The future looks bright for the nation’s “sunbelt” cities, including Phoenix, Miami, Las Vegas, Houston and Dallas. While hit especially hard by the recession, these secondary business markets show significant signs of promise. While vacancies overall may be elevated, Phoenix offers the ideal combination of low operating costs and a pro-business government environment to help carry it well through the rebound. The Valley is close to replacing Philadelphia as the fifth largest city in the US, and in 2011 Forbes ranked it as a top 10 boomtown that would flourish in the coming decade.

The first quarter of 2013 started off slower than anticipated, and Q2 continued to set the tone for slow steady growth. Overall, the Phoenix CRE market has steadied; vacancy rates in all sectors have declined or remained flat since Q1, and are down significantly since 2012. Net absorption remains positive in all sectors, with retail and office showing improvements since Q1. Leasing activity fell modestly in the office and industrial sectors in terms of square footage leased and overall transactions, while retail continues to recover posting positive indicators in these areas. Rental rates remained relatively flat overall, seeming to settle from previous lows. While overall the news isn’t as aggressively positive as desired for 2013, the consistency shows that the market is stabilized and is ready to begin its advance to previous levels.

The Arizona unemployment rate has dropped to 7.8% as of May, down from 8.4% in May of 2012. According to the State Department of Administration, 8 of 11 major sectors in Arizona added jobs last month, with construction leading the way with 6,200 new jobs. In the Phoenix Metro Area, unemployment continues to decline, down to 6.6% as of April. The increase of construction jobs follows the upward trend in the housing market, always a key precursor of a reviving commercial market. Residential active listing supply is 20% more this May year-over-year, but continues to fall. Distressed supply is down 29% which translates to a much healthier housing market than 12 months ago. The median sales price is up 30% from last year for single family homes, while foreclosure starts were down 60% from April 2012. Another important sign is that this growth is continuing even without the investors that saturated the market during the Phoenix housing market lows; purchases by investors dropped to just 27% of all purchases in April, down from 34.5% in April 2012, and is the lowest percentage seen in several years. These numbers hold evidence to the quickly expanding new home market that was thought to be lost in the hard hit Phoenix Valley; year-over-year as of April, new home sales were up by 27% and sales of previously owned homes that weren’t distressed rose by 72%. Conversely, sales of bank-owned homes fell by 53%, short sales fell by 44%, and investor flipped homes fell by 47%. While the numbers are staggering, long term the Phoenix housing market is self-adjusting after the sharp highs and lows it has seen since the rise began in 2004.

Nationwide, confidence is returning in the housing market. This year provides homeowners perhaps the last opportunity to lock in low interest rates for years to come as rates are sure to rise as the economy continues to recover. As Dr. Peter Linneman, NAI Global Chief Economist states, “By early 2014, many potential home buyers will ask themselves, ‘Should I buy now before it’s too late?’ We expect housing induced growth to promote hiring throughout the nation. As a result, a broader cross-section of metropolitan areas will reverse their trend of lagging behind the job recovery of the Gateway markets (New York, San Francisco, Los Angeles, Boston, Washington, DC).” With the nationwide housing market finally experiencing a strong level of recovery, the commercial market is poised to take its turn on the main stage.