Phoenix and Denver are the two largest markets that we provide services. We track the commercial office space and industrial space to better understand our clients, market trends, and to make more informed business decisions. We will review Q2 numbers in attempt to spot trends in the marketplace.
Continuation “We are navigating by the stars under cloudy skies.”–Jerome Powell said during the Jackson Hole Economic Policy Symposium, while describing the Feds economic outlook and some of the inherent market risk. Despite his cautionary statement, the US economy continues to be remarkably resilient. Will the US Economy stave off a recession while reducing inflation to 2%, the Feds goal? Jerome Powell is proud of our progress, but admittedly, not even Powell is sure of the exact coordinates to keep the ship on course without taking on water…
Both Colorado and Arizona have positive GDP growth in Q2, historical low unemployment rates and there is even a slight uptick in Office space in Denver $31.84 PSF and Phoenix $28.89 PSF. However, actual business confident rates are hovering slightly south of 50 in both Colorado and Arizona, which equates to a marginally pessimistic economic outlook. Why the negative perception? Some attribute it to a mix of inflation, 20-year high interest rates, increased regulatory pressures, and the economic slowdowns in Germany (largest EU economy) and China (largest Asia economy) are some of the factors.
Some investors have walked away from Commercial and Industrial space deals due to the aforementioned factors, while several institutional firms are making all cash offers to acquire real estate at a deep discount vs 2019 numbers. We will continue to monitor these markets in 2023 and hope for a “soft landing.” Regardless of the outcome, there are many business lessons to glean and more transportation metaphors to describe the economic conditions.
Return to Office Some good news: from small to large companies office attendance is up. In fact, companies such as Amazon, Wall Street banks, media firms, tech companies-even Zoom-have required their office workers to be in the office with more frequency. Return to office is trending-Kastle Systems reports Office Occupancy is slightly above 50% occupancy in the 10 biggest cities in the US.