The Winners and Losers in Valley Real Estate Since the Last Crash

Article originally posted on Phoenix Business Journal on November 13, 2017

Phoenix’s commercial real market still isn’t completely back from the last crash with a $4.67 billion drop in office sales from the end of the Great Recession.

Phoenix slipped three spots nationally when it comes to commercial real estate sales of office buildings and developments. The region now ranks 15th, down from 12th, according to data crunching by Commercial Cafe, a commercial real estate research and information site.

“The Phoenix office investment market experienced one of the more significant cool-offs compared to the 1997-2007 period, as it recorded a 27 percent, or $4.67 billion drop, in transaction volume, and was pushed down three positions from number 12 to number 15 on our list,” Commercial Cafe researchers write in their analysis

Phoenix is not alone among big U.S. markets trying to put the Great Recession fully behind them.

The Washington and Chicago office markets still are down significantly. New York, San Francisco, Silicon Valley, Seattle and Dallas have seen more office deals in the post-recession era (2008 to 2017) as compared the years leading up to the crash (1997 to 2007).

You can see the full rankings and percentage gains and losses in office investments from Commercial Cafe here.

From 1997 to 2007 and the start of the Great Recession, Phoenix had $17.02 billion on office sales transactions.

The volume of Phoenix office deals comes in at $12.35 billion between 2008 and 2017, according to Commercial Cafe’s analysis of data from Yardi Matrix and Moody’s Investors Services. That is down $4.67 billion or 27 percent.

Phoenix now ranks 15th in U.S. office investment, just below San Diego.

Arizona’s real estate market was hit hard by the last recession. The Valley still has an office vacancy rate near 20 percent, according to new data from JLL and Lee & Associates Commercial Real Estate Services.

Other big markets also are digging out of the last downturn’s whole. Washington and its affluent suburbs saw a $15.4 billion or 22 percent drop in office deals while Chicago had a $11.6 billion or 24 percent decline.

There are several big U.S. markets that saw more office investment in sales between 2008 and 2017 than the ten years before that.

The San Francisco Bay Area, New York and Dallas are among those.

San Francisco itself has seen 28 percent more deals, and the rest of the Bay Area (including Silicon Valley) 69 percent more. That translates into more $23.2 billion more in investment.

Dallas and Houston also have seen increases in office investments

New York is still the top office real estate market. Manhattan saw $128.7 billion in office deals between 2008 and 2017 compared to $118.4 billion between 1997 and 2007, according Commercial Cafe.

The next closest market is Washington ($55.1 billion and $70.5 billion). Los Angeles now has the third-most office investment activity in the U.S. at $45.5 billion.

Commercial Cafe also lists the top office investors and buyers. That list includes investment arms of JPMorgan Chase & Co. (NYSE: JPM) and CBRE Group (NYSE: CBG).