In Business Magazine - Commercial Real Estate

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Commercial Real Estate A special Commercial Real Estate Section spotlighting the industry “players� who are working hard to empower our commercial real estate market.

Office | Retail | Industrial | Multi-Family Dwellings


Commercial Real Estate Spotlight on the Best

Commercial Real Estate: Lows Make Highs for Investment by J. Rentilly

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he rebound of the Phoenix-area commercial real estate market remains a long, dark night, with sunnier skies forecast over the next three years, according to Mark Stapp of Arizona State University’s W. P. Carey School of Business. “The good news is that it appears the commercial market has reached its bottom and has stabilized,” says Stapp. “The bad news is we don’t know exactly how long a recovery will take. A lot of things need to shift for that to happen. We’re probably looking at 2014 or 2015.” Andrew Cheney, principal/partner in the Coppola/Cheney Group at Lee & Associates Arizona, agrees that an extended Darwinistic trial is more likely than a quick fix. “Ten years ago, the Phoenix-area commercial market was recovering from a recession. Today, it is trying to recover from the Great Recession,” he says, though he remains hopeful that Arizona’s surge of job creations — launching it to seventh-fastest in the nation status — will aid in a quicker recovery. “When we have sustainable job growth, we will see considerable improvement in the commercial markets.” By way of facts and figures, Phoenix-area commercial real estate — comprised of industrial and office space, retail, storefronts and apartment buildings — is in a holding pattern, at best, for now, which creates interesting challenges and opportunities in the marketplace. As office space vacancies hit above 27 percent — higher, even, than in the immediate aftermath of 9/11 — and industrial space vacancies hover around 12 percent, rental is at “rock bottom rates,” and may continue to decline in many locations. Stapp notes that a few submarkets — Southeast Valley, Downtown Phoenix — have made more recovery progress than surrounding areas. Multi-tenant properties, conversely, are moving comparatively quickly on the market, primarily because Phoenix’s residential housing market has been so hard hit by foreclosures. Displaced homeowners — who “need to live somewhere, and usually fast,” says Stapp — are migrating to apartment buildings.

Such shifts in the area housing market critically impact the commercial market, according to Stapp. “Even if it looks as if the overall market is recovering, commercial is lagging — retail in particular,” he says. “The primary reason for that: With so many people negatively impacted by the overall economy and home foreclosures, there is a scarcity of disposable income. A lot of people are only spending the bare minimum on the bare essentials these days, and that is devastating to a large portion of the commercial market.” For a more substantial, wider-ranging recovery for commercial real estate to occur, the Phoenix region’s overall economy must rebound from its harrowing five-year decline. When an economy grows, unemployment rates drop, property prices rise, consumer spending moves upward, businesses expand or begin and developers launch new projects. For more than two years, commercial development in the Phoenix area has been, essentially, static, although Bloomberg-reported corporate earnings forecasts of Phoenix-based businesses indicate a move toward normalcy. Traditionally, a company’s earnings forecasts link quite directly with the quantity of commercial real estate they’ll need. Stapp remains cautiously optimistic, as changing business models and spatial needs shift dramatically, particularly for retailers, many of

Commercial Real Estate: Now is Choice Time for Purchase or Lease In today’s real estate market, there are bountiful reasons for a business to consider purchasing a property over leasing, especially for a stable company with a long-term growth plan. Says Kent Hanson, who fronts the Industrial Group at Cassidy Turley, “Leasing definitely gives you flexibility if you’re not sure what your next couple of years are going to look like, but a lease cost versus a purchase cost right now is almost exactly even. If you’ve got the down payment, the financing and a little bit of guts to weather the storm, lock in these record-low interest rates and do it. This is a great time to buy.” Hanson also suggests investors or muscular business owners projecting long-term growth consider purchasing properties twice the size they presently need. “Use what you need now and lease out the other half to get some

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income happening to pay down your debt,” Hanson says. “When you need the space, it’s there, and it’s there at today’s price and interest rate. The market today supports that kind of progressive thinking for qualified buyers.” Although office vacancies of more than 27 percent and industrial vacancies of almost half that are white-knuckle challenges for investors and property owners, that can be a silver lining for business owners otherwise sweating the down economy. “What you’re seeing with landlords is concessions to tenants and business owners: lower rates, rent reductions and sometimes even forbearances,” says Mark Stapp of Arizona State University’s W. P. Carey School of Business. “Those concessions are mostly over, but they do exist. And that’s an argument for leasing in today’s market.”

“Office rental rates are low, and will probably continue to decline in the foreseeable future,” says Justin Himelstein of the Office Group at Cassidy Turley, noting there are a few exceptions in desirable submarkets like Downtown Phoenix. “We’re seeing more leasing for offices now than sales.” One of the leasing trends noted by Himelstein is clients moving up from C-level properties to A-level real estate, often without spending an extra penny. “If you’re leasing today, you’re going to get a lot more for your money than you would have in, say, 2004.” Cassidy Turley cassidyturley.com W. P. Carey School of Business at Arizona State University wpcarey.asu.edu

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The good news for savvy investors with solid credit and financial wherewithal to hold properties for the long term is that commercial prices in today’s market are highly accessible, and ample loan monies are available to qualified buyers. whom are downsizing or moving from traditional storefronts or big boxes to order fulfillment warehouses. “Investors need to really know the market today before making a move, and the market has a lot of moving parts today. What’s going on socio-economically, what’s going on demographically, what’s going on with location, with competing businesses, with public policy in general — all of these things affect the quality of your investment,” says Stapp. The good news for savvy investors with solid credit and financial wherewithal to hold properties for the long term is that commercial prices in today’s market are highly accessible, and ample loan monies are available to qualified buyers. “I have lenders literally calling me now trying to place money,” says Kent Hanson of the Industrial Group for Cassidy Turley. “Prices are almost at all-time lows; interest rates are incredible; and there’s a good amount of nice, available properties. The time is great to buy.” Lee & Associate’s Cheney agrees, noting that “the large majority” of the 300-plus office condos developed and sold in the area since 2002 “went

back to the lender when the market collapsed,” and many are available now at deeply discounted prices. “For buyers, there will continue to be outstanding opportunities to lock in low real estate costs,” says Cheney. Stapp says that this is clearly a buyer’s market, but warns that investments must be carefully considered and held over a long-term. “This is not a ‘flip it’ market. Opportunity does exist in this market, but it has to be carefully vetted with an eye toward the changes that are occurring — political, technological, socio-economic, demographic — and how they impact the market,” he says. “If you’re able to buy and hold onto portfolio elements over a longer period of time, this is a workable market, and multitenant properties still look like your best investment. People will always need a place to live.” Cassidy Turley cassidyturley.com Lee & Associates lee-associates.com Rd W. P. Carey School of Business at Arizona State Universitytt Dam wpcarey.asu.edu rtle

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Commercial Real Estate Spotlight on the Best

Cassidy Turley At Cassidy Turley, we are market leaders, industry leaders and community leaders. Nationwide, clients recognize us for the creative sophistication of our real estate advice as well as for the discipline and accuracy of our service delivery. We are a trusted partner and advocate, supporting our clients’ overall business performance. In markets across the country, we are respected as a leading provider of commercial real estate services as well as for our community engagement. Our thorough understanding of local business practices and market dynamics, combined with our customer focus and service commitment, give our clients a distinct edge in commercial real estate across the globe. Cassidy Turley provides real estate services with more than 3,600 professionals in more than 60 offices nationwide. The company represents a wide range of clients — from small businesses to Fortune 500 companies, from local nonprofits to major institutions. The firm completed transactions valued at $22 billion in 2011; manages 455 million square feet on behalf of institutional, corporate and private clients; and supports more than 28,000 domestic corporate services locations. Cassidy Turley enhances its global service delivery outside of North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Local Market Leadership Cassidy Turley Arizona has a strong legacy of commercial real estate market leadership in Arizona. In 2011, the office

completed 882 transactions with an overall transaction value of $776 million, and in 2012 was again named the No. 1 commercial real estate brokerage firm in the market by the Phoenix Business Journal. Based in Phoenix, we deliver tailored solutions in most major Arizona markets to help clients undertake any real estate challenge and achieve optimum, measurable outcomes. Cassidy Turley professionals provide their clients with unparalleled market knowledge backed by the industry’s finest research, marketing, mapping and support services. Committed to our community, we continue to give back through our work with industry and charitable organizations. Services Cassidy Turley Arizona is a full-service commercial real estate firm offering brokerage investment and advisory services in Capital Markets, Corporate Services, Project & Development Management, Project Leasing, Property Management and Tenant Representation for asset classes that include Office, Industrial, Retail, Multi-Family and Land. With every assignment, we focus on our clients’ real estate needs so they can focus on their business. We invite you to visit www.cassidyturley.com or call (602) 9549000 for more information about Cassidy Turley Arizona.

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Profile Company Name: Cassidy Turley Main Office Address: 2375 E. Camelback Road, Suite 300 Phoenix, AZ 85016 Phone: (602) 954-9000 Website: www.cassidyturley.com Number of Offices in Metro Phoenix: 1 Number of Commercial Agents: 75 City Nationally Headquartered: St. Louis, MO CEO / Managing Director: Bryon R. Carney, President & Managing Partner No. of Years with Firm: 25 years Year Est. Locally: 1973 Specialties: Brokerage investment and advisory services in Capital Markets, Corporate Services, Project & Development Management, Project Leasing, Property Management and Tenant Representation for asset classes including Office, Industrial, Retail, Multi-Family and Land

FINANCIAL: Property Sold in 2011 Value: $484,000,000 Square Footage: 5,200,000 SF and 1,250 acres Property Leased in 2010 Value: $292,000,000 Square Footage: 4,700,000 SF No. of Commercial Transactions Closed in 2011: 882 inbusine ssmag.com



Commercial Real Estate Spotlight on the Best

CBRE CBRE has been serving clients in Arizona for 60 years, growing to become a dominant player in the commercial real estate market. From asset services to brokerage services, and throughout its business lines, CBRE has earned a reputation as a respected leader in the business community with its vast market knowledge and enduring culture of client service. Despite its market dominance, CBRE believes that the truest measure of its success comes from providing superior service to clients — delivered by knowledgeable, creative and tenured employees, many boasting more than 20 years in the marketplace. It is their dedication to teamwork and commitment to excellence that makes it possible to serve the diverse needs of clients. Whether facilitating the design, construction and move of a new corporate headquarters or strategically planning and negotiating complex lease agreements, CBRE is the only commercial real estate firm

in the state to offer a fully integrated, global service platform to its clients, delivering seamless execution and measurable results. CBRE is a leader within the commercial real estate community. It has been recognized by numerous organizations and publications. Here are just a few of its company awards: “100 Best Arizona Companies of the Past Decade that Shaped the State” — In conjunction with the state’s Centennial, CBRE has been selected one of Arizona’s “100 Best” companies. The “100 Best” were selected by BestCompaniesAZ, along with community and business leaders, based on their research of award-winning companies over the past 10 years. CBRE received a “Best of Heart” award for building sustainable relationships with employees, customers and the community. “Arizona’s 2011 Most Admired Companies” — Arizona Business Magazine and BestCompaniesAZ have selected CBRE one of 60 winners for the 2011 “Arizona’s

Most Admired Companies Awards.” This esteemed honor is based on how the company has performed in the following areas: Workplace Culture, Leadership Excellence, Corporate and Social Responsibility and Customer Opinion. “Ranking Arizona — #1 Commercial Brokerage Firm” — As a result of the largest business opinion poll in the state, CBRE has topped the list of commercial brokerage firms in Ranking Arizona Magazine’s 2012 list of the “Best of Arizona Business.” This marks the 14th year CBRE has ranked No. 1 in this category. “Best Places to Work 2011” — CBRE is proud to be chosen as one of the “Best Places to Work” in the Valley by the Phoenix Business Journal and BestCompaniesAZ. This is the eighth year in a row CBRE has received this prestigious award.

Profile C ompany Name: CBRE Main Office Address: 2415 E. Camelback Road, Phoenix, AZ 85016 Phone: (602) 735-5555 Website: www.cbre.com/phoenix Number of Offices in Metro Phoenix: 1 Number of Commercial Agents: 79 City Nationally Headquartered: Los Angeles, Calif. CEO / Managing Director: Craig S. Henig, Senior Managing Director, Arizona Market Leader No. of Years with Firm: 12 Year Est. Locally: 1952 Specialties: CBRE serves real estate owners, investors and occupiers of all commercial property types, offering strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting.

FINANCIAL: Metro Phoenix Property Sold in 2011 Value: $1.2B Metro Phoenix Property Leased in 2011 Value: $800M

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Any firm can claim to be the best. We let the facts speak for themselves. #1 brokerage in Arizona1 #1 in financial performance—by any measure2 #1 real estate outsourcing firm3 #1 in investment sales4 #1 in loan origination and loan sales5 #1 in brokerage services6 #1 most admired brand7 #1 property management firm8 #1 in multi-housing brokerage services9 #1 Freddie Mac seller/servicer10 #1 in facilities management11 #1 in environmental sustainability12 #1 in corporate responsibility13 #1 in real estate technology14 Only Fortune 500 real estate services firm15 Only Arizona “most admired” full-service real estate firm

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We thank our clients for making our success possible. #1 in real estate services worldwide www.cbre.com/phoenix | 602.735.5555 www.cbre.com/tucson | 520.323.5100 1) “Top Commercial Brokerage Firms: 25 Brokers or More,” Ranking Arizona, 2012. 2) Company financial filings; CBRE 2011 revenue: $5.9 billion; CBRE 2011 normalized EBITDA: $802.6 million; CBRE 2011 normalized EBITDA margin: 13.6%. 3) #1 outsourcing company among real estate services firms, IAOP, Fortune, May 23, 2011. 4) Real Capital Analytics, December 2011. 5) “Top 20 Financial Intermediaries,” National Real Estate Investor, June/July 2011 (with the inclusion of loan sales volume). 6) “Top 25 Brokerages,” National Real Estate Investor, April 2012, 9th consecutive year. 7) The Lipsey Company Brand Survey, 2012, 11th consecutive year; Highest-ranked commercial real estate services firm in Fortune’s Most Admired Companies ranking, March 2012. 8) “Top 25 Property Managers,” National Real Estate Investor, June/July 2011. 9) Best multi-housing brokerage firm, Multi-Housing News, October 2011. 10) Freddie Mac ranking, 2010 through Q3 2011. 11) Best facilities manager for financial services (U.K.), European CEO Facilities Management Awards, September 2011. 12) Newsweek, October 16, 2011; U.S. EPA 2011 Sustained Excellence Award (Partner of the Year status four consecutive years). 13) Only commercial real estate services company on “Companies That Care Honor Roll,” The Center for Companies That Care, 2012, 5th consecutive year; Winner of the IAOP/ISG Global Outsourcing Social Responsibility Impact Award. 14) Only commercial real estate services firm in the top 100, InformationWeek 500, September 2011. 15) Fortune, May 21, 2012. 16) Only full-service commercial real estate firm among the 60 winners, Arizona Business Magazine, September 2011.


Commercial Real Estate Spotlight on the Best

GPE Companies GPE Companies is a privately held, thirdparty real estate company serving a range of clients, from private individual investors to publicly traded corporations to international investment groups. Now in its fifth decade, GPE is a leader in Arizona’s commercial real estate market, offering services for all property types, including office, retail, flex/industrial, dental international clients. GPE’s commitment to and land. GPE has facilitated acquisitions, exceptional service and creative marketing sales and leasing transactions exceeding $2 strategies solidifies its position in the Phoenix billion in real estate value. In addition, it has a market and beyond in successfully forging division specializing in all areas of healthcare close and lasting relationships with its clients. real estate. 2012 Ranking Arizona ranks GPE GPE Commercial Advisors and its Commercial Advisors as the Valley’s No.1 property management and construction commercial real estate company in the supervision company, GPE Management category of 24 brokers or fewer and GPE Services, collectively represent more than 10 Management Services among the top ten million square feet of commercial space in property management companies. GPE has the Phoenix Metro area. also been named a Top Leasing Firm by The name GPE has earned an enviable CoStar Power Broker Awards and one of the reputation GPE_InBusiness_Sept12-outlined.ai of providing expert knowledge, Valley’s “Best Places to Work” by Phoenix 1 8/3/2012 10:36:02 AM research and resources to its national and Business Journal.

Profile Company Name: GPE Companies Main Office Address: 2777 E. Camelback Road, Suite 230, Phoenix, AZ 85016 Phone: (480) 944-8155 Website: www.gpe1.com Number of Offices in Metro Phoenix: 1 Number of Commercial Agents: 26 City Nationally Headquartered: Phoenix, AZ CEO / Managing Director: David M. Genovese, P.C. No. of Years with Firm: 29 Year Est. Locally: 1973 Specialties: Sales, Leasing and Property Management of Office, Retail, Flex/Industrial, Medical, Dental, Land and REO

FINANCIAL: Property Sold in 2011, Value: $39.6M Property Leased in 2011, Value: $38.4M Number of Commercial Transactions Closed in 2011: 246

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Commercial Real Estate Spotlight on the Best

Lee & Associates Arizona Profile Company Name: Lee & Associates Main Office Address: 3200 E. Camelback Road, Suite 100, Phoenix, AZ 85018 Phone: (602) 956-7777 Website: www.leearizona.com Number of Offices in Metro Phoenix: 1 Number of Commercial Agents: 39 City Nationally Headquartered: Irvine, CA Managing Principal: Fred Darche No. of Years with Firm: 21 Year Est. Locally: 1991 Specialties: Industrial, Office, Investment, Land and Consulting

FINANCIAL: Property Sold in 2011 Value: $189M Property Leased in 2011 Value: $335M No. of Commercial Transactions Closed in 2011: 558

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LEE & ASSOCIATES Arizona is the Phoenix area’s premier commercial real estate brokerage firm and specializes in providing exceptional brokerage services to the industrial, office, investment and land sectors. The Phoenix office was established with 12 brokers in 1991 and is now recognized as one of the most successful brokerage firms in Arizona, with 39 brokers today. Each of the 45 nationwide Lee & Associates offices has a strong local ownership supported by a powerful platform from the national Lee & Associates network. Our unique business model empowers our brokers to provide the highest quality brokerage services and the most timely and accurate market information available. Our

dedicated staff provides our brokers the tools and support they need to focus on the best opportunities available for their clients. Lee & Associates Arizona is enjoying exceptional success, with some of the Valley’s largest lease and sales transactions placing it among the elite commercial real estate firms in the state. We are poised for even greater success in 2013 and beyond.

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