Surely these are signs of a market bouncing back right? Just when you thought it was safe to take your head out of the sand we had a headline  that Phoenix shares the highest office vacancy rate in the nation with Detroit, MI at 27+%. Ouch. The caveat is that at the bottom there will be signals in both directions.

What one has to understand is multi family on the commercial side, and residential, always turn up before office, industrial and retail.

Multifamily hasn’t had a negative signal in some time now. It has led the local real estate market upward beginning a year ago. This past month we had an A class property close for under a 4 cap (3.6). That is truly buying on a pro forma outlook as any slight downward turn and that property will begin to lose money. The REIT that purchased would probably have had a better return in one month buying iShares silver ETF than they will the first year. That aside, it shows how competitive the multifamily market has become in Phoenix, AZ.

Residential (which multi family is NOT considered to be part of) had its best month (March 2011) since the peak of the bubble in 2005. March 2011 was the first month retail sales broke the 10,000 level since 2005 and was only the third month to ever do so (both of the previous 10,000+ months were in 2005). What is even more interesting is Dec 2010 was the best December ever for sales volume. Jan 2011 was the best January ever for sales volume, Feb 2011 was the best February ever for sales volume and March 2011 was the best March ever for sales volume. Is anyone starting to see a trend here? Currently 2011 is ahead of the best year ever, 2005 but only by a few percentage points. Nevertheless it is moving at a fairly breath taking speed.

The biggest difference between 2005 and 2011 is the inventory. In 2005 there was less than one months inventory and currently there is roughly just under 30,000 homes as “active” with another roughly 7500 as “active with contingencies.” Most of those “active with contingencies” are short sales with an accepted offer by the owner, with the contingency being the bank has to approve it. So we have roughly 3 months inventory.

What is startling is the rapid pace in the drop in inventory from over 40,000 actual active (not including AWC as those have offers with contingencies) to below 30,000 in one quarter. The first quarter is NOT the most active quarter of the year. Traditionally the busiest quarters have been the second and third quarters. If we extrapolate from the past 4 months, the inventory will drop by summer into less than 20,000 active homes on the market. A strong sellers market. That will put strong upward pressure on home prices. If it is ANYTHING like the multifamily market, when buyers smell blood, ie a lack of inventory, they get very competitive very quickly and prices jump quickly.

The real question is how MUCH inventory are the banks truly sitting on locally, and how much will they release onto the market? If inventory drops significantly and prices go up, will they dribble it out to get top dollar for their beaten down portfolios or not?

Stay tuned…..

If you would like to discuss the current Phoenix Commercial Real Estate market feel free to call me at (602) 692-4288.

Marc Brodeur BS, DC
Phoenix Commercial Realtor
Marc@PhoenixCommercialRealEstate.com
Direct (602) 692-4288
www.PhoenixCommercialRealEstate.com

Copyright © 2010 by Marc Brodeur – All Rights Reserved – Irrational Exuberance in Phoenix, AZ Multifamily and the Best Residential Month Since 2005

Train wreck, beaten down, dying. No its not Charlie Sheen I’m talking about (though I wish him a speedy recovery). It’s the Multifamily situation in Phoenix Arizona that everyone was all but ready for the burial. That was the perception we were in here with the commercial real estate market. I have been telling clients it really started to turn upward around 10 months ago with the A class product, which then bled into the B and now the C class product. Multifamily Executive has an article that delves into the local market (MultifamilyExecutive.com) http://www.multifamilyexecutive.com/cap-rates/phoenix-apartment-market-rises-from-the-ashes.aspx.

Equity, Recap Partners, AEW Capital, Continental Realty, even the non profits are into the market heavily now. We have seen A class product dip briefly below a 4 cap in the 4th quarter 2010 but its now between 4 and 5. B product is going between a 6 and 7 cap, and C product is going for above an 8 in the Metro Phoenix Commercial Real Estate market.

The distressed product is usually turned over via court appointed rent receivers. Essentially the process works like this: owner falls behind on the mortgage, the bank hires a local attorney/trustee to go to court and have a rent receiver put in place to protect the asset. The receiver then gets the property back into shape, fills up the units as much as possible and puts the property up for sale. An example of this is a recent closing in Tempe, purchased at the top, Q3 2007 for 13.7, and just sold for 9.1. A 180 door B property that went for just over 50k/door. The rent receivers are able to get top dollar for the bank which is their purpose. The banks are not giving these away. Investors have to be prepared to pay market rate  on “distressed” properties. More and more banks are going the rent receiver route and is pretty much the norm right now.

The market is coming back strong…..don’t be left behind, buy early and buy often if you can!

I can be reached at (602) 692-4288 or Marc@PhoenixCommercialRealEstate.com with any of your Phoenix Commercial Real Estate questions.

Marc Brodeur BS, DC
Phoenix Commercial Realtor
Marc@PhoenixCommercialRealEstate.com
Direct (602) 692-4288
www.PhoenixCommercialRealEstate.com

Copyright © 2010 by Marc Brodeur – All Rights Reserved – Phoenix MultiFamily Rises Like… a Phoenix (What Else!) From Its Ashes

Almost every Commercial Real Estate buyer says that they want a steal. Whether it’s an owner looking to occupy a property or an investor. Prices are down 40-60% with Metro Phoenix Commercial Real Estate but many want even now the ‘deal of a lifetime.’ I personally am seeing missed opportunities due to greed and buyers being unreasonable. It already IS the deal of a lifetime if you actually BUY. If you aren’t reasonable, you will end up buying nothing, very little, or half of what you wanted.

I always point out that Equity Residential has already purchased over 1 Billion of Multi Family this year. A good chunk of dough by any measure. The principal of Equity, Sam Zell, is a cycle buyer. He has said he doesn’t want the best price ever, as that doesn’t make from actually enacting a transaction, he wants to simply buy as much as he can during the down cycle. It’s better to spend all budgeted money than to be left with half that money at the end of the down cycle. When the market swings back up and its time to sell, how does it help me if half my budgeted money went unspent during the down cycle but I made a few more percentage points? Its better to make 50% on 100% of your money than 52% on 50% of your money.

I am not sure what is so difficult to understand. Some buyers respond, I only want to buy one property. Well, that is fine, but that tells me a number of things. You have little to no experience in this market whereas your broker does and has much better feel for what actually works! Listen to them!

I do work with a note buyer who has mentioned he regretted not buying as much during the S&L crisis as had hoped and could not wait for the next down cycle to buy as much as possible. Opportunity lost, lesson learned. Isn’t it easier to learn from those who have gone down this road before than to try to reinvent the wheel now? It’s one of the easiest ways to leverage, i.e. use another experience and learn from it vs going to the school of hard knocks.

Experience is usually our master teacher however, a little extrapolation makes it pretty obvious from past down cycles. Please don’t be greedy, don’t miss the opportunity of a generation, if not a lifetime. I believe for some fear is what is costing them. Its a herd mentality. Investors are quite competitive in commercial real estate but if they are not realistic, they will not win. Look at what is going on with big boxes. The retailers themselves are buying them and bidding higher than the investors. Where does that leave the investors in 5 years? The retailers have purchased approximately 50% of the big box locations in southern California according to CoStar.

If you want to buy during this down cycle. You better not wait. This is going to pop soon, like multi family has in the last 12 months. Line up your financing and start looking hard. I already feel bad for the tire kickers who will be kicking themselves because fear froze them in this down cycle.

I can be reached at (602) 692-4288 or Marc@PhoenixCommercialRealEstate.com with any of your Phoenix Commercial Real Estate questions.

Marc Brodeur BS, DC
Phoenix Commercial Realtor
Marc@PhoenixCommercialRealEstate.com
Direct (602) 692-4288
www.PhoenixCommercialRealEstate.com

Copyright © 2010 by Marc Brodeur – All Rights Reserved –You Want a Steal When You Buy Commercial Real Estate in Phoenix?

Larger A+ Phoenix Multi-Family properties (100 doors+) continue to see their cap rates drop and prices are now starting to swing back up. We saw a roughly 300 door complex close just under a 5 cap this past week for $23.5 million, where many saw its value at a 6.5 cap of $18 million. The question I am asked is,  weren’t values already going up while there was cap rate compression over the last year? The short and confounding response is no.

When the “crisis” first erupted we had the typical response, with cap rates rising and prices falling. Then we had an “inflection” point where though values were falling, cap rates were also falling/compressing! It went against everything we were taught. Cap rates go up while values go down and vice versa correct? However, this was not a normal market. The inflection point where this aberration appeared is when values dropped below their replacement cost. This went on for over a year and may be the only time we see cap rates and values moving in the same vs opposite direction for such a prolonged period. While it appeared to have bottomed in the last 2 quarters, with prices most going sideways, now they appear to be going up.

The next question is where will Phoenix Commercial Real Estate go from here? While multi family is recovering, office, retail, and industrial to say the least, are still in the doldrums. With lending still tough, we expect those prices to continue to fall.

Marc Brodeur BS, DC
Phoenix Commercial Realtor
Marc@PhoenixCommercialRealEstate.com
Direct (602) 692-4288
www.PhoenixCommercialRealEstate.com

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View all Scottsdale Multi-Family properties

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Copyright © 2010 by Marc Brodeur – All Rights Reserved – Phoenix Multi Family – Under a 5 Cap

While the recent announcement that national unemployment went up, the local market continues to improve according to the US Bureau of Labor Statistics. Phoenix and Arizona, as a right to work state, generally leads the nation into recessions and leads the nation out. Why? Because employers can lay off employees easier and hire them back as required. While that can be ugly early in a recession as employers tend to dump workers fast and furious in Arizona, that reaction also allows companies to get back on their feet quicker and hire workers back as required when they recover. Who wants 20 years of deflationary increases in unemployment like in Japan where an employer has a social contract with an employee to lay them off only as a last resort? It doesn’t allow a company or an economy to recover quickly.

Metro Phoenix added 30,300 private sector jobs between Oct 2009 and Oct 2010. Second only to New York City, which added 42,500. As Phoenix is less than half the size of NYC in population terms, we actually grew our employment at a faster rate. The sun is starting to shine in the sun belt again.

This is great compared to cities that shrunk in employment like Chicago (-56,700), Las Vegas (-22,000), San Francisco-Oakland (-26,200), Detroit (-25,800) and Sacramento (-17,900). Other cities that grew were Washington, DC (+29,800), Boston (+24,100) and Minneapolis-St.Paul (+21,600).

The unemployment in the US went from 9.6 to 9.8, in Arizona it went from 9.6 to 9.5.

Our take on this is: Multi Family appears to have turned with values going up and caps under 5% on A class multifamily, unemployment is finally falling locally. The other classes of Commercial Real Estate have ways to go but office and retail are expected to recover in 2011. Unemployment will tell the tale.

If you have any questions about the Phoenix Commercial Real Estate market feel free to contact me at (602) 692-4288 or Marc@PhoenixCommercialRealEstate.com.

Marc Brodeur BS, DC
Phoenix Commercial Realtor
Marc@PhoenixCommercialRealEstate.com
Direct (602) 692-4288
www.PhoenixCommercialRealEstate.com

View Scottsdale Commercial Real Estate

View Phoenix Commercial Properties from $1 to $2 Million

Copyright © 2010 by Marc Brodeur – All Rights Reserved – Phoenix Unemployment Up: Implications for Phoenix Commercial Real Estate

In the last blog we talked about general visa options for a foreign investor in the US and discussed the requirement of an “active” investment. An “active” investment is vital to success in obtaining an investor’s visa in the US and in some circumstances, can eventually lead to a green card. An “active” investment actually describes the role of the investor rather than the type of investment. In other words, an active investment is one where the investor is actively involved in the daily operations of the investment. So, using our earlier example of the investor who purchases a parcel of land, this passive investment may become an active Real Estate Investment where the investor develops the land and sets up an office in the US to actively manage that investment. Or, an investor may buy several rental properties and manage those properties individually rather than hiring a property manager. These are examples of ways that a “passive” investment can become “active” for purposes of applying for a visa or a green card.

The purchase of an investment that is already generating income and has an established track record further increases the chances of success in obtaining an investor visa. For example, with this distressed economy, we are seeing some great deals on Phoenix Multi Family Properties. These properties have income statements and rent rolls going back several years and would be an excellent real estate investment for purposes of obtaining a visa. The reason for this is that an investment in an established business will have a greater chance of approval than a brand new business. Again, the investor would need to be actively involved in the day-to-day operations of the business. Hiring a property manager and overseeing the operations from afar won’t be considered an active investment. While I have seen many brand new businesses obtain investor visas, there are a few more hurdles to jump through to convince the US Immigration Service that the business is legitimate and that the investment is substantial. An investment in an asset with an established history would give the investor some instant credibility in applying for a visa.

For two types of investment visas – the E visa and the L visa, there is no minimum amount required to be invested. (Both of these visa types, as well as the so-called “million dollar” green card, will be discussed in further detail later in this series). I have successfully obtained visas for investors with as a little as a $10,000 initial investment. In the context of Arizona Commercial Real Estate, this investment would be the down payment as well as any mortgage on the property. Of course, a larger investment will be considered to be more substantial and will increase the chances of success.

Another key to the “active” investment is that the funds must actually be invested prior to obtaining the visa. In other words, the funds must be “at risk” before a visa will be granted. For a commercial real estate investment, this would mean that close of escrow has already occurred and that the property is in the name of the investor (or the investor’s company). Typically prior to filing a visa application, the investor should have formed a US company, made the investment, opened a bank account, and leased office space. These are indicators to the US Immigration Service that the investor is serious about this investment and has placed his or her funds at risk. Taking these steps will increase the chances of success in obtaining an investor visa.

Next topic:  Strategies for a successful investor visa application

If you are interested in viewing available Arizona Commercial Real Estate properties for your next investment click on the link. I would be happy to discuss your commercial investment options with you and can be reached at (602) 456-2393.

Dori L. Zavala BA, JD
Commercial Realtor / Licensed Attorney
Dori@PhoenixCommercialRealEstate.com
(602) 456-2393
www.PhoenixCommercialRealEstate.com

View available AZ Multi-Family properties

View available Commercial Foreclosures in Phoenix

The above article is for informational purposes only and is not meant to create an attorney/client relationship. As with all investment decisions, each individual should consult with an attorney and tax advisor prior to undertaking any action.

Copyright © 2010 by Dori Zavala – All Rights Reserved – Foreign Nationals:  Is Real Estate Investment a Route to Immigrate to the US? Part 2

Over the past ten years of my law practice, I’ve represented many foreign nationals who have wanted to obtain a visa or permanent residence in the US via Real Estate Investment. While there is no “real estate visa” per se, there are some options for investors depending on the type of real estate investment and on their long term plans for staying in the US. In this series of blogs, I’ll discuss the types of visas available to investors as well as the importance of determining a long-term strategy before undertaking a process with the US Immigration Service. Specifically, I will cover investing with a visitor’s visa, the E2 investor visa, the L-1 intracompany transferee visa, and the EB-5 aka the “million dollar” green card.

To address the most commonly asked question, the purchase of a second home in the US does not confer any special immigration status and does not qualify the purchaser for a visa or green card. While the US welcomes this type of investment, an individual purchasing a second home would still have to visit the US using a visitor’s visa and comply with all time limits imposed on that type of visa. For Canadians, this would mean spending no more than 6 months at a time in the US. For an individual who would like to stay in the US for longer periods of time and/or ultimately obtain citizenship, other pathways need to be pursued. The best option is usually to start a business and make an investment in the US.

The most common route I have seen that real estate investors would like to take to immigrate to the US is that of a “passive” real estate investment. In other words, many investors come to the US on a visitor’s visa, see investment property they would like to purchase (such as a parcel of land or a single-family rental) and hope that the investment in this type of property will facilitate a more permanent immigration status in the US. While the US welcomes this type of investment from foreign nationals, there is no corresponding visa for this type of situation because this is seen as a passive real estate investment. In other words, an investor can purchase this type of property and does not need to be involved with the day-to-day operations. A passive investment does not qualify for any of the investor-type visa options. In order to qualify for a visa and/or possibly a green card, a real estate investor must have an active investment in the US market.

If you are interested in viewing available Arizona Commercial Real Estate properties for your next investment click on the link. I would be happy to discuss your commercial investment options with you and can be reached at (602) 456-2393.

Dori L. Zavala BA, JD
Commercial Realtor / Licensed Attorney
Dori@PhoenixCommercialRealEstate.com
(602) 456-2393
www.PhoenixCommercialRealEstate.com

View available AZ Multi-Family properties

View available Commercial Foreclosures in Phoenix

The above article is for informational purposes only and is not meant to create an attorney/client relationship. As with all investment decisions, each individual should consult with an attorney and tax advisor prior to undertaking any action.

Copyright © 2010 by Dori Zavala – All Rights Reserved – Foreign Nationals:  Is Real Estate Investment a Route to Immigrate to the US?

The metro Phoenix Commercial Real Estate market is full of zombie buildings according to a recent report in the Phoenix Business Journal. One of those mentioned was the former IRS building down on 3rd Street and Earll. I know that area well as I used to have an office down there. Right around the corner from Tobacco, Alcohol and Firearms.

I always thought one should bring guns, knives and lawyers to certain meetings. I guess the tobacco and alcohol couldn’t hurt in addition right? I have to agree any IRS building, whether occupied or not is scary. Now that it has acquired “zombie” status I guess maybe someone should have turned it into a haunted house for Halloween? I guess it’s a bit late for that. They just knocked down the former Qwest tower just kitty corner to that IRS building so the area seems a bit desolate these days compared to 7 or 8 years ago when they both teamed with employees.

Those aren’t the only areas “blighted” by this down turn. There are brand new million square-foot industrial buildings quietly gathering dust in the southwest, just south of the I-10 corridor. There are other new office condo zombies up along Miller & Pinnacle Peak that were never occupied. Even here where our offices are at La Curvata just north of Pima on the 101. Out of the 5 buildings completed in 2008 and 2009, only one is fully occupied and one partially occupied. The other 3 just sit there like zombies. All are beautiful class A properties, zombies that can’t be sold for $100/sq foot. Price and demand have yet to meet.

Retail also has its zombies. Mostly its new product, just like the office and industrial. I have seen them in Goodyear, Gilbert, Phoenix, Anthem, everywhere. Mostly built in the last 3 years. Beautiful opportunities for those who see the sun belt still has a future.

We aren’t in the rust belt. Here in the sun, there is growth ahead. Phoenix was the fastest growing metropolitan area for 5 decades straight. Even when Vegas was booming (its 1/4 the size of Metro Phoenix) we were growing just as fast on an annual percentage basis. That will come back. Our unemployment is starting to tick down. It’s way lower than either Vegas or southern California which are both well over 10% (we are under 9%). They say if you build it, they will come. It’s been built, it’s now time for the buyers and people to start coming back.

Feel free to contact me regarding Arizona Commercial Properties at (602) 692-4288.

Marc Brodeur BS, DC
Arizona Commercial Realtor
Marc@PhoenixCommercialRealEstate.com
Direct (602) 692-4288
www.PhoenixCommercialRealEstate.com

View Multi-Family Commercial properties

Copyright © 2010 by Marc Brodeur – All Rights Reserved – Halloween Just Passed and we have Zombie Buildings all over Metro Phoenix. Coincidence?

Previously we discussed how Phoenix leads the nation in CMBS defaults (blog August 11, 2010). Well they took another bounce up according to the Wall Street Journal last month. For the first time they went over 9%, compared to over 6.49% at the beginning of the year.

That would appear to indicate more opportunity to purchase distressed assets in the future, or distressed notes. Most of the better opportunity is at the note level, which as we mentioned comes with more risk. Where will the Phoenix Commercial Real Estate market go with CMBS default rates going up? Most likely it gets worse.  Even if everything is “worked out” with the owner,  it will allow the owner to cut rents to fill their properties, which means lower NOI’s and more cannibalization of market rents.

Personally, I feel we can cut mortgages til the cows come home but until there is more DEMAND for office, retail, industrial, multifamily or what have you, we will continue to see rent cannibalization as we go forward with mortgage workouts, short sales and foreclosures. These properties can only perform better at the cost of someone else losing an existing tenant.

Still the message to the politicians is: It’s the economy stupid. Forget about the side show Bob routine, with health care, immigration, etc. Take care of the number one pressing concern in the US first. The ECONOMY!!!

Feel free to contact me at (602) 692-4288 or Marc@PhoenixCommercialRealEstate.com if you have any questions about the Arizona Commercial Real Estate market.

Marc Brodeur BS, DC
Arizona Commercial Realtor
Marc@PhoenixCommercialRealEstate.com
Direct (602) 692-4288
www.PhoenixCommercialRealEstate.com

Copyright © 2010 by Marc Brodeur – All Rights Reserved – CMBS Defaults Continue to Climb… and we know Phoenix Leads the Nation!

While Phoenix unemployment has held steady at 8.8% for the past few months, one ray of good news is that during the past year there was a net of 3600 private sector jobs added. While this is not enough to make a dent in unemployment numbers (there are roughly 1,500,000 privately employed people in Metro Phoenix) it is headed in the right direction. A 1% decrease in unemployment would require roughly a net of 15,000 jobs. The number is 14,559 to be exact.

One area of concern in the macro Arizona environment is the state continues to have budget short falls despite tax increases. This means there will most likely be MORE public sector layoffs. If those layoffs are not countered by an equivalent number of net private sector jobs the unemployment situation may get worse. If there is a perception there is more stability in government’s direction after the mid term elections, that should be a psychological boost to employers. Which should then translate to an increase in hiring by the private sector. We will have to wait until mid November to see if this psychological perception plays out.

For rents to stabilize and  improve in Phoenix Commercial Real Estate, unemployment has to drop, and jobs have to be added. More of the same, musical chairs with the same tenants in different locations will not help. If one studies the bottom of the recession in 73-75 and 80-83, there is a mixed bag of news while the recession recovers. I suspect this recession should be no different. The difference between now and 2 years ago is there is considerable good news mixed in with the bad news. Its not all bad news like it was 2 years ago.

I would be happy to discuss the current market conditions with you and assist in your Commercial Property search. Feel free to contact me at (602) 692-4288 or Marc@PhoenixCommercialRealEstate.com.

Marc Brodeur BS, DC
Arizona Commercial Realtor
Marc@PhoenixCommercialRealEstate.com
Direct (602) 692-4288
www.PhoenixCommercialRealEstate.com

View Arizona Commercial Foreclosure properties – Click Here

Copyright © 2010 by Marc Brodeur – All Rights Reserved – Phoenix Adds 3600 Private Sector Jobs