2014 Commercial Real Estate: Market Preview From the Experts
By Peter Madrid
Cushman & Wakefield of Arizona, Inc.
When experts speak, people listen.
That was the scenario at the first Valley Partnership Friday breakfast of 2014 at Phoenix Country Club. Another packed room heard market sector previews from Larry Downey, Vice Chairman at Cushman & Wakefield of Arizona; Mindy Korth, Executive Vice President at Colliers; and Matt Milinovich, Partner at Strategic Retail Group.
Mayor Vince Francia of Cave Creek addressed the crowd as part of the monthly “Mayor’s Minute” segment.
 Mayor Francia sang the praises of his municipality of 5,000 residents, telling the audience that growth, economic development and its historic core are all important issues. Retaining its Western charm (the mayor said there as many horses are there residents) is also key to Cave Creek.
Milinovich spoke first, giving his forecast of the retail market. Looking back, he said retail vacancy rates were a little more than 10 percent at the end of 2013. The market anticipates those rates will be at 9.5 percent or lower by the end of the year.
Among the best retail business types in Metro Phoenix are quick service restaurants, he said. One of Milinovich’s slides showed the logos of more than 15 local and national restaurant chains. Restaurants moving into adaptive re-use properties also showed an increase. Gym and fitness centers also filled some of that vacant space as well, he said.
On the office side of the ledger, Downey said that sector experienced a little under 2 million square feet of net absorption in 2013. For 2014, job growth will help lower the vacancy rate.
“Demand for office space will climb,” he said, adding that it will be an arduous climb.
One of the best submarkets heading into 2014 and beyond will be in Tempe, where State Farm is scheduled to move into a new, 2.1-million-square-foot campus starting in 2015.
In 2013, the sale of office properties totaled $1.4 billion, Korth said. The sale of retail properties reached almost $600 million and the sale of industrial properties totaled $962 million.

Her projection for the 2014 investment market: sale prices will increase, REO activity will be down, and cap rates will also come down for high-quality assets.