2017 Predictions: Animal Spirits, Cooling Apartments and Other Forecasts for Phoenix Real Estate

Article originally posted on Phoenix Business Journal on December 28, 2016

Real estate is a varied component, with factors such as home building, industrial, office and retail space all varying with strengths and weaknesses at different times.

What will happen in 2017 for the various sectors? Here’s a few ideas.

“Animal spirits” in construction and real estate: We’ve heard a lot about the old Keynesian term “animal spirits” in driving recent stock market gains. Investors have had positive gut feelings about equities. That could include real estate — which has seen strength in industrial and multifamily here in Phoenix but not so much in office and single-family.

The office market is seeing some new development and construction that has been lacking since the recession. There might not be an office boom, but look for developer interest in the already tight submarkets such as Scottsdale, Tempe and Phoenix’s Camelback and 44th Street areas.

Home builders will zero in on new infill projects as well as Pinal County.

The big winner could be construction. President-elect Donald Trump could team with Democrats on an infrastructure bill and the GOP on tax cuts and easing regulations.

Both could mean more building and work for contractors, designers and engineers

Apartments cool a little: We’ve been saying for a while the wave of apartments sales, development and leasing has to be cresting. It hasn’t.

But 2017 will see easing in sales and development here in Phoenix. Higher interest rates and developers looking at other uses for land will cut into the number of multifamily sales and new projects. There are also fewer distressed properties out there to be had and fewer prime infill spots.

Apartment builders will keep looking at Scottsdale, Tempe and the East Valley for sites. There will be some continued construction and sales but not at the pace of the past few years.

Valley’s center shifts east: You can already make a good argument that the region’s core is not in downtown Phoenix but farther east. Maybe it’s Phoenix Sky Harbor International Airport or Arizona State University’s main campus or the Loop 101 and 202 interchange.

The bulk of the post-recession jobs, real estate development and business site selection have landed in to the east.

Scottsdale, Tempe, Chandler and Pinal County are landing spots.

Expect that trend to continue in 2017.

Pinal County growth: The suburban county got hit hard by the recession. But it could be bouncing back. Lucid Motors and other business are landing there. Land is cheaper, available and owners are looking to sell after acquiring or making it through the last crash.