Phoenix Is No Longer An End-of Cycle Market

The cycle is mature—so mature that many are predicting a recession in the next 12 months. The mature cycle has meant peak pricing in many top markets, and as a result, investors have fled to secondary markets to chase yield, and Phoenix has been a favorite. In prior cycles, Phoenix has been a final play before a downturn hit, but this time, things may be different.

“One of my real estate investor buddies once said to me, ‘Phoenix, where California money goes to die at the end of every real estate cycle.’ There is no doubt that historically Phoenix has been a boom and bust market,” Alex Zikakis, president and founder of Capstone Advisors, tells “Many late stage investors got hurt in Phoenix during the last downturn. However, with the historically low cap rates in the far western U.S. markets, capital has now moved back to Phoenix in search of yield.”

The high and sustained competition has come with a price—or at least a higher price. ”The activity has made the buying opportunities more competitive and cap rates have dropped substantially over the last 4 to 5 years,” says Zikakis. “I believe we have done a very good job of acquiring high-quality assets in strong locations at attractive pricing in this market.”

Capstone doesn’t expect the momentum to slow down in the Phoenix market. It has been actively growing its investment portfolio and plans to remain an active buyer in the market through the next year. “We will continue to be an active buyer in the Phoenix market. As we build our footprint, we will focus on acquiring more value-added opportunities where we can drive value through property repositioning and re-leasing,” says Zikakis.

While it is an active buyer, it doesn’t have specific goals other than to gain marketshare. “We want to make sure we have enough assets in the market to drive synergy with our leasing and property operations teams and to provide flexibility to our tenants with good quality assets in a variety of locations,” says Zikakis. “We are focused on having strong relationships with the brokerage community so we can be at the top of the call list for new opportunities.”


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