The Phoenix economy is largely dependent on manufacturing (mainly aerospace, semiconductors and electronics), tourism and rapidly growing financial/tech industries. Increasing travel demand with ultra-low fuel prices and rising global security threats will fuel the production of civil and defense aircraft supplies thereby helping the area’s economy in 2016. However, the strengthening U.S. dollar will act as a drag for the manufacturing sector as foreign exports face increasing headwinds.
Cheaper travel costs will boost the multibillion dollar tourism industry in Phoenix. Attracted by the availability of a well-balanced workforce, world class amenities and business-friendly environment, many services and tech companies are either relocating to Phoenix or expanding their regional presence. Atlanta-based Home Depot is expected to add 1,600 jobs across 30 Phoenix locations in 2016. Farmers Insurance, with over 19 million insurance policies and 48,000 agents across the nation, is planning to add 1,000 new jobs and is expanding into a $23.7 million regional office in North Phoenix. Sub-Zero Group Inc. is adding an additional 248,000-square-foot, $34-million manufacturing facility in the City of Goodyear, creating hundreds of jobs over the next couple of years. Many health sector projects such as the 193,000 square foot expansion of Biodesign Institute at ASU and a new emergency department in Phoenix Children’s Hospital will add more jobs.
Strong business activity in the Phoenix area helped drop the office vacancy rate to its lowest level (19.5 percent) in the seven years after the Great Recession of 2008. The area saw a massive increase in multifamily transactions in 2015. According to ABI Multifamily, total revenue from apartment sales increased 34 percent year-over-year to $3.9 billion by the end of 2015. Low apartment vacancy rates of five percent allowed rents to grow by seven percent in 2015. The area’s tight home supply inventory and high demand caused home prices to appreciate as much as eight percent in December 2015, compared to a year ago.
Click here for the complete Phoenix Regional Economic Update: Phoenix 2016Q1.