Commercial real estate grows in Arizona despite hits from COVID-19 pandemic
PHOENIX- The COVID-19 pandemic sent a majority of the workforce home and out of the office, but that doesn’t mean commercial real estate in Arizona took a hit.
“The perceptions of a negative market are pretty over-exaggerated at this point,” Jon Rosenberg, co-founder of LevRose Commercial Real Estate, told KTAR News 92.3 FM.
He adds that despite more people working from home, the commercial market is currently seeing pre-pandemic levels of activity.
“The office market, the first half started out slow, picked up substantially,” Rosenberg said. “There’s been over 2 million square feet of new leases signed in just the second quarter of 2021.”
That’s up 65% from the same quarter in 2020, which Rosenberg attributes to California firms coming to the state.
“We’re seeing a lot of the California firms come here,” he said. “The rents are much lower, much more affordable.
“The average metro Phoenix rent is roughly 30% lower than the national index.”
San Francisco rents are 2 ½ times higher than Phoenix, according to Rosenberg, and Los Angeles is about 50% higher.
More people and businesses moving to the state also results in the need for additional coffee shops, restaurants and grocery stores as retail real estate is in demand as well.
“Retail overall is much stronger than the perception,” Rosenberg said.
More retail businesses have moved into new spaces than out in the first half of 2021, according to Rosenberg.
“There’s the old saying that retail follows rooftops, so as we continue to see growth in new construction we’re seeing more retail that follows those new developments,” he said.
Rosenberg added a lot of this is smaller California and Texas concepts coming to Arizona, as leases under 5,000 square feet make up 90% of the new activity coming into metro Phoenix.
He attributes this boom to the COVID-19 pandemic allowing workers to move where they want to live, not where they have to live since they’re working from home.
A lot of those workers are now being picked up and hired by the firms relocating in Arizona, Rosenberg said.