MAY 2016 – IN BUSINESS – What’s most visible of commercial real estate in metropolitan Phoenix is the multifamily market. Dennis Desmond, senior managing director of JLL in Phoenix, puts the number of units currently under construction at 6,000. This strength has been a trend as we’ve recovered from the recession. “Multifamily, as a segment of commercial real estate, is the No. 1 driver of growth for the past four or five years,” says Chris Loeffler, CEO of Caliber Companies.
The impetus for multifamily “going up like crazy,” observes Jon Rosenberg, managing partner of LevRose Commercial Real Estate, is the convergence of forces from two directions creating “the greatest demographic in history for multifamily.” Baby boomers are reaching retirement age in significant numbers, and many are choosing to trade large homes for an apartment or condo lifestyle. Even more impact is coming from the millennial generation, which is following a very different life pattern that impacts the housing market: In 1960, 65 percent of 18- to 32-year-olds were married; today, that’s less than 25 percent. So, rather than jumping into home ownership, millennials are choosing the flexibility of apartment living. But amenities and convenience are the important factors. As Rosenberg expresses it, “‘Live, work, play’ is a big thing.”
Biomed and tech are the main employing drivers, observes Bryan Fasulo, regional property manager for national multifamily management company Pinnacle, which manages Residences at Fountainhead, a development at Tempe Town Lake, and Proxy 333 in Downtown Phoenix — and these fields bring in a demographic that’s looking to live where they have the most amenities and the most convenient location. “And that tends to be multifamily.”
Their employers look at those factors as well. Says Rosenberg, “The businesses coming here are more vocal about what they want — locations that are easy to get to, and good residences for employees.” What makes a “good residence”? “Millennials want to be able to walk home, and to have restaurants and nightlife right there.”
Visibility is somewhat misleading, for those who may be concerned about another real estate bubble. Explains Desmond, “It seems like a lot because it’s so visible, but it’s 2 percent of the overall marketplace in the multifamily arena.” Noting the supply and demand figures are in equilibrium, he says, “The market is strong — it’s about 92 percent occupied.”
“There are apartments all over the Valley, including the periphery — along the I-17, the Southwest Valley, the Southeast Valley — as well as inner-city,” says Howard Weiner, president and Maricopa County manager with Lawyers Title of Arizona. And Mark Stapp, executive director of the Master of Real Estate Development program and Fred E. Taylor Professor in Real Estate at ASU’s W. P. Carey School of Business, notes that P.B. Bell is doing a first-build in the West Valley. – read more at inbusinessmag.com