The commercial real estate picture in the Phoenix area is slowing starting to improve according to the Greater Phoenix Real Estate Consensus Panel. The strongest gains can be seen in the industrial market where vacancy rates are expected to dip below 10.5% by the end of 2013. Even with new construction expected to reach 1.2 million square feet this year and almost 3 million square feet in 2013, it is projected to still be well below the level of absorption, which is estimated to be 4.7 million square feet and 6.2 million square feet, respectively.
The retail market is showing almost as much life with expected vacancy rates to be around 11.5% by the end of next year. Even with new construction estimated to add 500,000 square feet this year and 800,000 square feet next year, the absorption levels, expected to reach 1.2 million square feet this year and a projected 1.5 million square feet next year, will keep the vacancy rate down.
The laggard in the commercial space is clearly the office market. Vacancy rates are expected to remain high, approaching 23% by the end of the year. Even with little to now new space coming into the market demand is and has been weak and overall absorption is projected to remain low to very modest.
With the recent uptick in the overall economic outlook in the US there has been anticipation of a recovery in the commercial real estate market and while this may be true in certain sectors there is still a lot of progress to be made before these markets are at their pre-recession levels.
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