market report...sublet space. • net absorption: fell further into negative levels. • office...

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///////////////Los Angeles/////////////

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///////////Orange County///////////

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////////////Ventura/////////////////

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////////// I n land Empi re ////////////

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/////////////Phoenix/////////////////

///////////////////////////////////////// Although all information is furnished regarding for sale, rental or financing is from sources deemed reliable, such information has

not been verified and no express representation is made nor is any to be implied as to the accuracy thereof, and it is submitted

subject to errors, omissions, changes of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice.

www.daumcommercial.com | O N C O R I N T E R N A T I O N A L

Q3 | 2020

Market Report ///////// Phoenix Office

KEY TAKE AWAYS MARKET ACTIVITY ECONOMIC OUTLOOK

Direct Vacancy

D

Net Absorption

Overall Vacancy

V

Gross Absorption

Under Construction

Sale Price Change

Rental Rates (FSG)

Deal Volume

U.S. Employment U6 Rate

Interest Rate Changing GDP

Port Traffic Y/Y Δ NYSE Performance

Inflation Change 10 Yr. - 2 Yr. Spread

MARKET

REPORT

EXPERIENCE IN A CHANGING MARKET

@DAUMCOMMERCIAL /////////////////////////////////////////

Although all information is furnished regarding for sale, rental or financing is from sources deemed reliable, such information has not been verified and no express representation is made nor is any to be

implied as to the accuracy thereof, and it is submitted subject to errors, omissions, changes of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice.


14.8% -219,107 SF

15.7% 1,882,106 SF

1,188,055 SF

8.8%

$2.32

37.8%

Q3

Office 2020 Phoenix

MARKET

• Vacancy Rate: Overall vacancy increased by 30 BPS

to 15.7% largely due to an increased amount of

sublet space.

• Net Absorption: Fell further into negative levels.

• Office Supply: 230K SF was delivered in Q3. Under

construction increased to 1.18M SF.

• Leasing Activity: Fell by 1% from Q2 setting a new

record low for activity.

• Sales: In Q3, the median price PSF was $192.64.

Volume was down 37.8% from Q2.

ECONOMIC OUTLOOK

• GDP: Q2 finished slightly better than estimates, but

still worst on record with a -31.4% contraction.

Estimates for Q3 show growth of over 20% as

economies continue opening up.

• Employment: The unemployment rate continues to

decline, but the employment situation is bleak for

millions of Americans as thousands of business are

permanently closing, leaving more than 20M jobless.

• Economic Relief : A new round of much needed

economic stimulus is working its way through

congress. The HEROES Act is another $2.2 Trillion

stimulus proposal. Included in it is a 2nd round of PPP

funding that will be targeted more to small

businesses that continue to struggle.

7.9% 12.8%

2.9% (30 year fixed) 24.3%

-11.8% 9.0%

1.32% 56 BPS

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///////// Market Report

Although all information is furnished regarding for sale, rental or financing is from sources deemed reliable, such information has not been verified and no

express representation is made nor is any to be implied as to the accuracy thereof, and it is submitted subject to errors, omissions, changes of price, rental

or other conditions, prior sale, lease or financing, or withdrawal without notice.


Q3

OVERALL VACANCY

INCREASED BY 30 BPS IN Q3 TO 15.7%

GROSS ABORPTION

FELL BY 10.7% FROM Q2 TO BELOW 2.1M SF

NET ABSORPTION DIRECT TURNED POSITIVE. OVERALL NEGATIVE DUE TO INFLUX OF SUBLET SF

ASKING RENTS

INCREASED BY $0.01 PSF IN Q3 TO $2.32

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Direct Vacancy Total Vacancy Historical Average

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Net Absorption SF Direct Overall Vacancy

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Gross Absorption SF Total Historical Average

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

$0.20

$0.70

$1.20

$1.70

$2.20

$2.70

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Office Gross Rent Direct Overall Vacancy

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CONSTRUCTION ACTIVITY

230K SF WAS DELIVERED IN Q3. UC UP TO 1.18M SF

LEASING ACTIVITY

DOWN 1% FROM Q2 TO LOWEST TRACKED LEVELS

SALES THE MEDIAN PRICE IN Q3 WAS $192.64 PSF. VOLUME DOWN 37.8%

Q3

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Leasing Activity SF Direct Leasing Activity SF Sublet

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Under Construction SF

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

200

12

00

22

00

32

00

42

00

52

00

6

200

72

00

82

00

92

01

02

01

12

01

22

01

3

201

42

01

52

01

62

01

72

01

82

01

92

02

0

Sales Volume Med. Price PSF

Linear (Med. Price PSF)

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VACANCY BREAKDOWN SQUARE FOOT BREAKDOWN– 132,905,860 SF MARKET SIZE

VOLUME BREAKDOWN AVERAGE RENT PSF

Q3

11%

15%

11%

22%4%

14%

0%

18%

5% Airport

Central Corridor

East Phoenix

East Valley

North Phoenix

NW Phoenix

Pinal County

Scottsdale

West Phoenix

14

.38

%

16

.70

%

15

.12

%

12

.18

%

15

.88

%

19

.36

%

10

.10

%

13

.29

%

11

.98

%

15

.63

%

17

.41

%

16

.18

%

12

.69

%

16

.45

%

21

.12

%

10

.10

%

14

.21

%

13

.03

%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Direct Vacancy Rate Overall Vacancy Rate

$1.97$2.28

$2.63 $2.77

$2.33

$1.91

$1.33

$2.59

$2.11

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

Average Office Rent FSG

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$0.00

$10,000,000.00

$20,000,000.00

$30,000,000.00

$40,000,000.00

$50,000,000.00

$60,000,000.00

Sales Volume Price PSF

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METHODOLOGY

& TERMINOLOGY

Methodology

Non-Owner occupied, multi-

tenant office buildings that are

30,000 square feet & greater.

Direct Vacant SF

Space that is vacant and ready

for occupancy by a user. The

space is being offered for lease

or sale directly from the landlord.

Total Vacant W/ Sublet SF

Space that is vacant and ready

for occupancy by a user. The

space is being offered for lease

or sale by the landlord or for

sublease by the current tenant.

Direct Vacancy Rate

Total vacant direct space

(vacant space for lease or sale

from the landlord or owner)

divided by the total rentable

square footage for existing

buildings only.

Vacancy W/ Sublet Rate

Total vacant direct space and

sublease space divided by the

total rentable square footage for

existing buildings only.

Gross Absorption

The total change in occupied

space over a given period of

time, counting space that is

occupied but not space that is

vacated by tenants. Gross

absorption differs from leasing

activity, which is the sum of all

space leased over a certain

period of time.

Net Absorption

The net change in occupied

space over a given period of

time, calculated by summing

all the positive changes in

occupancy (move ins) and

subtracting all the negative

changes in occupancy

(move outs).

Under Construction

Planned buildings for which

construction has started but

have not yet been granted

a Certificate of Occupancy.

Planned buildings are

not included.

Completed in 2020

New buildings with original

construction completed in

the year 2020 and granted

a Certificate of Occupancy.

Renovated buildings are

not included

LOS ANGELES, CALIFORNIA

801 S. Figueroa Street, Suite 600

Los Angeles, CA 90017 213-626-9101

LOS ANGELES NORTH, CALIFORNIA

21820 Burbank Boulevard, Suite 201

Woodland Hills, CA 91367

818-887-3600

SANTA CLARITA VALLEY, CALIFORNIA

28494 Westinghouse Place, Suite 312

Valencia, CA 91355

661-705-2299

SAN GABRIEL VALLEY, CALIFORNIA

13181 Crossroads Pkwy. N, Suite 100

City of Industry, CA 91746 562-695-7244

SOUTH BAY, CALIFORNIA

1025 W. 190th Street, Suite 420

Gardena, CA 90248

310-538-6700

MID-COUNTIES, CALIFORNIA

13810 Cerritos Corporate Drive, Suite C

Cerritos, CA 90703

562-207-3300

ORANGE COUNTY, CALIFORNIA

4400 MacArthur

Boulevard, Suite 950 Newport Beach, CA 92660

949-724-1900

VENTURA & SANTA BARBARA, CALIFORNIA

751 Daily Drive, Suite 105 Camarillo, CA 93010

805-987-8866

INLAND EMPIRE, CALIFORNIA

3595 E. Inland Empire Boulevard, Bldg. 5

Ontario, CA 91764

909-980-1234

PHOENIX ARIZONA

1702 E. Highland Avenue, Suite 120

Phoenix, AZ 85016

602-957-7300

DAUM OFFICES

Q3

/////////////////////////////////////////

///////////////Los Angeles/////////////

/////////////////////////////////////////

///////////Orange County///////////

/////////////////////////////////////////

////////////Ventura/////////////////

/////////////////////////////////////////

////////// I n land Empi re ////////////

/////////////////////////////////////////

/////////////Phoenix/////////////////

///////////////////////////////////////// Although all information is furnished regarding for sale, rental or financing is from sources deemed reliable, such information has

not been verified and no express representation is made nor is any to be implied as to the accuracy thereof, and it is submitted

subject to errors, omissions, changes of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice.


Economic Overview

///////// Q3 2020

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PORT ACTIVITY INCREASED 6.6% IN Q2 FROM Q1 GDP IN Q2 FINISHED AT -34.4%. Q3 EST. TO GROW AT 24.3%

THE IMPACT FROM COVID-19 SHOWING SLOW SIGNS OF JOB RECOVERY

Q3

-40%

-30%

-20%

-10%

0%

10%

20%

30%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Real GDP Average Real GDP

*24.3% for 3Q20 based on CNBC/Moody’s Analytics Rapid Update Survey

LEISURE & HOSPITALITY SHOWS GROWTH AS RESTRICTIONS BEGIN TO EASE

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

'20'19'18'17'16'15'14'13'12'11'10'09

Imports Exports Empties

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Recession U6 Rate Official Rate

-13

74

143

10

658

203

4

42

78

439

429

1,094

264

486

-2,000 0 2,000

Government

Other Services

Leisure and Hospitality

Education and Health Services

Professional and Business Services

Financial Activities

Information

Utilities

Transportation and Warehousing

Retail Trade

Wholesale Trade

Manufacturing

Construction

Mining and Logging

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10-2 YEAR BOND SPREAD INCREASED AGAIN IN Q3 THE STOCK MARKET CONTINUES TO RISE

CPI REMAINS BELOW TARGET BUT PICKING UP THE FEDERAL RESERVE CUT THE FED FUNDS RATE TO 0.0-0.25%

Q3

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Recession CPI All Item

Less Food & Energy Fed Inflation Target

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17'18'19'20

Recessions 10-Yr Treasury Rates

Federal Funds Rate 30-Yr. Fixed Rate Mortgage

-150%

-100%

-50%

0%

50%

100%

150%

200%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Recession DOW Jones S&P 500 NASDAQ

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17'18'19'20

Recession Bond Spread

market report...sublet space. • net absorption: fell further into negative levels. • office...

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