PHOENIX-As the region continues its recovery, investors are taking notice. Specifically, according to a report recently released by Marcus & Millichap Research Services, office transaction velocity increased 10% during the past four quarters (in the trailing 12-month period). The Marcus & Millichap researchers say that both local and foreign buyers were responsible for the increased velocity.
The report points a couple of interesting facts:
- Investors moved away from the core to find good deals, though office buildings in Phoenix, Scottsdale and Tempe still traded briskly.
- The area is experiencing a bifurcated market. On end of the spectrum are the value-add assets priced as low as $25 per square foot. On the other end of the spectrum are the core class A assets, which have sold for as high as $300 per square foot.
- Property cap rates have averaged 8% to 10% for mid-tier assets. Class C buildings are trading on a price-per-square-foot basis.
The report forecasts that trading will continue to be brisk, with continued distressed opportunities keeping local investors in the game. Meanwhile, foreign investment will also continue, though the Marcus & Millichap researchers points out that lenders will remain cautious about financing, especially for multi-tenant office buildings.