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Phoenix market cap rates continue to fall

• Capitalization rates continue to compress to pre-recessionary levels, as buyers continue to compete for quality assets throughout the growing Phoenix market. Although not a primary southwest destination, secondary markets such as Phoenix have become highly sought after due to competitive rates and consumer proximity.

• Industrial capitalization rates continue to lower considerably as tenants in the market are met with limited availability. Phoenix’s current industrial vacancy is only able to support 50 percent of potential tenants in need of 100,000 square feet or more.

• Office rates also continue to drop, but are seeing more compression in competitive submarkets such as Tempe and Camelback Corridor as rents continue to rise in quality assets.

• Lower cap rates could indicate the continuation of the current landlord favorable market, as rising rental rates support increased NOI and property values. 

Source: JLL Research, Costar

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