Arizona Commercial Real Estate Market Trends Analysis

Commercial properties that house a business that serves other businesses (B2B companies) are considered industrial properties. Industrial tenants may be manufacturers and distributors like supply houses.

The exception is the rapidly growing world of fulfillment centers that warehouse and deliver goods sold by online sales websites straight to their consumers.

Industrial properties are long-term hold investments that are wanted by investors/landlords. Their investment projections count on revenue from both lease and the planned liquidation of the asset. Industrial leases can be based on either gross or net rent provisions.

Annual and 10 Year Population Growth

Population data is important for industrial investment methods in ways that are dissimilar from residential investments. A decreasing populace has a more indirect impact on industrial properties due to a declining tax base. Industrial investors want to see that the area’s infrastructure is sufficient and sufficiently administered.

An area that is dropping its populace will experience poor commercial property appreciation in addition to residential. A large consideration for industrial tenants is the availability of desirable employees. Significant industrial renters will avoid markets that are losing citizens.

Property Tax Rates

As we witnessed with apartment building investments, tax rates are a reliable indication of the financial strength of a possible market. Uncertain tax rates show an environment that probably is not advisable for your investment’s success.

Our articles about commercial property taxation and commercial real estate tax reduction will inform you about taxation rules.

Accessibility

The users of industrial properties produce or transfer considerable numbers of goods that are large. Tractor-trailer trucks are routinely used to handle this. If the business is not far from significant highways, trucks can get to them more quickly and conveniently.

Many industrial tenants have to access train or airport freight terminals. This means that being close to an interstate, which usually takes traffic close to air and railway hubs, a large advantage for industrial properties.

Utilities

Businesses that make goods themselves need large levels of water and electricity. If a property doesn’t have sufficient amounts of these utilities, some companies will search elsewhere.

Companies that are housed in retail spaces sell directly to the population in the area. This includes single-tenant and multi-tenant assets. Single-tenant properties may contain a bank, a pharmacy, a restaurant, or an auto repair store.

A multi-tenant property might be as small as several units, somewhat bigger “neighborhood” or “strip” centers, or larger centers that are anchored by national stores such as grocery stores. Shopping centers that contain condominiums or apartments, offices, and retail shops are known as “lifestyle” centers.

Retail leases are known as “net” leases meaning the renters take care of the property taxes, insurance, and common area maintenance of the facility in what is known as “additional rent”. Tenants are responsible for maintaining the facility as well.

A retail investor will employ the identical demographic data that their desired renters utilize to find a satisfactory investment asset.

Population Growth

The total data for the trade area under consideration is not enough for retail investors. Investors also look at the area’s submarkets. Retail locations need to be visible and accessible to their shoppers as they go about their daily activities.

A trade area that doesn’t already contain sufficient “rooftops” won’t do for retailers no matter if it is growing. Retail real estate investors need to review the current population growth, average annual population growth, 10 year population growth, and daytime population.

Median Income

The populace’s income levels are an important part of retail site requirements. Costly products need customers with large wages while lower end products need lower wage residents.

Median Age

Age information is more important to retail investors than other investor categories. If your retail property is placed close to the age groups that possible tenants need, it is less difficult to enlist them.

Property Tax Rates

Tax rate information is studied by retail investors for similar reasons as residential and industrial property buyers. Higher taxes add to the amount of additional rent paid by tenants which can hamper leasing efforts, and create a negative impact on property market worth as well.

You lose even more money if the county tax assessor’s evaluation of your property value was incorrect. The best commercial real estate attorneys in Arizona can assist you with a property tax protest procedure.

Office properties rent working locations to businesses. Office buildings can be a one level flex space or a multi story building. For many major brands, renting office space enables them to utilize their cash for the development of their business.

Office renters sign a “full service” lease which is additionally considered a gross lease. These kinds of lease agreements add the owner’s expenses, including real estate tax and property insurance into the payment. The terms can be changed depending on the tenant and landlord’s requirements.

Long-term investments like office buildings create ongoing rental revenue and the expected income from the ultimate sale of the asset.

Population

The specific demographic data that office landlords utilize illustrates the number of desired office employees in the populace. This includes the populace’s size, age, and education level. So that they can lease to reliable tenants, investors need to reflect the tenants’ specifications in their site criteria.

Property Tax Rates

Growing cities that possess a strong group of possible office employees will have understandable, consistent tax rates. Preferable renters for your property will analyze this factor and so should you.

Incomes/Cost of Living

Office renters acknowledge current income levels as one sign of the quality of the workforce. It can additionally reveal the salary levels that employers will need to pay.

Education

Education levels are studied by office renters and investors more than other property investors. They have to realize if they are marketing to renters who need higher levels of education or not.

Buy, rehab, rent, refinance, and repeat (BRRRR) is an investing strategy that creates a collection of leased assets. It’s a type of Buy and Hold strategy in which a revenue generating asset is held for a long time. The advantage is that the asset generates income while you hold it and could be sold later on at a profit once its worth has appreciated.

First the investor buys a rental property, then they rehab it and secure a tenant. When a positive cash flow is achieved, the landlord takes capital out of the asset by refinancing their mortgage loan. The investor uses these funds to purchase more property which is rehabbed, leased, refinanced, and so on.

To purchase and repair a commercial building, investors look for unconventional financing. Conventional financing firms prefer not to serve this type of projects because they are too risky.

Scan our commercial real estate service provider directory to contact the best commercial rehab lenders in Arizona and the best Arizona commercial hard money lenders.

Also, don’t forget about the real estate knowledge of the best commercial real estate agents in Arizona. Read below to learn about the stats to talk with them about.

Median Gross Rents

This information tells the investor if they can hit their initial and projected profit goals. This one item carries a lot of weight when the final market decision is made.

Property Value Growth

Buy and hold investments obviously need properties that are supposed to increase in value.

Population

BRRRR investors will analyze the population growth rate. Weak housing markets that they need to sidestep will show flatlined or shrinking rates.

Income

To acquire the right investment property, investors must be aware of their target audience’s amount of income. An asset that does not provide the needs of the market will show a high unoccupied rate.

Property Tax Rates

Higher tax rates will dampen both short and long term returns. On the contrary, stable tax rates can point out an expanding market.

This gets even more essential when your real estate is incorrectly valued by the government tax assessors. When that is the case, you may need the services of the top commercial property tax appeal firms in Arizona and the best Arizona commercial real estate appraisers.

The industry definition of development usually means whole residential communities or commercial ventures of virtually any scope. The developer must find land that meets their criteria so that they can produce housing lots for sale or commercial leasing properties.

This involves suitable zoning, land use plans by civil engineers, construction plans for improvements, and approval by the local authorities. When approvals are obtained, the property is developed, and the finished product is marketed to the targeted audience.

The time it takes to finish a real estate development can be several years. A lot can occur, before the development is completed, that could damage the developer’s profitability. That is why the most financially dangerous type of property investing is development.

Risks can force you to pause the development for an undefined period of time. During this time, the property may be damaged by criminals, weather conditions, or other things. The best commercial property insurance companies in Arizona help local developers compensate for losses caused by such events.

Insurance is a service you are likely to need to provide to lenders when qualifying for financing. Ask the best commercial construction real estate lending companies in Arizona whom of the local insurance firms they approve of.

Population

To confirm that their housing and commercial development projects are located in favorable places, developers use the identical populace size, populace growth, household incomes, and education achievements of the populace that their desired users need to have.

Income

Wage levels will tell investors if the shoppers and restaurant patrons in the location are the people that their tenants need. A location that does not draw a high-end retailer could be just what a low priced tenant is searching for.

Statistics on incomes can help industrial and office tenants see what they’ll be required to pay their labor pool in that area. Income standards help developers see if a place is desirable for industrial or office properties.

Education

Businesses that rent space in industrial and office buildings have particular education information in mind for their locations’ populace. High end companies want to find a majority of college graduates. Industrial employers look for a higher accumulation of high school degrees.

Age

An aging populace that more intensively utilizes public services is not what developers are searching for. A populace that is actively involved in the workforce is ideal for office and industrial property projects. Retail building developers want families and workforce participants who eat out and go shopping more often.

A working age populace additionally contains the most active homebuyers that residential investors require.

Investing in promissory notes involves paying a lower amount than the payoff balance for a loan that is in effect so that the note buyer becomes the lender. Lenders often sell loans to increase cash, but they typically unload them due to them not being paid as promised.

The investor can re-amortize the loan with reduced payments giving them a long-term investment with interest income payments. The note purchaser is shielded by the mortgage note that the borrower executed and can take back the property if need be.

Population

One of the most fundamental indicators in real estate investing of various categories is the magnitude of the market’s populace and if it’s increasing. This is a fast “sniff test” of the financial strength of the locale.

Property Values

Expanding real property values are the most important sign when mortgage note investors assess a market. The investor is loaning on the viability of the property instead of the borrower’s reliability.

Property Tax Rates

When property taxes increase consistently, borrowers who have problems paying their mortgage payments will find it troublesome to keep up. That’s not good for interest income, but is in fact desired by investors who expect to make a profit faster by repossessing the asset.

A REIT (Real Estate Investment Trust) is an organization that holds and operates income producing real estate. They produce revenue from lease payments and create long-term asset appreciation.

These trusts have to pay out 90% of profits to shareholders as dividends. The capability to get their cash out by liquidating their REIT shares appeals to modest investors.

REIT investors are classified as passive investors which means that they have nothing to do with the acquisition or operation of any real estate.

Those pondering becoming passive investors consider buying REIT shares. They dispose of their own real estate to reinvest the money into REIT shares.

There is a highly beneficial legal vehicle permitting you to postpone paying taxes on property sale in this situation. Learn details about this by reading our articles: Can You Do a 1031 Exchange to REIT Shares? and What Is a DST 1031 Exchange?.

A 1031 Exchange Qualified Intermediary will be required by the IRS to serve as a middleman in the exchange. Find them in PropertyCashin’s directory of the best 1031 exchange Qualified Intermediaries in Arizona.

Another investment choice that pools money from individuals to invest in real property is a real estate investment fund. These entities possess shares in companies that invest in real property, notably REITs.

This investment vehicle doesn’t distribute dividend income to their investors. Similarly to regular stock funds, the return is created by increases in the worth of their stock.

Mutual funds, ETFs (exchange-traded funds), and high-end private equity funds are designated as real estate investment funds. Like REITS, real estate investment funds provide investors liquidity by enabling them to unload their shares on the market when needed.

Because they are passive investors, fund shareholders are not involved in any choices including asset purchases.