Although returns in the real estate market were up to 14.5% for 2011, investors and businesses alike may be hesitant to make any large decisions until the elections are over. The huge sign of 2012 will be the adoption and election of beneficial policy implementations that encourage stability and foster growth. Right now, it’s unclear if the federal reserve will continue to keep borrowing costs at low rates with the economy generating growth. If rates increase, confidence will be enhanced and investment activity will increase across all asset classes.

Unemployment nationwide is finding lower levels from the highs reached during the peak of the recession. Arizona has experienced measurable increases in employment. Manufacturing added gains in job growth, while construction jobs also saw a YTD increase (up 2.4%). Consumer spending increased during the first quarter, yet it was met with rapidly increasing prices.

Manufacturing nationwide has been one of the largest growth factors improving for 34 consecutive months according to ISM.

Arizona has seen overall cap rates trending up to approximately 8.65% which may be due to the excess Class B and Class C property supply, yet reported by Cole Capital, risk and return valuations favor the commercial real estate industry. The 30 year fixed mortgage rate has ticked down since late 2011, a positive factor as our residential housing market has begun to experience a significant increase in sale velocity. For prices to return to pre-recession levels, we need to see significant increases in employment, businesses confidence, and more optimism in the minds of credit lenders. Investors will flock to the real estate markets for steady.

There were varied differences in absorption between class and submarket strata. The worst performing submarket was Sky Harbor Class B property with negative absorption of (-158,813) square feet. On the other hand, the best performing submarkets were Downtown Phoenix Class B, and Northwest Valley Class B space, both absorbing over 300,000 square feet of space. There was a decline in absorption for the suburban markets, as this quarter reported around 202,000 square feet, compared to roughly 615,000 square feet in fourth quarter 2011. Net absorption totals will likely continue with positive figures, but strict lending conditions and slow job growth restrain full acceleration.

Despite some job growth, and a feeling of economic optimism, vacancy rates increased slightly up to 20.8%. We attribute this excess available space to downsizing in underperforming businesses, as well as the downfall in the total space absorbed. Property type did play a large role in the vacancy rate, while Class A space trended up to 23.1% from 20.7%, Class C space trended down to 13.3% from 21.5% across all submarkets. Part of this reported downfall is due to tenants scaling back expenditures, and favoring lower quality, lower priced office space. As we should see with the overall rise in vacant space, rental rates declined this quarter to $20.13. Occupancy rates were trending up from second quarter 2011, however first quarter 2012 noticed a slight decline in this momentum; rates fell .2% to 78.2%.

Construction projects accelerated as a total for Metro Phoenix; new construction increased from approximately 35,000 square feet to over 140,000 square feet, current projects under construction total close to 265,000 square feet. While this will be a great boost for business expansion opportunity, we saw total sale activity maintain similar levels, with a slight decrease from 33 to 32 transactions totaling $222,350,000 in volume; the median price for transactions was $120.41 per square foot. At the same time, leasing activity gained momentum with nearly 590 transactions recorded over first quarter 2012. One of the largest leasing transactions was 80,158 square feet of space signed by Rancho Solano Private School at 9180 E Via De Ventura, as well as 70,000 square feet of space at 1500 N Priest Dr signed by IPOWER. The leading sale transaction was an $86,000,000 purchase by Parkway Properties of 299,540 square feet of space, the Hayden Ferry Lakeside II project.

Cap rates were seen trending down for the office sector to 7.91% from 8.89%. Office space gave way to a peak of 12% cap rates in 2011. The movement down supports the positive absorption data seen across both Class A and Class B space. As investors look to higher quality properties, and with interest rates remaining low, cap rates should remain at current levels through 2012.

Absorption was positive over all submarkets but declined from fourth quarter, levels which were consistent with forecasts made in late 2011. The Southwest Valley was the worst performing submarket with a loss of 505,118 square feet, while the Northeast Valley had gains nearing 400,000 square feet. The great news and playing theme of 2011 was increased absorption at high rates.However, with the first quarter of 2012 slowing, the final three quarters will have to find strong acceleration to meet the initial annualized forecast. According to those forecasts, we should see a continued expansion in net absorption, leading to 7.5 million square feet, up from the 7.1 million square feet absorbed in 2011; a slow start is commonplace as investors/tenants are usually cautious in the first quarter.

Vacancy was little affected as we began the first quarter. Tenants and investors look on with wary eyes, finding any conviction difficult to grasp with improving but volatile conditions nationwide. Industrial vacancy remained unchanged, just under 14%. Job growth within the two main contributing sectors for industrial space, manufacturing and construction, was positive but fleeting. Flex space has persisted to record the highest vacancy rates averaging out around 20.5%; it has remained above 20% for the past three years. This property type will struggle against the subdued pricing of lower class industrial and office space properties. We hope to see business growth improving with low borrowing costs, green technology incentives, and a turnaround from one of the deepest recessions. If we continue to push forward, estimates surmise that up to 5 million square feet of vacant space throughout the year should be absorbed by tenants who are more confident in their business sectors. The first quarter showed that there was an increase in properties under construction; totaling up to approximately 3.4 million square feet. This will support expected new job creation and provide for an increase in class A highly desirable, first generation space.

Rental rate averages remained level with the average rate being at $0.49 per month, and we should continue to see average industrial rents unchanged, or have slight improvements as demand in the industrial sector increases. However, with a limited supply of large box space, and increased foreign investment nationwide, rents may find the effort to edge up. Additionally, a larger circulation of goods paired with increased economic activity will benefit the industrial sector as warehouse space will be in greater demand. The first quarter gave way to nearly 560,000 square feet of completed space, and approximately 3.3 million square feet of industrial space was under construction. The submarket with the highest addition was the Southeast Valley, with 2.2 million square feet of manufacturing space. We will need to see drastic improvement in rental rates to compensate for the declines experienced over the last four years, but moving in a positive direction is the momentum the market needs.

Consumer spending has already shown signs of improvement, albeit at a slow pace. Large movements of capital will be reserved after elections take place late in the year, and investor confidence will be restored if constructive outcomes are reached. The quarter was marked with passive, but improving job growth, coupled with a declining unemployment rate throughout Metropolitan Phoenix. The largest transaction seen in the first quarter was MiTek Industries acquiring roughly 260,000 square feet of warehouse space at 7890 W Lincoln. The quarter’s largest sale transaction was a purchase of a 3 property portfolio for $18,325,000 by Alliance Commercial Partners.

Although returns in the real estate market were up to 14.5% for 2011, investors and businesses alike may be hesitant to make any large decisions until the elections are over. The huge sign of 2012 will be the adoption and election of beneficial policy implementations that encourage stability and foster growth. Right now, it’s unclear if the federal reserve will continue to keep borrowing costs at low rates with the economy generating growth. If rates increase, confidence will be enhanced and investment activity will increase across all asset classes.

Unemployment nationwide is finding lower levels from the highs reached during the peak of the recession. Arizona has experienced real increases in employment. Manufacturing added gains in job growth, while construction jobs also saw a YTD increase (up 2.4%). Consumer spending increased during the first quarter, yet it was met with rapidly increasing prices. Manufacturing nationwide has been one of the largest growth factors improving for 34 consecutive months according to ISM.

Arizona has seen cap rates trending up to approximately 8.65% which may be due to the excess Class B and Class C property supply, yet reported by Cole Capital, risk and return valuations favor the commercial real estate industry. The 30 year fixed mortgage rate has ticked down since late 2011, a positive factor as our residential housing market has began to experience a significant increase in sale velocity. For prices to return to pre-recession levels, we need to see significant increases in employment, businesses confidence, and more optimism in the minds of credit lenders. Investors will flock to the real estate markets for steady and reliable returns, as lenders supply capital to high-quality credit borrowers.

NEW YORK, NY, June 22, 2011 — C-III Capital Partners LLC (C-III) announced today that it has entered into a definitive agreement to acquire NAI Global, the largest and premier network of independent commercial real estate firms worldwide. C-III is led by Andrew L. Farkas, who founded and was Chairman and CEO of Insignia Financial Group, Inc. (NYSE:IFS). NAI Global will continue to operate as a separate company under its current management following the acquisition.

NAI manages a network of commercial real estate firms comprising 5,000 professionals and 350 offices in the US and 55 countries throughout the world. NAI’s network members provide a full spectrum of corporate, financial, technology and project management services.

“C-III plans to use its asset base, along with strategic acquisitions such as NAI, to create a fully diversified commercial real estate services company,” said Mr. Farkas. “This is the strategy that was successful for Insignia. C-III is led by the same team that built Insignia, and with C-III’s significantly larger asset base, I believe C-III can substantially exceed Insignia’s success,” concluded Mr. Farkas. At its height, Insignia managed $12.5 billion in assets, while today C-III’s portfolio approximates $150 billion in assets. Insignia was one of the largest commercial real estate services companies in the world when it merged with CB Richard Ellis in 2003.

C-III commenced operations with the purchase of Centerline Capital Group’s institutional real estate debt fund management and commercial mortgage loan servicing businesses in March 2010. Since that time, C-III has successfully launched mortgage origination, investment sales and title insurance businesses from scratch, and expanded its principal investment, loan origination fund management and primary and special loan servicing businesses.

“Today’s agreement represents a tremendous opportunity for NAI and our members,” said Gerald C. Finn, Chairman of NAI Global. “By teaming up with Andrew Farkas, one of the world’s leading real estate businessmen, we expect NAI will be able to significantly grow its service offerings and present new opportunities to our members.”

“We have built the world’s leading commercial real estate network, but we now believe it is time to take the enterprise to a new level and add even greater value to our members and our collective corporate and investment clients. The combination with C-III will provide a depth of resources, talent and tools from which we can draw upon to accelerate our growth,” noted Jeffrey M. Finn, President and CEO of NAI Global. “Rarely do you find partners so perfectly strategically aligned as NAI Global and C-III. This is a natural fit and extremely exciting news for the industry.”
The transaction is expected to close in the third quarter of 2011. Financial terms of the transaction were not disclosed.

About C-III Capital Partners
C-III Capital Partners LLC is a leading commercial real estate services company engaged in a broad range of activities, including primary and special loan servicing, loan origination, fund management and principal investment. The company’s principal place of business is located in Irving, TX, and it has additional offices in New York, NY, Greenville, SC and Nashville, TN.

C-III Asset Management LLC, a wholly-owned subsidiary of C-III Capital Partners, is a highly rated servicer (primary and special) of commercial real estate loans. Its clients include issuers of commercial mortgage-backed securities (CMBS) and collateralized debt obligations (CDOs), institutional lenders and other investors. C-III Asset Management is the primary servicer for approximately $20 billion and the named special servicer for approximately $127 billion of commercial real estate loans. C-III Asset Management is rated CPS 2- by Fitch and Above Average by Standard and Poor’s as a primary servicer, and is one of the highest rated special servicers in the industry with ratings of CSS 1- by Fitch and Strong by Standard and Poor’s.

About NAI Global
NAI Global is the premier network of independent commercial real estate firms and one of the largest commercial real estate service providers worldwide. NAI Global manages a network of 5,000 professionals and 350 offices in 55 countries throughout the world. NAI professionals work together with the global management team to help clients strategically optimize real estate assets. NAI offices around the world completed over $45 billion in transactions annually. NAI also manages over 200 million square feet of commercial space.

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The Sky Harbor Industrial submarket offers some of the most sought-after, strategically located properties in the Valley with adjacent freeway access and close proximity to Phoenix Sky Harbor International Airport. But few could point to as many amenities and features as the Sanmina Campus, located south of Broadway Rd near 36th Street in Phoenix, AZ. These signature properties are represented by NAI Horizon brokers Jeff Hays and Chad Neppl.

“Our team is extremely excited to secure the listing on this unique industrial property,” says, Jeff Hays, Senior Vice President of NAI Horizon. “The fact that we are currently in negotiation with several parties now is very encouraging.”

The Sanmina property consists of approximately 88,000 SF of buildings and an additional 10 acre, fully-improved land parcel which can be divided into (4), 2.5 acre parcels for build to suits. The buildings can accommodate single or multi tenant uses and are available for lease or sale.

The newly renovated manufacturing/warehouse buildings feature heavy power, paved yard(s) and functional floorplans for a variety of businesses. “This project really fills a void in this submarket because many of the existing, freestanding buildings in the area are second and third generation and we’re offering clean, new product,” says Chad Neppl, Vice President.

For more information on this project, contact Jeff Hays at jeff.hays@naihorizon.com or Chad Neppl at chad.neppl@naihorizon.com.

NAI Horizon brokers Barbara Lloyd, Rob Downing and Cameron Harkey have branded themselves Strategic Commercial Partners, a direct reflection of the team’s commitment to servicing their clients with a full arsenal of property and investment options.

Barbara, Rob and Cameron focus geographically on Tempe, Scottsdale and Downtown Phoenix helping office tenants, landlords and investors navigate what has become a complicated market full of opportunity. The team specializes in urban infill locations that offer tremendous opportunities for reduced rates, but access to transpiration and urban living amenities.

“We have a commitment to providing excellent service and research based advice for our clients,” says Downing. “Our marketing program exposes our clients’ properties to the highest number of qualified buyers in the shortest period of time and we also bring over 35 years worth of experience to the table.”

Notable clients past and present are Boeing Corp., LandAmerica Title, Edward Jones Investments, California Bank & Trust, Zion’s Bank and many more. The team works hard to coordinate the needs of their clients by keeping them in the loop with a team blog, follow up conference calls and additional market knowledge. This builds trust between client and broker making the Lloyd, Downing & Harkey team the first place clients turn to when they have questions about commercial real estate options.

But it’s not all work and no play for the team. Barbara volunteers with several organizations including the Tempe Community Council and Tempe Neighbors Helping Neighbors. She is also an avid hiker and biker, too. Rob has competed in several marathons and ironman triathlons and is also a baseball coach for the McCormick Ranch Little League in Scottsdale. Cameron also enjoys an active lifestyle and was a player on the ASU Sun Devils football team.

As for where the team is positioned now, Lloyd says she has seen a significant increase in business. “Our team sales and leasing volume is up over 100 percent over first quarter, 2010. We feel 2011 is the year savvy investors and tenants make the decision to take advantage of terrific prices and steadily solidifying fundamentals.”

Over the past three years, NAI Horizon has taken a contrarian approach to the sluggish market by expanding its brokerage and support staff. We have also added an apprasial group to our service line. We’ve also added new components to NAI Horizon such as a commercial mortgage group and a major property management expansion all designed to provide a higher level of service to our clients. All of this comes with a dedication to the Phoenix market and our ability to work across the nation and the world as part of NAI Global.

If you feel the time is right to make your move, I welcome you to contact me, Thad Seligman, at thad.seligman@naihorizon.com to see if joining NAI Horizon is the right path for you.

Dr. Linneman is a world-renowned economist with NAI Global. This is a unique opportunity to hear an economic briefing and pose questions to one of the world’s foremost real estate economists. The webcast is free for all participants, but you do need to register. Don’t miss this great opportunity to position your firm as a powerful global player with something of great value.

Click here to register. http://bit.ly/fZvYC0

Over the past three years, NAI Horizon has taken a contrarian approach to the sluggish market by expanding its brokerage and support staff. We have also added an apprasial group to our service line. In the coming year, we plan to add new components to NAI Horizon such as a commercial mortgage group and a major property management expansion, all designed to provide a higher level of service to our clients. All of this comes with a dedication to our local market and our ability to work across the nation and the world as part of NAI Global.

If you feel the time is right to make your move, I welcome you to contact me, Thad Seligman, at thad.seligman@naihorizon.com to see if joining NAI Horizon is the right path for you.