unfold in the Valley of the Sun, the City of Phoenix --- and perhaps the state of Arizona.
In 2019, Crown Realty won a $54 million bid --- on land with an estimated value of $121 million --- in United States Bankruptcy Court District of Arizona entitling the real estate firm to 96.5 acres and exclusive Master Developer Rights on nearly 6,000 acres of state trust land.
For nearly a decade the property, which encompasses the urban north core of Phoenix --- and developer rights had been the subject of active litigation at Bankruptcy Court.
The acreage acquired by Crown Realty through bankruptcy proceedings --- where Todd Burgess of Phoenix-based Polsinelli Law firm represented the interests of Crown Realty ---- comprises the majority of the vacant land east of the 1.2-million-square-foot Desert Ridge Market Place surrounding the existing High Street development.
Crown Realty officials expect to create 2 million square feet of office space and other uses, and 2,200 multifamily units in the northeast Phoenix area.
Over the last decade Crown Realty has been an instrumental figure in Arizona resort redevelopment namely setting the stage for two beloved luxury resorts:
Each resort redevelopment project were complex --- at times contentious --- revitalization efforts playing out on several different stages from United States Bankruptcy Court to resident living rooms. Those lessons are paying dividends, according to CEO Robert Flaxman.
“We are only interested in great retail uses that drive convenience and service to our base of employment and residential,” he said of how quality-of-life concerns trump all others in new commercial real estate.
“The best in food, customer service and convenience. If you want it cheaper or later, order online. If you’re willing to pay for right now, the way you want it, among the people you want to be with, you will pay more for the best in the best place. This is not new but it is more and more relevant as our lives have become more busy and more picky.”
Mr. Flaxman also agrees with the notion inventory is playing a significant role in Phoenix development.
“There is limited good quality properties to invest in,” he explained. “Good quality means type 1 construction --- steel and concrete, not wood --- great location, convenient access, mixed-use environment, walkable amenities, quality design, credit behind the income stream.”
But as things change, so will Mr. Flaxman’s perspective on what codifies as, “new.”
“New, new and new is what works,” he said.
“If it was built prior to 2000 it's not relevant unless the location is perfect, in which case people sacrifice function and design for the benefit of being exactly where they want to be. Employment has broadened and is more sustainable in Phoenix. Parking still matters as do freeways. People care about good design and functionality.”