Broker's Forum: Commercial recovery slow uphill climb

A group of the Valley’s most successful brokers, meeting at a real estate forum at the W. P. Carey School of Business, agree that although the commercial real estate market is recovering, improvement will be slow. Pete Bolton, executive vice president and managing director of Newmark Grubb Knight Frank (NGKF) who helps organize and moderates the forum, summarized the discussion this way: “2014: More of the same, but better!”

A group of the Valley’s most successful brokers, meeting at a real estate forum at the W. P. Carey School of Business, agree that although the commercial real estate market is recovering, improvement will be slow. Pete Bolton, executive vice president and managing director of Newmark Grubb Knight Frank (NGKF) who helps organize and moderates the forum, summarized the discussion this way: “2014: More of the same, but better!”

The Broker’s Forum is convened quarterly by the school’s Center for Real Estate Theory and Practice to gather insights from brokers representing a variety of sectors and specializations and a cross section of firms. The group is surveyed each quarter to uncover a consensus about the sector, and then members meet to discuss current trends. The center recently released the report for the first quarter of 2014.

Mark Stapp, director of the Master of Real Estate Development program, works with Bolton to manage the forum.

“The opinions and comments of the participants reflect the fact that the underlying economic fundamentals driving real estate are still too weak, and market participants too uncertain to cause a significant acceleration in growth,” he commented. “It will take more economic healing before significant growth occurs locally, and that will not be during quarter 1 of 2014 and probably not in quarters 2 or 3 either. Imagine a year ago, and the situation we were in. Now consider where we are. Look at how things are different, yet somehow everything is still in some way the same. This will continue.”

Quarterly reports, including quotes transcribed during the discussion, are available for download under “Commercial Survey.” The identity of the forum members is kept confidential to ensure a free conversation.

Here are highlights from the first quarter 2014 report. Forum members are polled on the same questions every quarter:

Where are we in the cycle?

• 100 percent — Recovery, 0 percent — Expansion, 0 percent — Correction, 0 percent — Maturity, 0 percent — Recession (NOTE: Only 87 percent said the area was in recovery in Quarter 4, 2013.)

In what direction is the metro Phoenix market moving?

• 73 percent — Up, 27 percent — Stationary, 0 percent — Down

Is uncertainty in the federal government affecting the commercial real estate market and hindering our local growth potential?

• 100 percent — Yes, 0 percent — No

Will the number of people who have stopped working or stopped looking for work affect commercial real estate/industrial/office/retail/multifamily?

• 40 percent — Not yet, but it will, 30 percent — No, 30 percent – Yes

Have land prices reached their peak?

• 90 percent — No, 10 percent — Yes

Have homebuilders stopped buying land?

• 100 percent — No, 0 percent — Yes

Where are apartment rents headed in the next three months?

• 45 percent — Stationary, 40 percent — Up, 10 percent — Down; 5 percent — No response

Where are office vacancy rates headed in the next three months?

• 64 percent — Down, 27 percent — Stationary, 9 percent — Up