National Association of REALTORS® ranks Phoenix and Tucson among Top 10 Commercial Real Estate Markets
NAR identified the top 10 markets with stronger economic and commercial market conditions – when compared to the national averages or indicators – among the 52 markets for which NAR has commercial market data. In identifying these markets, NAR considered 25 indicators based on the latest data as of 2020 Q4 on the area’s economic, demographic, housing, and commercial market conditions in the multifamily, office, industrial, retail, and hotel property sectors.
Phoenix stands out in several aspects. Among the top 10 metros, it had the largest net domestic migration in 2019, at 72,000 in 2019. Nonfarm employment was down just 2.3% as of December 2020 (6% nationally). With strong domestic migration, the rental vacancy is at 3.9%, lower than the national rate, indicating a demand for more multifamily housing. Among the top 10, it ranked first in absorbing new industrial space of 7.7 million square feet in 2020. However, with the buildup of industrial space, the industrial vacancy rate has increased to 8.1%, which is higher than the national rate (5.2%). However, this should also bring down the asking price of industrial space, at $7.7 per sq. ft., which is higher than the national average ($5.2/sq. ft.).
With its low office and apartment rent, Tucson has a huge potential to attract businesses and residents. Its net domestic migration is about 12% the size of the net domestic migration into Phoenix, but the cheaper cost of housing and office rent can attract more people and businesses into the area in the future. Office occupancy increased in 2019 by 101,950, one of a few metros in the top 10 list to experience positive net absorption (along with Raleigh and Cape Coral Fort Myers). Office space is relatively inexpensive, at $20.5 per sq. ft., compared to Phoenix ($28.1 per sq. ft.). The median apartment rent as of December 2020 was $1,124, compared to $1,338 in Phoenix.