Where is the Phoenix Commercial Real Estate market headed? Depending on whom you speak to some investors believe its the bottom (see Sam Zell), but many investors believe the current “outlook” can be only called grim and believe the owners of about to reset CRE are still “high on hopeium,” going through “delay and pray, or the favorite “Extend and Pretend.” That the only thing coming in the next few years is a farther decay in the market. There are bears and bulls in every market, but what makes most sense?
With an estimated 1.5 to 2.0 Trillion dollars in CRE debt to reset and valuations 30-50% below where they were a few short years ago, can you blame them for being incredulous that this is the bottom? There is a lot of money on the sidelines. Waiting patiently for those distressed assets to be dealt back on the Commercial Real Estate Market. Maybe people like Sam Zell want you to buy now so when the bottom really hits, a lot of the competition will be tied up with already purchased product. Not that Sam would never be anything more than 100% transparent right?
My personal take is the Phoenix AZ Commercial Real Estate market has a ways to go, but it will be dealt out mostly via the FDIC. The smaller banks can’t let it go, and or won’t let go but they can only “delay and pray,” or “extend and pretend” for a limited amount of time before their balance sheets catch up with them. Many hope the market will improve to the point where there losses can be handled but the rate of US bank failures in 2010 is currently at twice the pace of 2009. Sooner or later the piper has to be paid, and it most likely will be the FDIC who pays it.
The Phoenix Business Journal sponsored a study recently that stated over two thirds of Arizona based banks are at risk of failure, based on statistics compiled in the 4th quarter of 2009. The banks have countered that they are in better shape now. I for one think waiting isn’t a bad idea, but if something makes sense now, especially something which isn’t crowded with umpteen competitors, one should move on it before one gets crowded out. Its possible with all the money waiting on the side lines, that when these non performing assets are brought to market, they will attract so much attention they will not be the steal of a lifetime everyone is hoping for.
If you have any questions about the Phoenix Commercial market feel free to call me at (602) 692-4288 or (480) 788-8577. I can also be contacted by e-mail at: Marc@PhoenixCommercialRealEstate.com.
Marc Brodeur BS, DC
Commercial Realtor
Marc@PhoenixCommercialRealEstate.com
Direct (602) 692-4288
www.PhoenixCommercialRealEstate.com
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