Phoenix area sales rise for office, industrial buildings

The financial gridlock that has frozen Phoenix-area commercial-real-estate sales over the past three years has begun to break up, according to brokerage-firm executives.

The boost in sales since Jan. 1 has been particularly noticeable among smaller industrial properties and apartment buildings, they said, but even office buildings and some retail properties have begun to change hands.

As of Sept. 30, about 110 Phoenix-area industrial properties had been sold in 2010, said Craig Henig, senior managing director at CB Richard Ellis in Phoenix. The total price of those assets was more than $241 million.

Twenty-seven multitenant office properties were sold during the first three quarters, for a total price of about $107 million, and 17 retail properties were sold, totaling almost $42 million.

That's a major change from a year earlier, when virtually no sales were occurring, Henig said.

The uptick is being driven primarily by an increase in commercial foreclosures, as more lenders seek to clear non-performing loans off their books, he added.

"They (foreclosures) are slowly coming to the marketplace - they are not flooding the marketplace," Henig said.

Real-estate firm TransWestern, in Phoenix, hired veteran office-tower broker Phil Marino recently in anticipation of a future high-rise sell-off that most area brokers said is inevitable.

"You're going to see a lot more (commercial) foreclosures in Phoenix," said Marino, senior vice president of investments.

Marino is former president of Intercon West Realty Advisors, which specialized in office towers. The firm folded when high-rise properties stopped selling in 2007.

He said financial pressure on high-rise owners has been mounting that likely will lead to debt restructuring, short sales and possibly foreclosures.

A number of large office properties built during the real-estate boom have short-term loans coming due in 2011 and 2012, he said.

Bob Mulhern, managing director of Colliers International in Phoenix, said that the majority of individual property sales still are below the $5 million mark and that the primary buyers have been business owners who want to own their own buildings.

Asking prices are still higher than what most investors are willing to pay, he said, but they have fallen within a reasonable range for owner-occupants.

"Users of those buildings can come in there and buy for cash," Mulhern said, adding that more expensive buildings generally require financing, which many lenders still are reluctant to provide.

Both optimism and impatience have prompted a number of market watchers to make purchases in recent months, said Don Mudd, managing director of commercial-realty firm Jones Lang LaSalle in Phoenix.

"We're 3 1/2 years into this cycle, and people think we're starting to come out of it," Mudd said.

by J. Craig Anderson The Arizona Republic Oct. 20, 2010 12:00 AM




Phoenix area sales rise for office, industrial buildings