Housing Woes Stall All Phoenix Land Demand

Chaz Smith, SVP with Colliers International's Phoenix office, agrees with Vasey's assessment and points out that lack of residential development is creating more available land. More available land means a lower bidding price.

Additionally, "anything impacted by residential impacts commercial," Smith notes. "We're starting to see the retail side affected from the subprime fallout. We're seeing projects put off for a year to two years that were in the pipeline to get going this year or early next year."

Vasey, Smith and Jason Hyams with CB Richard Ellis are also seeing some of the residential land flipped back to potential commercial use. Hyams, an FVP, says that a few years ago, land on the far west side, particularly Buckeye, was zoned for industrial construction. However, the huge residential housing boom rezoned the land for residential development, he says.

"With homebuilding all but stopped, some of that land is being rezoned again for industrial use," Hyams tells GlobeSt.com. "With contraction in the residential market, it's being switched back over."

None of the brokers see an immediate change in the market, but do predict that the gap between buyer offers and seller asking prices will narrow. Smith predicts that the gap will narrow sometime this year. Vasey agrees, assuming the overall market improves.

Hyams, on the other hand, isn't quite so optimistic. Though he says seller's expectations will be more in line with buyer offerings, "the best case scenario for any improvement in the market is late 2009, or early 2010."