Arizona is the fastest growing state in the country, with families flocking from all over, but especially California, searching for an affordable piece of the American Dream-homeownership. This is excellent news for the Arizona commercial real estate market.

Most of Arizona's land is uninhabited, either in the hands of Native American tribes or state or federal government. What's left of the uninhabited land is, usually, private farmland. Government land has long been open to multiple uses, with the primary uses being ranching, mining and recreation. As Arizona's water resources become more and more scarce, agriculture is quickly giving way to urban development as Arizona's major population centers-Phoenix, Tucson and Yuma-spread out into the surrounding deserts and croplands. Private land, formerly agricultural, has been quickly snapped up by developers and speculators at a premium, and savvy investors are paying closer attention to state trust lands, which are sold by the state relatively cheaply. While state trust land can seem like a bargain for a developer, be aware that state trust land usually sits in prime recreational or sensitive environmental areas. Combine this with the inherently political nature of the trust land system, and purchasing state trust land can be a more costly proposition than an investor might think. Particularly in the more environmentalist southern part of the state, community and environmental activists can squash a public land deal.

The residential market is still relatively strong in Arizona, mostly due to the constant stream of new residents, but it is softening. Hit particularly hard are developers who built new construction homes at the tail end of the real estate boom. Developers are still building new construction homes, today, and selling them more cheaply than they were yesterday. While you can purchase a residence for a great price, don't expect to be able to flip it for a nice profit in the next few years. Indeed, it will be hard to flip almost any residential property for the next couple years as the Arizona residential market is flooded with out of state speculators and investors. Phoenix and Tucson, both of which have public universities with student bodies over 30,000, have strong, reliable, though seasonal, rental markets.

Outside of Phoenix, the state is underserved by retailers. There are great business opportunities for large, national chains to move in as well as for franchises of national chains. Most areas are open to all types of development, but in the southeast and the northeastern parts of state, there is some resistance to national, particularly big box developers, since these areas use their unique environmental and cultural features as economic engines. As well, the market for office development remains strong. There are still vacant lots within the major cities, and all the major urban cores are going through a renaissance, so look to infill for retail and office property.