JULY-AUGUST 2012
Back to School Major education building construction projects ready to open their doors
INSIDE Office, Industrial Over view: Hope on the Horizon p. 10 Tucson Outlook: New Buzz in the Old Pueblo p. 20 AZCREW: An Advocate for Women in CRE p. 36
Delivering value through energy management and sustainability strategies. Health Care REIT’s Management Services Group is committed to supporting tenants in creating a healthier care environment. By aligning health care real estate with high-quality, sustainable business practices, Health Care REIT creates positive outcomes for its tenants.
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Project Featured: Arizona’s First Net Zero School Colonel Smith Middle School Completion Date: July 2012 Ft. Huachuca Accommodation School District #00 Ft. Huachuca, Arizona Images: EMC2 Group Architects Planners, PC; Turner Construction Company
Turner Construction Company 637 S. 48th Street, First Floor Tempe, Arizona 85281
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MAGAZINE.COM Looking down on an industry that is finally starting to look up
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flew out of Sky Harbor International Airport recently and my bird’s eye view of construction cranes reaching to the sky around the Valley offered further proof that the industry is making a comeback. Work is moving along on a new student housing project for ASU students attending school in Downtown Phoenix. Although the Kimpton Palomar Hotel opened in June at CityScape, a remaining crane stands guard, ready to spring back into action. (My guess is that upscale residences could be next). And as the airplane made a turn to head south, workmen on the ground in Chandler resembled industrious ants at the new Phoenix Premium Outlets next to Wild Horse Pass Hotel & Casino. These projects are not only crucial to the major general contractors in the state. They are also the lifeblood of the many Arizona subcontractors, some of which are featured in our annual Arizona Builders’ Alliance supplement. The July/August issue of AZRE also profiles Arizona Commercial Real Estate Women, better known as AZCREW. Formed in 1985, AZCREW “promotes the advancement of professionals in commercial real estate by providing high-level networking opportunities, connections and access to decision-makers within the Phoenix market.” The local chapter also does a wonderful job giving back to the community. Finally, our annual statewide real estate update focuses on Tucson. As my return flight began its descent, I challenged the passenger sitting in the window seat across the aisle to a spirited game of “Name That Property Type.” Four points for medical office; 3 for multi-family, 2 for a retail center and 1 for industrial. I skunked him, 21-0. After all, if the editor of a commercial real estate magazine can’t identify a medical office building or industrial warehouse from the air, who can?
President & CEO Michael Atkinson Publisher Cheryl Green Vice President of Operations Audrey Webb AZRE: ARIZONA COMMERCIAL REAL ESTATE EDITORIAL Editor in Chief Michael Gossie Editor Peter Madrid Associate Editor Kristine Cannon Interns Aubrie Artiano | Alexa Bowman | Kelly Church Joel Miller | Remi Omodara | Maria Thompson Contributing Writer Melissa Bordow ART Senior Graphic Designer Christin Gangi Senior Graphic Designer Mike Mertes Contributing Photographer Cory Bergquist | Jim Amrine Intern Lindsay Hanson DIGITAL MEDIA Web Developer Eric Shepperd Web & Graphic Designer Melissa Gerke MARKETING/EVENTS Manager Whitney Fletcher SALES Account Manager Steve Koslowski OFFICE Special Projects Manager Sara Fregapane Executive Assistant Kathy Mutschler Database Solutions Manager Cindy Johnson ARIZONA BUSINESS MAGAZINE Senior Account Manager David Harken Account Managers Michelle McBay | Shannon Spigelman RANKING ARIZONA Vice President / Sales & Marketing Lenore Grobstein EXPERIENCE ARIZONA | PLAY BALL Director of Sales and Marketing Scott Firle SCOTTSDALE LIVING Account Manager Anita Weldon | Susan Harken | David Silver AZ BIG MEDIA EXPOS SCOTTSDALE SUPER EXPO WOMEN’S SUPER EXPO HOME & LIFE SUPER EXPO Exhibit Directors Kerri Blumsack | Sheri King | Tina Robinson HOME & DESIGN IDEA CENTER Showroom Manager Joanne Stanley Account Manager Marianne Avila Event Coordinator Sara Fregapane
Editor (602) 424-8844 peter.madrid@azbigmedia.com AZRE: Arizona Commercial Real Estate is published bi-monthly by AZ BIG Media, 3101 N. Central Ave., Suite 1070, Phoenix, Arizona 85012, (602) 277-6045. The publisher accepts no responsibility for unsolicited manuscripts, photographs or artwork. Submissions will not be returned unless accompanied by a SASE. Single copy price $3.95. Bulk rates available. ©2012 by AZ BIG Media. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without permission in writing from AZ BIG Media. 2 | July-August 2012
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ROCKEFELLER GROUP DEVELOPMENT CORPORATION IS PLEASED TO BE REPRESENTED ON ITS CURRENT DEVELOPMENTS IN ARIZONA BY THE FOLLOWING BROKERS: In Chandler and Gilbert
Phil Breidenbach, SIOR Paul Sieczkowski, SIOR Rob Martensen, CCIM, SIOR Lindsey Carlson Steve Larsen
Colliers International 2390 E. Camelback Road Suite 100 Phoenix, AZ 85016 602-222-5000 tel. colliers.com/phoenix
In Tucson
Peter Douglas, SIOR Rob Glaser, CCIM, SIOR
PICOR 1100 N. Wilmot Street Suite 200 Tucson, AZ 85712 520-748-7100 tel. www.picor.com
For information regarding current Rockefeller Group Development Corporation projects, please contact: Tom McCormick, SIOR, FRICS
Mark Singerman, LEED® AP
Senior Vice President and Regional Development Officer
Assistant Vice President and Regional Director - Arizona
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OUR CLIENTS INCLUDE: BMW OF NORTH AMERICA LUCENT TECHNOLOGIES DELTA AIRLINES UNILEVER COSMETICS INTERNATIONAL S E I K O CORPORATION OF AMERICA CRATE AND BARREL TIAA-CREF MORGAN STANLEY PEARSON E D U C AT I O N NOVARTIS AT&T Chandler MCGRAW-HILL Corporate COMPANIES TIME INC. TEJON Center* RANCH SPORTCRAFT F E D E McClintock RAL E and XPRESS Desert Breeze Blvd. WYNDHAM GARDEN HOTELS Chandler LEHMAN BROTHERS BMW OF NORTH AMERICA Rockefeller Group LUCENT TECHNOLOGIES DELTA AIRLINES UNILEVER Chandler Crossroads COSMETICS INTERNATIONAL Gilbert and Queen Creek Roads S E I K O CORPORATION OF Chandler AMERICA CRATE AND BARREL TIAA-CREF MORGAN Rockefeller PGroup STANLEY EARSON EDUCA T I O N 101 NOVARTIS Chandler AT&T MCGRAW-HILL Loop 101 at Chandler Blvd. COMPANIES TIME INC. TEJON Chandler RANCH SPORTCRAFT www.rgdcchandler101.com F E(The D EASU R AW.L P. Carey E X Evening PRESS WYNDHAM GARDEN HOTELS MBA Program wil be located at LEHMA N B R O T Chandler 101.) H E R S BMW OF NORTH AMERICA LUCENT TECHNOLOGIES Rockefeller DELTA AIRLINES Group UNILEVER North INTERNATIONAL Gateway COSMETICS SWarner E I K O Road CORPORATION OF and Recker Road AMERICA Gilbert CRATE AND BARREL TIAA-CREF MORGAN STANLEY PEARSON E D URockefeller C A T I O N Group NOVARTIS AT&TGilbert Crossroads MCGRAW-HILL COMPANIES TIME INC. TEJON Germann Rd. and Mustang Drive RANCH SPORTCRAFT Gilbert FEDERAL EXPRESS WYNDHAM GARDEN HOTELS Rockefeller Group LEHMAN BROTHERS Distribution Center** BMW OF NORTH AMERICA AirportTECHNOLOGIES Submarket LUCENT Tucson UNILEVER DELTA AIRLINES COSMETICS INTERNATIONAL S*20,500 E I K O SFCORPORATION OF NEW CLASS A OFFICE AMERICA CRATE AND AVAILABLE; LEED–CERTIFIED SILVER BARREL MORGAN **UP TOTIAA-CREF 62,500 SF NEW HIGH STANLEY EARSON CUBE WAREHOUSEPAVAILABLE E D U C AT I O N NOVARTIS AT&T MCGRAW-HILL COMPANIES TIME INC. TEJON RANCH SPORTCRAFT FEDERAL EXPRESS WYNDHAM GARDEN HOTELS LEHMAN BROTHERS BMW OF NORTH AMERICA LUCENT TECHNOLOGIES DELTA AIRLINES UNILEVER COSMETICS INTERNATIONAL S E I K O CORPORATION OF AMERICA CRATE AND BARREL TIAA-CREF MORGAN STANLEY PEARSON E D U C AT I O N NOVARTIS AT&T MCGRAW-HILL COMPANIES TIME INC. TEJON RANCH SPORTCRAFT FEDERAL EXPRESS WYNDHAM GARDEN HOTELS
taBLE OF COntEnts
July-August 2012
The Interdisciplinary Science & Technology Building 4 is an 8-story research, outreach and administration facility on ASU’s Tempe campus. General contractor is Sundt Construction and architect is Steve Ehrlich Architects and HDR Architecture Inc.
BaCK tO sCHOOL sPECiaL sECtiOn
FEatUrEs
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new to market
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Brokerage
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Projects in the pipeline
The Valley is seeing an uptick in office and industrial property types
Project news
New Arizona Opera offices; new assisted care facility for the Hopis
Economic Development
Tucson overview: Confidence building again in the Old Pueblo
Building Green
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Fort Huachuca middle school earning straight A’s in sustainability
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investment
SkySong catalyst for innovation, technology and research
aZCrEW
Women’s CRE group an advocate for professional development
iCsC
UNION brings novel retail approach to Biltmore Fashion Park
newsmakers
The Valley is seeing an uptick in office and industrial property types
after Hours
Monica Perez: Architect by day, women’s roller derby star by night
50 54 60 62
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COminG nEXt issUE
» » » »
All-Star Brokers Arizona Multihousing Association Adolfson & Peterson Urban Land Institute
4 | July-August 2012
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From schools, to industrial buildings to mixed-use projects
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Five questions with ABA Executive Director Mark Minter
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FASTER FORWARD
Putting the pedal to the metal. Some show up just to rev their engine. We’re focused on pulling ahead as the first true alternative to real-estate-as-usual. We’ve put the pedal to the metal to help our clients race forward with investments in new markets, top talent, and a unified global brand in more than 520 offices in 62 countries worldwide. We’ve got the inside track on service to accelerate your success. Phoenix +1 602 222 5000 | Scottsdale +1 480 596 9000 | www.colliers.com
nEW tO marKEt
HEaLtHCarE
1 1 aDELantE mEsa Developer: World Properties General Contractor: LGE Design Build architect: Cawley Architects Broker: Aaron Kuhl Location: Dobson and Main, Mesa size: 41,000 SF
The $6M medical office building will be located on the East Valley Institute of Technology campus and will be pursuing LEED certification. Expected completion is 3Q 2012.
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2 vEtErans aFFairs CLiniC Developer: U.S. Dept. of Veterans Affairs General Contractor: McShane Construction Co. architect: Rees Associates Location: NEC S. Val Vista Dr. and S. Market St., Gilbert size: 60,000 SF A new, 2-story clinic will replace an existing VA healthcare facility in Mesa. The new outpatient clinic will provide healthcare services to more than 19,000 veterans in Maricopa County and parts of Pinal and Gila counties. The facility will be designed and built to meet LEED Silver standards. Expected completion is 2Q 2014.
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3 mOUntain ranCH mEDiCaL COmmOns Developer: Irgens General Contractor: Ashworth Construction architect: 33 North Architects Location: Estrella Parkway and Elliot Rd., Goodyear size: 18,000 SF Irgens, Banner Health and Estrella by Newland Communities plan to develop the Class A medical office facility on 5.3 acres of land in Estrella. The single story-structure will offer custom-designed medical space, upscale amenities and a sustainable design. Expected completion is 2Q 2013.
EDUCatiOn 4 ranCHO sOLana sCOttsDaLE CamPUs Developer: Mindspring General Contractor: hardison/downey architect: Ayers/Saint/Gross Broker: CBRE Location: 9180 E. Via de Ventura, Scottsdale size: 82,000 SF A new campus will include space for 700 students (300 middle school; 400 high school), dedicated fine arts spaces, learning commons, media center and a full-size soccer/football field. A 23,000 SF student center will also be part of the project, which will involve more than $10M in improvements. Subcontractors include Arctic Air, Wilson Electric, Pinnacle Plumbing, RCI and Dicken Quality Demolition. Expected completion is 3Q 2012; 4Q 2012 for the student center. 6 | July-August 2012
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EvEnts & sEminars ABA
Azre
AIA
BoMA
State Convention oCt. 18-20 PreSCott reSort, PreSCott WMr/nWP Joint ConferenCe oCt. 10-13 LoeWS ventana Canyon reSort, tuCSon
AzASLA
Hunter/azaSLa GoLf tournaMent SePt. 24 WHirLWind GoLf CLub
ASLA NAtIoNAL CoNfereNCe
SePt. 28-oCt. 1 PHoenix Convention Center
PeoPLe to KnoW nov. 8 LoCation tba
NAIoP
tHurSday niGHt Live oCt. 11 tHe Grand at PaPaGo ParK Center
MontHLy LunCHeon auG. 15 renaiSSanCe PHoenix doWntoWn
ULI
IreM
VP
faLL LeaderSHiP ConferenCe oCt. 16-20 neW orLeanS
faLL MeetinG oCt. 16-10 denver friday MorninG breaKfaSt JuLy 27, auG. 24, 7-9 a.M. PHoenix Country CLub
LAI
MeMberS breaKfaSt MeetinG auG. 17 PHoenix Country CLub
I N COM M E RCIAL
R E A L E S TAT E
Azre People to Know in Commercial real estate nominations are now open. Go to azremagazine.com
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nEW tO marKEt
mULti-FamiLY 5
5 tHE PrEmiErE at Dana ParK Developer: Route 2 and PCS Development General Contractor: Adolfson & Peterson architect: Todd and Associates Location: US 60 and Val Vista Rd., Mesa size: 199,000 SF
The $18M project is a 198-unit market rate multi-family development. The buildings will feature a mixture of studio and 1- to 3-bedroom units. Amenities will include a clubhouse, cabana, outdoor bar/patio areas, a pool and spa and fitness and yoga studios. Expected completion is 3Q 2013.
6 san tan viLLaGE aPartmEnts Developer: LWI Properties General Contractor: hardison/downey architect: Architects Orange (Orange, Calif.) Location: Williams Field Rd. and San Tan Village Parkway, Gilbert size: 575,000 SF The $30M, 382-unit, garden-style apartment complex will include 22 2and 3-story apartment buildings, as well as a 2-story clubhouse with a fitness center, theatre, and resort-style swimming pool with indoor/outdoor cabanas. Solar panels will be installed on parking shelters to provide energy. Expected completion is 3Q 2013.
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HOsPitaLitY 7
7 CasinO ariZOna BinGO HaLL Developer: Salt River Pima-Maricopa Indian Community General Contractor: Kitchell architect: Seaver Franks Architects Location: 101 and McKellips, Scottsdale size: 26,000 SF The new addition marks a return to bingo for the SRPMIC. The multi-use room will primarily be used for bingo, but can also be used for large events. It will accommodate 1,000 people. Expected completion is 4Q 2012.
PUBLiC 8 CitY OF mariCOPa CitY HaLL anD POLiCE statiOn Developer: City of Maricopa General Contractor: Okland Construction architect: Gensler Project manager: ABACUS Location: NEC Bowlin Rd./White and Parker, Maricopa size: 45,000 SF City Hall; 11,000 SF Police Station The $14.5M project is a first in the community’s history as it celebrates the building of a permanent City Complex. The first phase will include construction of Maricopa City Hall and the Maricopa Police Station. Expected completion is 4Q 2013. 8 | July-August 2012
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NEW MEMBER EVENT
this August!
WWW
WINE WOMEN WEBSITE Stay tuned for our August new member event! At WWW (Wine, Women, Website), new AZCrew members will learn the ropes of the CREW Network website and mix and mingle with current board members.
www.ArizonaCrew.org 602-268-7877
More Details Coming Soon!
Email Christine Olson at colson@hannayproperties.com for more information. Fortitude-HalfPg_Layout 1 12/13/11 7:40 AM Page 1
Fortitude
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9
BrOKEraGE BY PETER MADRID
Hope on the Horizon as jobs return to arizona, industry experts predict a brighter future for the industrial and office markets Dick’s Sporting Goods
A
fter 4 to 5 years of being bludgeoned, the Metro Phoenix industrial and office markets appear to be on the mend. “It has been our belief that in order for the industrial and office segments to return to health, the Metro Phoenix housing market would first need to be firmly entrenched in recovery — and it is,” says Chris Toci, executive director, Cushman & Wakefield of Arizona. As one of the four states hammered during the subprime housing fiasco, Arizona — specifically the Valley — received more than its share of negative press during the Great Recession. Arizona’s fall from grace was hard as the state witnessed a peak-to-trough decline in the median single-family home price of about 55%. According to the Arizona Regional Multiple Listing Service (ARMLS), median home prices in Phoenix peaked in June 2006 near $265,000 and hit bottom near $120,000 first in March/April 2009 and then again in late 2010 after the $8,000 new home price stimulus was withdrawn. Through 2Q 2012, the median home price is $147,960, 24.9% higher from the lowest point in 2Q 2011. “The key metrics to indicate a bottoming real estate cycle are one, trend reversal on price, and two, an increased velocity of sale transactions,” Toci says. With the median home price 25% higher than 2Q 2011 and with annual sales of single family residences approaching, and in some instances exceeding, peak levels in 2005, there are indications to suggest that Arizona has bottomed in the housing market. Continued reduction in housing supply — combined with elevated demand from new home buyers and investors purchasing at deep discounts — have led to new affordability levels which have had the impact of attracting major employers to the Valley, namely American President Lines (APL), Amazon.com, eBay/PayPal, Safelite Auto Glass, Transperfect
10 | July-August 2012
and Power One. Both the Metro Phoenix industrial and office markets are the beneficiaries of this employment growth. In 2005, Phoenix was No. 1 in the nation in terms of job growth with 103,800 new jobs added. Three years later, in 2008 and 2009, Phoenix lost nearly 230,000 jobs. During that time, the industrial market, with a current base inventory of 263 MSF, suffered negative absorption of 2.3 MSF and 2.8 MSF, respectively. Similarly, the office market, with a current base inventory of 78 MSF, suffered negative absorption of 1.1 MSF each year in 2008 and 2009. With 2010 being a transition year, 2011 witnessed 6.1 MSF and 1.1 MSF of positive industrial and office absorption, respectively. 1Q 2012 trends are continuing with nearly 600,000 SF of industrial and 210,000 SF of office absorption, respectively. “Phoenix is leading the national recovery in housing and commercial development,” says Kurt Rosene, senior vice president for The Alter Group. “The current activity from potential corporate relocations looking at Arizona are at an all-time high. Phoenix is on every site selection list, based upon affordable housing, strong educated employment base, the availability of zoned land, a relatively easy development process and a proactive state government that keeps signing additional economic incentives into law. “We believe that all of these factors will combine to cause positive job growth in Arizona, maintaining the recovery that has already taken place in the industrial distribution sector,” Rosene adds. According to Toci, rental rates for the industrial sector are beginning to firm with strong rental increases projected within the next 12 months across many of the submarkets. Office rents in certain submarkets are beginning to firm and will continue to do so in those submarkets with rapidly declining vacancy rates. More peripheral office submarkets will take more time to chew through excess supply levels generated in the last development cycle.
Chandler Corporate Center
“After nearly five years of ‘chill’ in Phoenix, institutional investors are beginning to lift their restrictions for acquisitions,” Toci says. “As trite as it sounds, blue sky and sunshine will once again prevail and will continue to attract residents from the frozen tundra of the Rust Belt. “The systemic challenges related to California’s deep budget deficit will serve as a catalyst for future growth in Phoenix and we will once again demonstrate that the Valley of the Sun’s resilience should never be taken lightly.”
Industrial outlook “Net absorption of industrial space slowed in the first quarter following a 2-year run where tenants moved into a net of more than 12 MSF. The easing pace of absorption was not a function of a retreating demand, however, but rather a function of a lack of available product, Mulhern particularly among large users. “Tenant demand for large blocks of space has been driving the local industrial market, and will fuel future development. After peaking at approximately 20% in early 2010, vacancy in industrial buildings 250,000 SF and greater fell below 7% in the first quarter, well below the rate for all industrial properties in the market and nearly identical to levels achieved from 2002-2006.” — Bob Mulhern, managing director, Colliers International “The Metro Phoenix industrial market has seen 2+ years of growth as demand among users continues, resulting in declines in vacancy and positive absorption. Large users, 250,000 SF and greater, continue to be active and have fueled the growth in the Southwest Valley. Ahrens With only three or four viable options in this size range, Phoenix will see both spec and build-to-suit development projects break ground this year. In 2012, and specifically during the second quarter, there has also been renewed interest from mid-size users looking for 100,000 to 200,000 SF of industrial space. Growth among the mid-size user, continued interest from large users, and developers willing to pull the trigger on new development are strong indicators that the Phoenix will continue its positive trend as one of
the country’s leading industrial markets.” — Brad Ahrens, vice president, Cassidy Turley BRE Commercial “With the banks beginning to loan to owner-occupied small business industrial sites, I predict that smaller industrial spaces will become scarce and the average price will begin to rise. A small business person can now purchase a building with an equal to or lower mortgage payment than lease payment and only put down 10% for an SBA loan. “This re-entering of the banks into industrial building loans should start to slowly drive up prices.” — Rex Griswold, VP sales & leasing, Commercial Properties Inc.
Office outlook “During the first quarter of 2012, the Greater Phoenix office market failed to gain any notable momentum and similar performance is forecast for the remainder of this year. Vacancy ended the quarter at 22.1%, marking the 12th consecutive quarter where the rate was above 20%. While the local economy is showing signs of life, more sustained expansion will be needed to ultimately prompt developers to move new projects into the pipeline. The good news for the office market is the accelerating pace of employment growth in Metro Phoenix. The addition of more than 23,000 workers in the first three months of 2012 was the strongest quarterly growth in six years and forecasts for future expansion were recently revised higher.” — Bob Mulhern, managing director, Colliers International “All of the leading indicators — vacancy, rental rates and net absorption — were flat at the end of the first quarter. However, everyone agrees that we are seeing much more tenant activity in the market whether its calls, tours or proposals. Based on this increased first- and second-quarter demand, I believe we will look back at year-end and see significant leasing activity in the third and fourth quarters. Our sense is that the indicators will move from flat to positive as vacancy declines, net absorption increases and rental rates start to improve in the metro Phoenix office market.” — Tyler Wilson, vice president, Cassidy Turley BRE Commercial
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BrOKEraGE “The office market remains mired at 27% vacancy. After a reasonable 2011, net absorption reverted to negative in 1Q 2012. We continue to be bullish. Long term, however, we need job creation from basic industries to spur expansion and a lowering of the vacancy rates. As long as vacancy stays at this level, there will be downward pressure on rents. We are still surprised at some of the low terms we have been able to negotiate for tenants we represent. “One bright spot is Class A properties. They are leasing up (at the expense of Class B properties) and have been able to tighten their leasing criteria in select areas. — Craig Coppola, principal, Lee & Associates “To date, 2012 is showing a lot of positive signs. Tenants are certainly active relative to that of 2010 and 2011. Businesses seem to be gaining confidence in the market as well as in their own industries and in turn are looking to relocate and expand. Distressed properties are being traded and struggling owners are being replaced with stable, healthy owners that are in a much better position to raise funds for capital and tenant improvements and to sign leases at rates in line with this environment.” — Justin Horwitz, senior advisor, Sperry Van Ness
“Per square foot sale prices will increase throughout 2012, especially for assets in good locations with 80% occupancy or higher. We will experience cap rate compression due to a scarcity of good assets on the market and the influx of institutional investors that have been priced out of larger/coastal markets. “Rental rates will remain relatively flat through 2012 and incentives (free rent, higher fees, etc.) will likely remain unchanged. We should experience rental increases in 2013, as the vacancy for Class A and B spaces begins to fall, and incentives will begin to decrease. “Over the next 12 months, we will see a handful of build-to-suits and pre-leasing of certain planned developments (in core markets), with limited speculative development taking place.” — David Carder, senior vice president, CBRE “The office market is still scraping along the bottom and will remain there until more jobs are created. Companies are taking advantage of this huge buying opportunity to own their space and reduce and control their occupancy costs.” — Craig R. Trbovich, commercial real estate advisor, CPI
Today’s market We are still experiencing a high number of well known companies searching for large, big box, distribution space in the West Valley. The amount of spaces more than 300,000 SF has severely decreased over the past 2 years leaving the user who is looking with a minimal amount of spaces to choose from. There are currently only 2 options left for a tenant that needs 300,000 SF or more. There are 5-6 well known developers who are in various stages of design for speculative distribution style buildings ranging from 400,000 SF up to 1 MSF. All
of these facilities are located in the West Valley. Rental rates remain low in the West Valley but most anticipate a rise in the rates due to the increased volume of activity and the decreased number of functional spaces. There are two build-to-suits underway in the West Valley, Dick’s Sporting Goods for 600,000 SF and TJ Maxx for 1 MSF. There are also a few on hold, a large boot company and a door company. In the East Valley, the sales market remains strong for the owner/user type facilities with 11 buildings being sold of more than
40,000 SF in 2011 and a number of buildings in escrow of the same size range now. Smaller facilities from 5,000 SF to 20,000 SF for sale are difficult to find. The sales prices have dropped but the inventory is also low. The leasing activity in the East Valley is slow for the local and regional companies ranging in size from 5,000 SF to 25,000 SF. Most of these small companies have made it through the economic downturn and are now trying to recover. A large majority of them still rely on the “home-building” industry and as that market slowly
returns so will their confidence. Companies in the East Valley that are buying and leasing are in industries including aerospace, nutrition, technology and of course all of the contract work with Intel and its massive construction project in Chandler. Overall, the sales activity for small buildings is up and trending that way. The product is hard to find for those buyers but most buildings that are for sale today have good activity. Overall, the leasing activity for small space remains slow and the large distribution spaces remain robust.
year in the West Valley. Expect to see a slight increase in rental rates in all sectors of the market, distribution, flex and multi-tenant. The sales prices on buildings will increase faster than lease rates and outpace the leasing market.
Lenders will remain strict in underwriting, however, the SBA program will stay in place and allow the smaller buyers the ability to buy real estate. Expect institutional investors to pay a premium for institutional grade product, as they are flush with cash and need to place it.
Nationally, Phoenix is showing a turnaround and those who did not get in during the last cycle find themselves trying to get in on this cycle at a lower basis.
Future market Expect more build-to-suits by local and national contractors. While the market has a number of vacant buildings, the number of quality buildings available for sale is very low. Expect 2-3 developers to break ground on speculative distribution facilities within the next
12 | July-August 2012
Source: Chris McClurg, principal, Lee & Associates
N
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13
BrOKEraGE BY PETER MADRID
Supplying the Demand as vacancy rates shrink, new industrial and office developments could break ground in the valley
P
lans for a 600,000 SF spec industrial warehouse in Southwest Phoenix and a 92,000 SF, 2-story office building in Chandler’s Price Corridor are signs that those two property types are making a comeback in Metro Phoenix, some industry experts are cautiously predicting. In January, California-based Doug Allred Company broke ground on Park Place, the Valley’s first post-recession spec office complex to be built since 2009. In October, The Alter Group breaks ground on a 605,700 SF spec warehouse at the Buckeye Logistics Center. And according to those in the trenches, the reason could be as simple as supply and demand. “Developers are responding to the lack of (industrial) supply available in the market by revving up activity, particularly in the Southwest Valley,” says Bob Mulhern, managing director for Colliers Internatinal. “By the end of this year, multiple developments totaling approximately 4 MSF are forecast to be under way, with other projects likely to enter the development pipeline in 2013.” With regard to office, the market is still very weak for that property type, says Clay Wells, director of business for McShane Construction Company. However, he does add that news of the new office building in Chandler is encouraging. “The street buzz is that they may already have a tenant who will take the entire building,” Wells says. That rumor, in fact, became reality in June when software maker Infusionsoft announced it would move its headquarters from Gilbert to Park Place in Chandler. “The other real activity is in Tempe where the next tower at Hayden Ferry will come out of the ground when there are enough leases signed, and that could be a while,” Wells adds. “Downtown is the last submarket where both RED (Development) and Colliers (International) are mak14 | July-August 2012
ing noises about new towers. A clue there could be the tower crane at CityScape is in the air and the hotel opens in two weeks.” According to Cushman & Wakefield research, strong absorption levels driven by trailing 12-month job growth through March of 43,200 jobs are positively influencing both industrial and office vacancy and rent levels. Industrial vacancy levels crested in 2009 at 15.9% and currently are near 12%. Industrial has been very hot over the past year, especially for users looking at 500,000 SF to 1 MSF buildings. While there is one building (it’s in the West Valley) remaining that fits that criteria, there are three to five developers talking about doing a “spec building in the 300,000 to 600,000 SF range that could be expanded to more than 1 MSF,” Wells says. There is optimism from the brokers as well. “The developers who have land holdings that we meet with are now busy with construction preparation and plans in response to an emerging warehouse demand, coupled with a thinned out inventory,” says Isy Sonabend, senior vice president at NAI Horizon. “When we see the first warehouse walls being tilted, it will be the leading indicator that our economy is recovering.” Office vacancy levels spiked in 2010 at 25% and are more slowly inching their way down. Except for “one-off ” projects, it will be 3 to 5 years before the office market witnesses new development, says Chris Toci, executive director, Cushman & Wakefield of Arizona. Uncertainty will cloud most business decisions for small- to mediumsized companies where 70+% of all jobs are created in this country, says Mark Singerman, Regional Director – Arizona for Rockefeller Group Development Corporation. This will restrain demand for office space until after the presidential and congressional elections, he adds. “Larger companies will continue their efforts to consolidate or down size to become more efficient to reduce operating overhead,” Singerman says. “They will represent the majority of office demand until smaller com-
Software maker Infusionsoft plans to move its headquarters to Allred Park Place (left photo) in Chandler. The Buckeye Logistics center may break ground in 4Q 2012 in Southwest Phoenix. panies feel that they can project their costs for at least the next 2-3 years. “Hopefully, after the elections, enough uncertainty will be removed so businesses can plan and make strategic moves to grow their businesses, regardless of who or which political party wins in November. Business can adapt to almost any set of circumstances, except uncertainty. This freezes everything.” On the industrial side, Singerman says, changes in consumer buying patterns that include more purchases via the Internet will continue to impact retailer’s capital investment plans. “It makes sense for national retailers to allocate some of their investment capital to warehouse/distribution facilities to service their e-commerce business,” he says. “This has been driving a lot of the industrial demand in the Southwest Valley. I believe this will continue with national companies. But as with office space, the small- to medium-size users of industrial space are afraid to make real estate decisions until the future is less uncertain.” A lot of what happens in the Valley depends on what happens to supply and demand for industrial buildings in the Inland Empire of California, namely Riverside and San Bernardino counties. If the spec buildings being developed in that market do well, which reports from brokers in that market indicate that they will, that will bode well for the Southwest Valley, which has traditionally been a viable yet less expensive alternative for users looking to service southern California, Arizona and other Southwestern states. If, however, the Inland Empire struggles to find tenants for all of their spec buildings, that is a good indicator that demand is not strong enough to warrant spec inventory in the Southwest Valley. “For the rest of this year, I see build-to-suit continuing to dominate industrial development activity in the Phoenix area,” Singerman says. “Long term, spec buildings will return as demand firms up.” 15
BrOKEraGE SALES
PHX INDUSTRIAL
son and Scott Nelson of Voit’s Phoenix office and Pete Beauchamp of Voit’s Irvine office represented the seller.
PIN LAND
¢ Team Toci of Cushman & Wakefield sold the 336,665 SF Lincoln
¢ CBRE completed the $3.05M sale of 556 acres four miles east of
Commerce Park 2 to Cornerstone Real Estate Advisors of Santa Monica, Calif., for $26.1M. The seller was Lincoln Commerce Park II Limited Partnership. Team Toci (Chris Toci and Chad Littrell) represented both buyer and seller, along with Allen Lowe and Jeff Conrad of Lee & Associates.
Quail Run Road on the north side of Skyline Drive in Pinal County. Mike Ratliff, Dave Headstream and Jason Hyams of CBRE’s Land Services Group represented the seller, SA Group Properties Inc. of Los Angeles. The buyer, Seventh Heaven Family Trust of Carlsbad, Calif., was represented by John Finnegan, Chaz Smith and Ramey Peru of Colliers International.
¢ Cassidy Turley BRE Commercial completed the $7.3M sale of
Arrowhead Commerce Center, 8581-8643 W. Kelton Lane, Peoria. Arrowhead Commerce Center Partners LLC purchased the 120,948 SF multi-tenant industrial park California-based MECGArrowhead 1, LLC, Et Al. Paul Boyle, Rick Danis, Tom Atkinson and John Pompay represented the seller. ¢ Lee & Associates and Cushman & Wakefield helped negotiate the
$3.28M sale of a 57,128 SF warehouse at 21405 N. 15th Lane, Building F. MAB Ventures was the seller. The buyer was Deer Valley 15 Investments. The seller was represented by Mark Linsalata and Jeff Conrad with Lee & Associates. Kyle Westfall at Cushman & Wakefield represented the buyer.
PHX MULTI-FAMILY
TUC INDUSTRIAL ¢ DCM Development purchased a 36,727 SF industrial build-
ing,1765 W. Prince Rd., from Richard Geare for $300,000. Patrick Welchert with Cushman & Wakefield | PICOR Commercial Real Estate Services represented the seller; Dave Hammack with Volk Company represented the buyer.
TUC LAND ¢ Land Advisors Organization-Tucson negotiated the $1.957M sale
of 29 lots at Preserve III at Dove Mountain in Marana. Lennar Arizona was the buyer; Miramonte at Dove Mountain was the seller. Will White of LAO handled the deal.
LEASING
¢ Cassidy Turley BRE Commercial completed the sale of The Metro-
politan Lofts, 535 W. Thomas Rd., for $2.7M. David Fogler, Steven Nicoluzakis and Don Arones handled the deal for the 61-unit partially completed residential community is located at 535 W. Thomas Rd. in Phoenix. Lead Properties V, LLC out of Centennial, CO purchased the lender owned property from ML Manager LLC. ¢ CBRE negotiated the $1.25M sale of Homeside Acres Apartments
to Turney Properties LLC of Phoenix. The 29-unit property is at 2019 and 2025 E. Turney Ave. Brian Smuckler and Jeff Seaman represented the buyer and the seller, 2025 E. Turney Ave. LLC.
PHX OFFICE
PHX LEASING ¢ Lee & Associates and CBRE negotiated an 80,158 SF lease of a
building that will house Rancho Solano Private School, 9180 E. Via de Ventura, Scottsdale. Bill Blake, Colton Trauter, Craig Coppola, Mark Linsalata and Andrew Cheney of Lee & Associates represented the landlords, Farallon Capital Management and GEM Realty Capital. Jim Fijan of CBRE represented the tenant. ¢ Jones Lang LaSalle and Lee & Associates negotiated a 50-month
E Rio Salado Parkway, Tempe, for $86M. Sumitomo Corporation was the seller.
sublease of 70,000 SF for IPOWER in Papago Buttes Corporate Plaza, 1500 N. Priest Dr., Tempe. Stein Koss of Lee & Associates represented the sublessee. Don Mudd, John Bonnell and Brett Abramson of JLL represented the sublessor.
¢ Artis Real Estate Investment Trust of Canada acquired the
¢ Sperry Van Ness and Orion Realty Group negotiated a 31,889 SF
¢ Parkway Properties Inc. purchased Hayden Ferry Lakeside II, 60
210,202 SF FBI Regional Headquarter building, 21711 N. 7th St., Phoenix, $75M. Ryan Companies US was the seller. Thomas Holtz with CBRE in Minneapolis represented the seller, and procured the buyer in the deal. ¢ Excel Trust Inc. bought the Promenade Corporate Center, 16427-
16435 N. Scottsdale Rd., Scottsdale, for $56M. Levine Investments LP was the seller.
PHX RETAIL ¢ Voit Real Estate Service directed the $6.2M sale of Santan Gateway
South. The 57,038 SF shopping center, 1305-1445 S. Arizona Ave. in Chandler, is anchored by Sam’s Club. Darren Tappen, Troy Nel16 | July-August 2012
lease for Integrated Software at Portales Corporate Center II, 4900 N. Scottsdale Rd., Scottsdale. Justin Horwitz of Sperry Van Ness represented the tenant. Tom Imparato of Orion represented the landlord, Principal Financial Group, Inc.
TUC LEASING ¢ UnitedHealth Care Services leased 81,835 SF at 9040 S. Rita Rd.,
Suite 1500, from Campus Research Corp. The location will house a healthcare customer service center for OptumRx, a division of UnitedHealth Group. Peter Douglas and Brandon Rodgers of PICOR Commercial Real Estate Services handled the deal.
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COnstrUCtiOn: PrOJECt nEWs
Brycon’s Hopi Assisted Living Facility will feature a solar hot-water system.
BRYCON BUILDING ASSISTED LIVING FACILITY FOR HOPI TRIBE
D.L. WITHERS, ORCUTT | WINSLOW TEAM UP FOR 2 NEW PHOENIX SCHOOLS
Brycon Construction is the general contractor and Jarratt Architecture is the architect for the $3.5M, 12,000 SF Hopi Assisted Living Facility in the Upper Village of Moenkopi, southeast of Tuba City. The facility is a 16-bed, masonry and wood new ground up. Brycon, working with the Hopi Assisted Living Facility Task Team, was able to increase the expected floor plan area by 3,000 SF and include an on-demand/solar hot-water system. Estimated completion is 4Q 2012.
D.L. Withers is general contractor and Orcutt | Winslow is architect for the new M.C. Cash K-8 Elementary School. The 105,000 SF campus is being built adjacent to the existing M.C. Cash Elementary School, which will replace the old campus. Once the new campus is open, the old structures will be demolished to make way for new recreation and sports fields. Both firms also combined efforts on the 80,000 SF Painted Rock Academy, Greenway Rd. and Black Canyon Freeway. The academy is the second school in the Reid Traditional Schools family. It will have the capacity to serve more than 700 K-8 students. The structure will include more than 30 classrooms, a library and a cafeteria. The school is scheduled to open Aug. 13.
BRIGNALL GC FOR INDIAN CULTURAL CENTER; RENOVATING 2 ARTS BUILDINGS Brignall Construction has been selected as general contractor and SmithGroupJJR will provide design services for the 44,000 SF Yavapai-Prescott Indian Cultural Center to be built on the YavapaiPrescott Indian Reservation. The new cultural center will be located on a 3.5-acre site on the reservation. The building will contain spaces for a museum and cultural education center. Brignall also is renovating Arizona Opera and Ballet Arizona buildings for the City of Phoenix. The opera project, 1636 N. Central Ave., will be completed in two phases. Phase I is the construction of an 8,700 SF rehearsal hall and 3,200 SF storage facility and all site work and improvements. Phase II will completely gut the existing 16,800 SF building to allow for new offices, fitting rooms, coaching rooms, the costume department and storage. Motley Design Group is the architect. The other project, The new look for Arizona Opera’s offices, being built by Brignall 2835 E. Washington St., is Construction. the renovation of a 52,800 SF warehouse to include a black box theater, three rehearsal studios, the administration department and storage warehouse. Architect is Durkin + Durkin Architects.
18 | July-August 2012
DPR CONSTRUCTION PROJECTS INCLUDE NEW OPERATING ROOMS AND CLEAN LAB DPR Construction was awarded the $3.7M, 7,383 SF Phase 1 GMP (Good Manufacturing Practice) Lab at Caris Life Sciences in Phoenix. The fast-track TI project includes a 1,200 SF mezzanine. Lord Aeck Sarent | Van Boerum & Frank Associates is the architect; GF Group is the engineer. In addition, DPR is building two operating rooms — one hybrid and one CVOR — at University Medical Center in Tucson. Shepley Bulfinch and Richardson and Abbott are architects for the $6.5M, 22,600 SF project. Phoenix project subs: UMEC, Wilson Electric, Able Steel, KTI Tile, Ganado Painting and Star Roofing. Tucson project subs: J.B. Steel, RBG Construction, Sun Mechanical and Stark Electric.
REHABILITATION MEDICINE BUILDING RISING AT VA CAMPUS A $9.5M, 36,000 SF Rehabilitation Medicine Building is cur-
COnstrUCtiOn rently under construction at the Veterans Affairs campus, 650 E. Indian School Rd., Phoenix. General contractor for the building, developed by the U.S. Dept. of Veterans Affairs, is RCDS Contractors Inc. The architect is Westlake Reed Leskosky. The 2-story building will offer a new rehabilitation area to house physical therapy, prosthetics and orthotics departments. Expected completion date of 2Q 2013.
ADOLFSON & PETERSON FAST-TRACKS 4 CHARTER SCHOOLS Adolfson & Peterson Construction and Schoolhouse Development, LLC completed work on four charter schools in Metro Phoenix that open this upcoming school year – Paideia Academy of South Phoenix, The Odyssey Institute for Advanced and International Studies in Buckeye, and two American Leadership Academy campuses (Mesa and Queen Creek). The four campuses were fast-tracked and completed at the end of June. Details: • Paideia Academy: New 47,800 SF preschool, K-6 charter school and family services center to accommodate 850 students at 7777 S. 15th Terrace; • The Odyssey Institute for Advanced and International Studies: New 34,900 SF college-preparatory charter school with a 29,000 SF gymnasium; • American Leadership Academy Queen Creek Campus (K-6 and 7-12): New 31,350 SF K-6 and 38,500 SF 7-12 charter schools with a 29,000 SF gymnasium; • American Leadership Academy Mesa Campus (K-6): New 31,350 SF K-6 charter school.
MCCARTHY AWARDED CONTRACT FOR PHASE III OF CHANDLER WATER PROJECT The Southwest Region of McCarthy Building Companies was awarded a contract for preconstruction and construction services for the Phase III Airport Water Reclamation Facility Expansion project, 905 E. Queen Creek Rd., in Chandler. The project is a 7 MGD expansion that will allow the Airport Water Reclamation Facility to treat up to 22 MGD on a maximum month basis. In 4Q 2009, McCarthy completed construction of the Phase II Chandler Airport Water Reclamation Facility Expansion project. It expanded the facility’s liquid processing from 10 MGD to 15 MGD. The anticipated construction schedule of Phase III is June 2012 to June 2014.
SUMMIT BUILDERS NAMED GC FOR MARRIOTT PROPERTY IN TEMPE Summit Builders is general contractor for the $28M, 173-room Residence Inn by Marriott to be built at 125 E. Fifth St. in Tempe. The developer is Finvarb Group and the architect is LawKingdom Architects of Kansas City, Mo. The hotel in Downtown Tempe will feature guest suites with fully-equipped kitchens. It will offer stateof-the-art amenities, including an outdoor rooftop pool and fire pit with panoramic views of downtown, 3,500 SF of meeting space and 5,700 SF of ground-level retail. Expected completion is 1Q 2014.
MERIT PARTNERS DEVELOPING 260,000 SF WAREHOUSE IN TOLLESON Merit Partners of Scottsdale broke ground on a 260,000 SF buildto-suit industrial warehouse in Tolleson. Colliers International represented MiTek Industries Inc. in negotiating a 10-year lease agreement for the warehouse at 7890 W. Lincoln St. Nitti Graycor is general contractor and Ware Malcomb is the architect.
COnstrUCtiOn: P&Z CITY OF GOODYEAR The City of Goodyear has been processing a 2012 revision to its Engineering Design Standards & Policy Manual and its Engineering Standard Details. A draft revision of these standards was completed in 2010 but was never taken through for City Council approval. The current 2012 version is an updated version of the 2010 draft. The Engineering Department has posted the 2012 version in the City’s “draft documents” web page for the development community to view and to provide comments. In order to keep the process at a manageable size, the document has been broken into groups that will be up for review at different times throughout the year. Review time allotted for each group is 20 business days. Visit: ci.goodyear.az.us/index.aspx?NID=36
CITY OF TEMPE In accordance with Arizona Revised Statutes, the City of Tempe gave notice of proposed adoptions of, or changes to, city taxes or fees. The City adopted its final property tax levy for fiscal year 2012-13 on June 28. Information can be found by contacting the City of Tempe Finance and Technology Department at (480) 350-8350.
CITY OF AVONDALE Avondale’s new Alarm Ordinance took effect on May 1. Residents and businesses are required to register their burglar alarms online with Public Safety Corporation’s CryWolf at crywolf.us/avondaleaz. The new program is aimed at cutting down on false alarm activations in the City along with the amount of time police officers spend responding to false alarms. Under this program residents will not be fined for the first two false alarms that occur within the same year.
CITY OF MARICOPA The City of Maricopa has joined more than 20,000 communities nationwide that are allowed to purchase federally-backed flood insurance. Th is availability follows the community’s adoption and enforcement of ordinances to reduce flood losses and acceptance by the National Flood Insurance Program (NFIP). Property owners wishing to take advantage of this program should be aware that there is a 30-day waiting period before the flood insurance coverage goes into effect. Lenders must require borrowers whose properties are in a designated flood hazard area to purchase flood insurance as a condition of receiving a federally backed mortgage loan in accordance with the Federal Disaster Protection Act of 1973. The P&Z column is compiled by Dave Coble and George Cannataro with Coe & Van Loo Consultants, cvlc.com.
19
ECOnOmiC DEvELOPmEnt: trEO BY PETER MADRID
The District on 5th, new student housing for UA, is being built by Construction Enterprises, Inc. (CEI) of Nashville and architect is Humphreys & Partners Architects of Dallas.
The South Also Rises tucson’s commercial real estate cycle starting to churn again as key indicators show positive signs
T
here’s a new vibe in the Old Pueblo these days as the commercial real estate industry is slowly making a comeback down the interstate. The multi-family industry in particular is seeing a resurgence as more than 3,000 Class A apartments — including two housing projects for University of Arizona students — are projected to be built in the
next two years. “While average gross rents have trended upward, rates remain below peak levels achieved in late 2008,” says Bob Kaplan, principal in apartment and investment sales at PICOR Commercial Real Estate in Tucson. “Numerous student housing and other Class A projects are under construction. “Despite strong pre-leasing, many are concerned about the region’s ability to absorb significant new inventory. From an investment standpoint, we expect a balance of distress and overleveraged sales with a mix of stabilized properties changing hands,” Kaplan says. “The months ahead may be timely to sell or refinance at today’s attractive rates, given many analysts predicting an interest rate and cap rate
20 | July-August 2012
increase after the November elections.” Industrial buildings are also beginning to fill up after a horrendous 2008 when a chain reaction of massive vacancies snowballed. Window manufacturer Pella Corp. closed its 260,000 SF facility; air systems manufacturer Krueger Industries vacated its 245,000 SF building — and all this happened on top of children’s novelty manufacturer Lisa Frank shuttering a 300,000 SF building near Tucson International Airport. The Tucson industrial market has recently been buoyed by three major construction projects: Iowa-based Involta recently broke ground on a $15M, 40,000 SF data center; Sargent Aerospace & Defense just moved into its 278,000 SF office and manufacturing plant; Graybar Tucson also moved into a new building, a 55,000 SF LEED certified facility. “Market fundamentals have approached the bottom for Tucson industrial space,” says PICOR industrial specialist Russ Hall. “While flex space is still abundant and facing downward rent pressure, lease
ECOnOmiC DEvELOPmEnt: trEO
More than 3,000 Class A apartments, including student housing (above), will be built in Tucson during the next two years. On the industrial side, Graybar Tucson moved into a new, 55,000 SF facility. rates for warehouse space should not decline further. We expect vacancy to improve by year end on an increase in demand in the market for space larger than 15,000 SF.” Similar to the recovery of the commercial real estate industry in Metro Phoenix, how the Tucson housing market bounces back is also critical. The unemployment rate in the Metro Tucson (Pima County) has dropped to 7.2% as of 2Q 2012 from a recession peak of 9.5 percent. “The recovery of Arizona’s economy from the Great Recession continues, and we’re gaining a little momentum,” Marshall Vest, director of the Eller College of Management Economic and Business Research Center, told a group of business leaders at a midyear economic outlook in June. “We see unemployment coming down, but it’s still painfully high.” Although new-home construction continues to lag, Vest predicts an 18.7% increase in permits for the remainder of 2012 and a spike of more than 45 percent in 2013. However, the UA research center trimmed its forecast for local residential permits this year to 2,662 from a forecast of 3,877, Vest says. As in most markets, employment and housing have a trickle down effect on retail. In Tucson, the retail market is marked by slow but steady progress, says PICOR retail specialist Greg Furrier. “The pendulum has begun to shift from years in the tenant’s favor to a more balanced marketplace,” Furrier says. “The convenience store, gas and drug stores remain active in competition for quality sites, and certain franchises are in site selection for multiple locations. “Grocery-anchored centers continue to fare better than unanchored retail, with vacancy rates 7.2% for the former and 15.8% for the latter. Sales 24 | July-August 2012
volume is markedly improved year over year and expected to increase.” In the office sector, PICOR’s Tom Nieman says the market has stabilized, both in terms of lease rates and occupancy. “Looking forward, we see modest improvement in both sale and lease activity, with the most promising growth in healthcare-related space, from new practitioners to urgent care. Vacancy should improve by year end, while we expect asking rents to remain fairly flat.” The Economic and Business Research Center at UA’s Eller College of Management updates its forecasts quarterly at ebr.eller.arizona.edu Adds UA economist, Gerald Swanson, who says he also sees improvement: “The good news is, we are growing, and we’re not Europe.” And when asked what goals he would like to see the commercial real estate industry in Tucson strive for, Tucson Regional Economic Opportunities (TREO) President and CEO Joe Snell says: “Embrace a changing economy and be open to new ideas. Seize exciting opportunities ahead.”
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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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.
BUiLDinG GrEEn BY MARIA THOMPSON
Earning Straight A’s in
Sustainability Colonel Smith Middle School in Fort Huachuca is targeting net-zero certification.
Colonel Smith Middle School in Fort Huachuca makes the grade as state’s first net-zero certified school
S
ustainability is gradually becoming a new favorite subject at schools across the U.S. Turner Construction Company — along with Emc2 and Fanning/Howey Architects — is in the final stages of completing the first net-zero certified school in Arizona. Colonel Smith Middle School at Fort Huachuca in Southern Arizona is the most recent school to adopt certain sustainability techniques that allow for a net-zero qualification. The 26-acre energy efficient project broke ground May 2011 and is scheduled to open its doors in July — just in time for the 2012-2013 school year. Turner Construction is one of the increasing number of general contractors nationwide that are embracing sustainability. Shawn Rosenberger, vice president and general manager of Turner Construction Company AZ, says his firm’s skill set and availability matched with the needs of the project. “The stars were aligned,” he says. Net-zero buildings are becoming more practical because of increasing costs of traditional fossil fuels and the negative impact on our environment’s ecological balance. Richard Clutter, Emc2 architect and Colonel Smith Middle School project manager, distinguishes the principal approach and design as important steps to the project’s overall success and completion. 26 | July-August 2012
The $17M school will generate more energy than it consumes on an annual basis through its energy-efficient design, solar potable water heating, photovoltaic panels, daylighting techniques, and wind machines. In addition, the project has undertaken a major water harvesting operation. With an instructional focus on Science, Technology, Engineering and Mathematics (STEM), planners of the Colonel Smith Middle School complex re-thought the traditional design of educational buildings. The new facility will support a project-based learning model with flexible common and collaboration spaces that facilitate learning both indoors and outdoors. The 88,693 SF school will accommodate approximately 350 students in grades 6, 7, and 8, primarily children of military families. Students will be exposed to energy-saving strategies and will be provided with real-world situations. By training students at an early age, the contractors and architects can reach out to that younger generation, hopefully preparing them to be catalysts for future sustainability projects. In early January, Tuner Construction Company installed the first of two 25,000-gallon water tanks that was lowered 15 feet into the ground. The purpose of the tanks is to harvest and store rainwater that will be used for landscape irrigation. They will be managed by
Students at Colonel Smith Middle School will be exposed to energy-saving strategies and provided with real-world sustainable situations every day. the students and faculty, allowing additional opportunities for students to learn the importance of the environment, ecosystems and water conservation. “Features of sustainability are meant to be exposed and ‘out there’ for the students,” Rosenberger says. “We are taking it out of the textbook.” Turner Construction Company presented the plans for the net-zero certified school at a symposium at Arizona State University in February. The Council of Educational Facility Planners International and the Global Institute of Sustainability sponsored the event. “What’s Next for Sustainable Schools and Communities?” focused on various issues that elementary and high schools face while striving to achieve sustainability. These matters include rising costs for operations and subsequent lack of funding. As a spectator of the symposium, Rosenberger says it was interactive and he says he believes it was well received by the audience. Aside from hosting the symposium, ASU also has taken measures to promote sustainability with its unique program that works to develop practical solutions for economic and environmental challenges. Quinn McLamb, a freshman at ASU studying sustainability with a focus in urban planning, acknowledges the innovative work his program is currently implementing into real life situations and solutions.
“Since the first day of class we’ve been learning that the smallest features such as solar panels and ‘green roofs’ hold the greatest value and efficiency in the sustainability world,” he says. Colonel Smith Middle School was built on the basis of generating short-term investments for long-term savings. “We are enabling plenty of sustainability features at minimal cost,” Rosenberger says. “It was a team approach and collaborative process from the beginning, and this process was needed to understand the team’s goals,” Clutter adds. 27
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BUiLDinG GrEEn BY GARY WORTHY, AIA, ASLA
The State of Sustainable Architecture A glimpse of what Arizona has achieved through AIA 2030 Commitment and the Architecture 2030 Challenge
N
early 7 years ago, the American Institute of Architects and other leaders in sustainable design put forth a challenge to drastically reduce carbon emission and energy consumption in the building industry to positively impact the health of our environment. The specific target of carbon-neutral buildings is set for the year 2030, with incremental improvements to be achieved every 5 years beginning in 2010 with a 60% reduction in CO2 emissions for all new buildings. The goals set by AIA’s 2030 Commitment (based on what is known as the 2030 Challenge) called on architectural design firms to not only embrace the effort to positively impact the health of the environment, but asked for a commitment to track and report their efforts through multi-year plans and strategies. A brief overview of how Arizona architects and their clients are committed to changing the way they design for more sustainable results:
Commitment to energy Modeling As never before, designers are able to predict costs of operating a building through software tools known as Energy Modeling. These tools can accurately measure amounts of daylight and glare entering a building at certain times of the day and through every season of the year. They can measure the operational impact of setting a building in a slightly different orientation for tremendous energy savings, or find “hot spots” in a specific room of a building that requires moving a window to a different location. Energy Modeling not only makes buildings more efficient, but has become a way of communicating methods of energy savings and healthy buildings to owners and future occupants of the facility. Conceptual modeling during early design stages is not a luxury for a project anymore. It is quickly becoming standard practice for architects and owners serious about high performance design solutions. This year the AIA 2030 Commitment 2nd Annual Progress Report noted that of the 656 MGSF reported, 57% used energy modeling to predict operational energy consumption. For building owners such as the Paradise Valley Unified School District who are committed to energy reduction solutions for their 30 | July-August 2012
schools, energy modeling helped them decide how best to apply the dollars they had for achieving a near net-zero facility for their new Fireside Elementary School (above). This included everything from the building envelope design, to insulation, to glazing options, space conditioning methods, rainwater harvesting and Energy Star equipment.
Commitment to renewable energy As much as reducing the carbon footprint of the built environment requires commitment to reduction efforts, reaching that golden ring of net-zero nearly always requires an equal commitment to production of renewable energy. Renewable energy encompasses a vast array of solutions including solar photovoltaic panels, wind turbines or geothermal heating and cooling. In Arizona, the most apparent expansion of renewable energy is in the solar photovoltaic solutions. Solar panels are appearing in nearly every public venue, from universities to rural elementary schools, churches and business parks, to vast fields of panels harvesting sunshine as seen in Yuma County’s Agua Caliente Solar Project which will produce sufficient electricity to power about 100,000 homes per year. Arizona is at a crossarchitecture 2030 roads in becoming a leader A non-profit, non-partisan and independent in sustainable design and organization established by architect Edward renewable energy soluMazria in response to the global-warming crisis. tions. The possible meththe 2030 Challenge ods to achieving carbon A request issued by Architecture 2030 to the neutrality in Arizona are global design and building community to adopt endless. But the effort is specific targets in reducing global greenhouse embodied in that single gas emissions with the ultimate goal of word – commitment.
carbon-neutrality by the year 2030.
Gary Worthy, AIA, ASLA, is the Southwest Design Leader at DLR Group in Phoenix.
aia 2030 Commitment The AIA’s formal request for firms to provide annual metrics proving progress toward fulfilling 2030 Challenge targets.
Lighting represents one of the largest energy expenses for businesses, but an upgrade can cut those costs by as much as 35%! You’ll also save on cooling costs and be more comfortable, because new lights emit less heat. SRP rebates help offset the initial cost of projects and provide a quick return on investment. Complete an application, install the new equipment and watch the savings roll in. To learn more about our many rebates or find an SRP Alliance Contractor to get you started, visit savewithsrpbiz.com or call (602) 236-3054.
FINANCI NG NO W AV AIL AB L E ! National Bank of Arizona is offering qualifying SRP business customers financing for energysaving projects, subject to credit approval.
invEstmEnt BY MICHAEL GOSSIE
SkySong (below and facing page) is projected to generate more than $9.3B in economic impact during the next 30 years.
Sky’s the Limit SkySong becoming a catalyst for innovation, technology, research
I
t was supposed to be the new home of the Phoenix Coyotes. Before that, it was a boarded-up, vacant mall. It hardly sounds like the perfect location for a global center for innovation. But despite battling an economic downturn that crippled many businesses and most new development, SkySong, the ASU Scottsdale Innovation Center, has become one of the most successful incubator and technology centers and one of the Valley’s most remarkable success stories since the recession. How remarkable? The projected economic impact of SkySong over the next 30 years is equivalent to the Valley hosting the Super Bowl every year. According to a Greater Phoenix Economic Council study: SkySong is projected to generate more than $9.3B in economic growth over the next 30 years. SkySong has now generated more than $397M in economic impact for the City of Scottsdale since the doors of SkySong I were opened in late 2007. SkySong also has generated more than $460M in economic impact for the Valley as a whole. Over a 30-year period, SkySong is now expected to generate $8.5B in economic output for Scottsdale. During a 30-year period, SkySong is expected to create $9.9B in total economic output for the Greater Phoenix area. “We wanted to create an environment where innovation was part 32 | July-August 2012
of the culture and companies had a variety of resources available to them to improve their chances of success in the global marketplace,” says Don Couvillion, vice president of real estate for the ASU Foundation. “Th is vision has become a reality for a large number of the companies at SkySong, creating a great result for these organizations, their employees and the community as a whole.” The original vision for SkySong was started with ASU President Michael Crow, who wanted to create the kind of technological and innovation-minded environment that would attract companies and job creation to the metro Phoenix area. Crow’s idea was to create a mixed-use project of 1.2 MSF that would draw entrepreneurs and innovators into the project, give them the resources they need to grow and thrive, and provide them a home for when their businesses begin to take off. SkySong’s 42-acre campus was designed to: Create an ecology of collaboration and innovation among highprofi le technology enterprises and related researchers. Advance global business objectives of on-site enterprises. Raise Arizona’s profi le as a global center of innovation through co-location of ASU’s strategic global partners. Create a unique regional economic and social asset. Crow’s vision has been realized. Expansion by existing tenants and new leases by several new companies has boosted SkySong I and SkySong II (opened in 2008) to 97% occupancy. More than 1,000 employees are now on site, working for the more than 70 companies
Innovation. Technology. Success. S
kySong, The ASU Scottsdale Innovation Center has been one of the biggest success stories in the Valley economy over the past few years. It has fulfilled its mission of becoming a hub for companies from startups to Fortune 500 companies that thrive on innovation and technology. The unique culture at SkySong, as well as the on-site resources of Arizona State University, the largest and fastest growing research institution in the country, have helped companies at SkySong experience dramatic growth. Now at 97 percent occupancy at its first two buildings, SkySong is preparing for the future. The project has begun pre-leasing on SkySong III and SkySong IV (below), with completion of the additional 300,000 square feet of office space scheduled for late 2013.
Whether your company is a larger organization looking for significant build-to-suit space, or a startup looking for ways to get a leg up in a superior working environment, we invite you to become another SkySong success story. Visit www.skysongcenter.com for more information, or contact: ASU SkySong, Janice Kleinwort 480.884.1860 | janice.kleinwort@asu.edu SkySong commercial office opportunities: Andrew Cheney, Lee & Associates 602.954.3769 | e-mail acheney@leearizona.com
Rendering of SkySong III and IV
invEstmEnt Plaza Companies is the developer of SkySong.
from 10 different countries that are housed at SkySong and the ASU SkySong incubator. The SkySong team is now working to make the next two buildings, SkySong 3 and 4, a reality. SkySong is reaching out to progressive, technology-focused companies that can benefit from its entrepreneurial and innovative environment. “SkySong is truly living up to its potential as a job creator for the Phoenix metropolitan area, and having 1,000 employees on site is a significant milestone for the project,” says Sharon Harper, president and CEO of Plaza Companies, the developer of the project. “We are very pleased at how the project is evolving and the incredible economic impact on Scottsdale and the Valley as a whole. The combination of technology, research and innovation taking place at SkySong is clearly a winning formula.”
Building SkySong
Developer: Plaza Companies in partnership with the Arizona State University Foundation and USAA Real Estate Company Brokerage services: Lee & Associates Property management and construction services: Plaza del Rio Management Corporation Architects: Pei Cobb Fried and Partners, DMJM Design, Butler Design Group and Kendle Design Collaborative
34 | July-August 2012
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aZCrEW BY MELISSA BORDOW · PHOTOGRAPHY BY JIM AMRINE
Jessicah Amrine (right) of Wells Fargo Bank and Laurie Sandau of Title National Commercial Services celebrate a great shot at the annual Golfiesta Charity Golf Tournament. The event has brought in more than $40,000 for AZCREW’s philanthropic efforts.
Helping Women Rise Through the Ranks azCreW’s mission for its members is to provide professional development, networking opportunities
W
hen Jackie Orcutt interviewed for a job at a local commercial real estate firm she was steered into the marketing department — despite her desire to be a broker. Men historically have dominated commercial brokerage firms, and not many in Orcutt’s new company appreciated her desire to be a broker. So she set about looking for supportive role models in the industry. Her search led her to Arizona Commercial Real Estate Women (AZCREW), an organization whose mission is to provide professional development and high-level networking opportunities to the growing number of women in commercial real estate. With hard work and support from AZCREW professionals, Orcutt managed to land a job five years later as an associate broker at Cushman & Wakefield, where there are now four women under the age of 35 in her area of expertise, industrial and flex products. Founded in 1985 as Women in Commercial Real Estate in Arizona, AZCREW offers education, mentoring and service oppor36 | July-August 2012
tunities to its 92 members. “It’s not just networking, even though that is a part of what we do, but it’s more than that,” says President Christine Hughes, an assistant vice president and branch manager for Fidelity National Title Agency. “It’s professional development. We want to encourage and support women in commercial real estate.” Membership is open to men and women, she says, although currently all but two of its 92 members are women. What is important, she says, are the professional qualifications members bring to the table. To join, one must have decision-making authority on the job, have been in the commercial real estate industry for at least two years, and derive 75 percent of one’s income from commercial real estate. AZCREW’s roster contains representatives from throughout the industry: brokers, attorneys who specialize in commercial real estate, property managers, lenders, and, like Hughes herself, title insurance professionals. Membership has its rewards.
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aZCrEW
How AZCREW gives back
AZCREW members and volunteers relax with lunch after the 2012 Golfiesta. President Christine Hughes (below) addresses the audience at Gainey Ranch.
AZCREW is part of a national network of chapters, the CREW Network that includes 8,000 members in 74 major markets. The Crew Network casts an even wider net, providing members opportunities to work with professionals in other markets, tap into CREW Network white papers and benchmark studies and take advantage of its professional development programs.
In the beginning AZCREW was founded at a time when networking and professional development opportunities for women in commercial real estate were sorely needed. “In the 1980s there were very few women in the commercial real estate industry, it was very male dominated, as many industries are,” says Kathryn Ferron, a certified public accountant and partner at Ernst & Young, where she works primarily with commercial real estate clients. “It’s still not great, but it is improving,” says Ferron, who credits AZCREW with opening doors and keeping her “on top of the market.” An important professional development tool is AZCREW’s month38 | July-August 2012
AZCREW actively supports charities and scholarship programs. As its website says, “A little goes a long way … but a lot goes further.” Here’s how AZCREW is giving a lot: The annual AZCREW Golfiesta Charity Golf Tournament and caddy auction is held each year around the Cinco de Mayo holiday. Now in its 11th year, the Golfiesta is gaining momentum, bringing in more than $40,000 for AZCREW philanthropic efforts. This year’s beneficiary was the Ryan House, a home where Arizona families can care for children with lifethreatening conditions. The golf tournament helps fund AZCREW’s annual scholarship, given each year to a woman in Arizona State University’s Masters in Real Estate Development Program. This will be the 4th year AZCREW has awarded the scholarship. The chapter put together a team last year of 27 volunteers to walk in the Susan G. Koman Race for the Cure, which funds breast cancer research.
ly luncheons, held at The Biltmore. Hughes says AZCREW works hard to feature topics that are timely and informative and often out in front of other commercial real estate groups in the Valley. Topics cover four broad categories: development or redevelopment case studies on specific projects or areas of the Valley; market and finances updates; topics that impact real estate, like the light rail’s impact on the industry; and finally, iconic figures in the Valley, including at least one high-powered woman each year. Philanthropy is another important goal of AZCREW, members say. Its primary fundraiser is an annual golf tournament, but this year, Hughes says members are working to boost donations to the CREW Network Foundation, which offers 10 $10,000 scholarships to undergraduate women studying commercial real estate. A new fundraising event is scheduled for November, and Hughes says the chapter hopes to increase contributions not only to the national network but also to its own scholarship, given annually to a woman in Arizona State University’s Master’s in Real Estate Development program.
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Helping Our Customers Grow Evergreen is dedicated to helping customers achieve their growth and expansion goals through a commitment to quality, integrity and partnership. Over our nearly 40-year history, we have completed more than 400 retail, commercial and multi-family development projects across the United States and we are always looking to explore new opportunities.
Evergreen is a proud member and supporter of Arizona Commercial Real Estate Women (AZCREW) and is pleased to announce Laura Ortiz has been named a Managing Partner of Evergreen.
www.evgre.com Arizona
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aZCrEW: mEmBErs
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BY KELLY CHURCH
Karen Halpert, Cole Real Estate Investments
edythe Higgins, Wells Fargo Bank
Melinda Hinkson, Sigma Contracting
ext year marks Karen Halpert’s 10th as a member of AZCREW, a milestone highlighted by the fact that she take over as president. Already she is looking ahead. “It’s important to support the organization because it is a way to show that women can be successful at commercial real estate and it provides a forum and mechanism to inform the next round of women leaders in the industry,” says Halpert, senior vice president at Cole Real Estate Investments. Giving back to the community is important as well, she says. AZCREW has a tradition of partnering with organizations such as Susan G. Komen, and Halpert says she hopes the charity she chooses next year will continue to help raise awareness for AZCREW. Another important aspect of being a member of AZCREW is the networking opportunities, Halpert says. “It’s important to have a good network that you can reach out to,” Halpert says. “That’s the best way to keep your finger on the pulse of what is happening in the industry.” Being part of an industry that has seen its share of highs and lows, Halpert says the group is trying to adjust memberships to allow women in transition phases of their careers to remain involved in the network. “It’s nice to have a place where I’ve been anchored and in times of change it is always nice to have support from others in the industry,” Halpert adds.
hether it’s raising funds for charity, scholarships or helping other members remain in the organization, Edythe Higgins is AZCREW’s ace. That’s a fitting analogy for the vice president of Wells Fargo Bank, an 8-year member of AZCREW who is also very active on the golf committee. “The money usually goes to one nonprofit that we work with for two years and the other part goes to AZCREW that we donate for scholarships that help women with their education,” Higgins says. AZCREW also channels funds toward helping women remain in the organization. Higgins says that in these tough economic times retaining membership is a challenge. Companies that do pay the AZCREW membership dues for their employees tend to cut back on such things in a down economy. “I feel that it’s a really good way to allow people to continue to network,” she says of AZCREW utilizing its own funds to retain members. Higgins also says the opportunity to build relationships with other women in the industry is very important to her. In addition, she says staying active and attending meetings allows her to have the newest information on what is happening in the economy and in the commercial real estate industry. “I feel that it’s a great organization to meet very strong, knowledgeable women and develop great relationships,” Higgins says.
s an active member of AZCREW, Melinda Hinkson says those in the organization drive her to be devoted to the industry and also be the best professional she can be. “You are always mixing and mingling with smart and powerful women and they know how to make things happen,” says Hinkson, sales executive for Sigma Contracting. “They work hard and they play hard.” AZCREW’s charitable work is the part of her membership that she enjoys most, she says. “When you see that many people coming together for a common cause to not only support your own organization, but to support an organization that does so much good for the community, you know you are in the right place,” she says. “What you can do collectively is amazing.” Hinkson is active in AZCREW’s golf and membership committees, and says she has never been involved with a group that is this successful at giving back to the community. “(The women) have a good time doing what they are doing,” she says, which is why she always looks forward to attending AZCREW-sponsored events. Hinkson also says the network that makes up AZCREW is, “the inspiration and challenge” for her to be the best.
N
40 | July-August 2012
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iCsC BY JAMES NEAL
Better Odds at iCSC’s reCon 2012 in Las vegas, the Metro Phoenix retail market is hot talk once again
R
eturning interest in the Metro Phoenix market from the nation’s retailers highlighted the International Council of Shopping Centers’ RECon 2012 in Las Vegas. Attendance at the Las Vegas Convention Center was up: more than 32,000 commercial real estate professionals were there. The four-day event was abuzz with activity in both the South and Central Halls, which is significant considering the past couple of years the Central Hall has been a virtual ghost town. Several brokers indicated they had busy schedules and came away from their meetings with retailers with an overall positive feel. While many meetings may have been repeat pitches of sites from the previous couple of years, retailers seemed to finally be receptive of those sites and actually willing to move forward. When asked about the biggest difference between this year’s event and those of the past couple years, Torrey Briegel of Phoenix Commercial Advisors summed it up: “We’re having real meetings for real sites and real deals are actually getting done.” One example of the increased retailer activity was evident in the South Hall with ICSC’s version of the “sandwich wars.” You couldn’t walk through the South Hall without being bombarded with offers of free sandwiches or drinks from Jimmy John’s, Firehouse Subs, Jersey Mike’s or Quizno’s; all of which have been very active in the Phoenix MSA over the past 12 months. New development, however, continues to be almost non-existent, with the focus on existing product and infill redevelopment opportuni42 | July-August 2012
ties. Well located and high profile properties remain in high demand. B and C properties continue to struggle with vacancy issues and aren’t receiving much attention from the national retailers. Activity in the investment market also was brisk, with individual investors coming back into the market as financing is more readily available. This trend has been compressing cap rates on single tenant net leased properties, in some cases matching their lowest levels from 2005 and 2006. Brad Richardson of Stan Johnson Company summed up the increased investor activity in the market: “Last year was the year of the institutional investor, 2012 is going to be the year of the individual investor.” Overall there was the positive feeling that we’ve turned the corner. The glass was half-full this year vs. the half-empty outlook of previous years. There was even an uptick in maybe the biggest bellwether of all – the nightlife. LMFAO made a surprise appearance at one industry sponsored party that was reminiscent of “networking” events of the previous decade. And perhaps there is no better indicator of the renewed confidence in the market than a packed casino floor at the Cosmopolitan teeming with members of the Valley’s commercial real estate industry. Even if we’re just breaking even, it feels good to feel good again. James Neal, associate broker at Hinkson Company in Scottsdale, is an active member of the commercial real estate community and has attended ICSC RECon every year for the past 8 years. Neal is co-chair for the ICSC Southwest Idea Exchange, ICSC’s local convention for the Southwest Region including Arizona, New Mexico and Nevada. Hinkson Company, LLC is a full service brokerage and development firm. hinksoncompany.com
iCsC BY KRISTINE CANNON
In With the New
biltmore fashion Park’s union offers local, independent retailers a home within the urban mall
B
iltmore Fashion Park is taking something old, squeezing in something new and providing a retail shopping experience that has been done before — but not quite like this. With comparisons being made to the Ferry Building in San Francisco and the Limelight Shops in New York City, Biltmore Fashion Park is adding a unique shopping experience into its already established mall, called UNION. Expected opening date is Nov. 8. With just under 7,000 SF, UNION will provide 19 opportunities for local, independent retailers to sell their products in a 200 SF to 500 SF space. “I know it has been done before, but usually it’s done on a smaller, more independent base,” says Lew Gallo, the artistic designer behind UNION. “I think the idea of a big retail center that’s already established, like Biltmore, hasn’t been done under these terms or these conditions before. That’s what makes this unique.” Biltmore teamed with local architect Hayes McNeil, the principal and founder of Plus Minus Studio, to design the space. UNION will embrace both warm woods and an industrial shell, creating a fresh and elegantly modern environment with overhead chandeliers. Each of the retailers’ spaces has sliding doors and glass panels, which will allow for growth and any potential changes. “UNION will open up to the interior of the mall and to the Camelback Road facing side,” says Mary Boyd-Williams, senior manager of leasing for Macerich. “It will have a very open feel.” UNION will consist of 12 shops and seven “permanent kiosks,” according to Boyd-Williams. The local and independent retailers fi lling the spaces will include “the best of the best of retail,” including women’s and men’s apparel, skin care, baked goods and more — giving these independent retailers more exposure, Gallo adds. 44 | July-August 2012
“We have new start-up companies that no one has seen before,” Gallo says, “and we have the local favorites that have been around for a long time and are working on new concepts.” With these smaller spaces, retailers have faced the challenge of fitting into the space, while still maintaining an urban feel. “A lot of people have had to rethink their formula to make it fit, coming from a 2,000 SF space and having fit into a 500 SF space,” Gallo says. “They’ve had to rethink their concept in a completely new window to what they’re going to do when they create their space.” For instance, the restaurant on-site has just 738 SF with which to work, which has created many limitations, such as no access to natural gas. But with a little creativity, these retailers are making it work. “What I think it’s going to produce is a restaurant that’s very different and unique to Phoenix,” Gallo says. “It actually created a completely new dining concept based on its limitations. “We had a certain standard of food we were expecting to produce, so they thought out of the box and looked to places like Italy where there are very old buildings and Europe with smaller, confined areas and not quite the access you have in more newer, modern places. It’ll be a little bit of old, a little bit of new.” But UNION is not only embracing local businesses; it is creating a sense of community as well. “When I moved to Phoenix, I felt like it was missing that downtown street where you found great shops,” Gallo says. “And not only was it great to shop, but you knew you were going to run into someone you knew and see new things. Th is will be the closest thing Phoenix has to that — that downtown with heart to it and energy.” A 250 SF “foodie’s” farmer’s market with “all high-quality produce” is also in the works, which will be available to the public seven days a week and open the same hours as the mall.
CENTENNIAL SERIES
Valley Par tn e rs h ip I s You r Advocate For R e s p on s ib le R e al E s tate Deve lop me n t
COMING NEXT ISSUE MAY-JUNE 2012
MARCH-APRIL 2012
JANUARY - FEBRUARY 2012
TOWERof POWER
Will Hensel Phelps, solar firm project reach for the sky in western Arizona?
INSIDE
EIFFELL TOWER: 1,063 ft.
The Valley's multi-family market will be brisk in 2012 with projects such as Optima Sonoran Village in Scottsdale.
EMPIRE STATE BUILDING: 1,454 ft.
ENVIROMISSION SOLAR TOWER: 2,800 ft.
Sophisticated Senior Living p. 10 Kitchell: Innovative Healthcare Builder p. 18 Valley Partnership Celebrates 25 Years p. 35
INSIDE 2012 Outlook by Industry p. 8 Valley Partnership Roundtable p. 28 AZRE's 7th Annual RED Awards p. 40
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45
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traDE OrGaniZatiOns
ABA
Arizona Builders’ Alliance Phx: 602-274-8222 tuc: 520-881-7930 azbuilders.org
ACA
Arizona Commerce Authority 602-771-1100 • azcommerce.com
ACA
Arizona Contractors Association 602-246-8627 • azca.com
ACt
GPeC
Greater Phoenix economic Council 602-256-7700 • gpec.org
ICSC
International Council of Shopping Centers 646-728-3800 • icsc.org
IfMA
International facility Management Association ifmaphoenix.org
Alliance of Construction traders 520-624-3002 • actaz.com
IIDA
International Interior Design Association 602-273-6210 • iidasw.org
AGC
Associated General Contractors of America 602-252-3926 • agc.org
IreM
Institute of real estate Managment 602-253-1852 • iremphx.org
LAI AIA
American Institute of Architects 602-252-4200 • aia-arizona.org
Lamda Alpha International lai-phx.org
MPA AMA
Arizona Multihousing Association 602-224-0135 • azama.org
Metropolitan Pima Alliance 520-878-8811 • mpaaz.org
APA
Arizona Planning Association 602-866-7188 • azplanning.org
ASA
American Subcontractors Association of Arizona 602-274-8979 • asa-az.org
AAeD
Arizona Association for economic Development 602-240-2233 • aaed.com
AzASLA American Society of Landscape Architects (Arizona chapter) 602-258-8668 • azasla.org AzCreWArizona Commercial real estate Women 602-361-6478 • arizonacrew.org BoMA Core DPP eVP
Building owners & Managers Association 602-200-3898 • bomaphoenix.org
NAIoP National Association of Industrial & office Properties 602-230-1645 • naiop-az.org PCA
Phoenix Community Alliance 602-254-7477 • phoenixcommunityalliance.com
SMPS
Society for Marketing Professional Services smparizona.org
treo
tucson regional economic opportunities 866-600-0331 • treoaz.org
ULI
Urban Land Institute 480-727-9889 • arizona uli.org
USGBC Untied States Green Building Council usgbcaz.org Vf
CoreNet Global Desert Mountain 623-581-3597 • corenetdesertmtn.org
Valley forward 602-240-2408 • valleyforward.org
VP
Downtown Phoenix Partnership 602-254-8696 • coppersquare.com
Valley Partnership 602-266-7844 • valleypartnership.org
WeSt
WeStMArC 623-435-0431 • westmarc.org
east Valley Partnership 480-834-8335 • evp-az.org
46 | July-August 2012
nEWsmaKErs ment plant projects and serves as team lead on some of the largest and most complex projects in Arizona, Colorado, New Mexico, California and Texas. He replaces Bob Knochenhauer, who retired from McCarthy after a 40-year career.
Russell
Ash
Goldsmith
» At CBRE: Traci Russell joined the Phoenix office as vice president in the Retail Group. She brings more than 10 years of real estate experience at the regional and national levels. ... John Ash was promoted to senior associate in the Tucson office. Ash specializes in the sale and lease of industrial properties, as well as negotiating investment and land transactions. … Two retail investment sales professionals, Steve Julius and Jesse Goldsmith, joined the Phoenix office. The brokerage team comes to CBRE from Grubb & Ellis. ... Gavin McPhie, managing director for Valuation & Advisory Services (VAS), achieved Member Appraisal Institute (MAI) designation. McPhie has more than 10 years of real estate appraisal and consulting experience. … Mitch Stravitz rejoined the Phoenix office as vice president in the Industrial Group. Most recently he was a vice president at Grubb & Ellis. He started his career at CBRE in 2004, leaving in 2008 to pursue other opportunities. » At Sundt Construction: John Stewart was named preconstruction project manager responsible for mining and industrial projects. Stewart brings more than 35 years of mechanical industry experience to Sundt. … Gary Graham was hired as a senior estimator. He brings more than 25 years of experience and served as a project manager at Sundt from 2007-2010. … Shawn Yeager was hired as a senior estimator in the preconstruction department. Yeager will work on the coordination of preconstruction and estimating services for mining and industrial construction projects.
Kobierowski
» John Kobierowski and Alon Shnitzer joined the Scottsdale office of Orion Investment Real Estate as senior vice presidents and co-founded The Orion Multifamily Group. The are partnering with senior vice president Rue Bax and vice presidents Doug Lazovick and Eddie Chang in establishing the group.
» Lee & Associates hired Kurt Saulnier as associate broker. He is considered a market leader in the East Valley and has worked with such clients as Abus Lock, Innovion, Datex Instruments, Infinity Trading and Solutions, McFarland Machine and Ceiba Technologies. Most recently he was with Grubb & Ellis. » Cushman & Wakefield | Commercial Real Estate hired LaPrise as a retail broker in the office. He previously worked at The Company and CBRE.
PICOR Aaron Tucson Harpel
» Sperry Van Ness appointed Phoenixbased Mark Phillips to establish and lead its new National GSA Team. The team will provide full-service brokerage expertise for niche GSA transactions, ranging from site sourcing for developers to completed, occupied and stabilized investments for buyers.
LePrise
» GPE Management Services added Danielle O’Dea to its property management team. She will handle a portfolio of properties including Alma School Corporate Center, St. Luke’s Medical Center MOB and Arizona Medical Plaza among others. O’Dea previously was with Healthcare Trust of America. » D.P. Electric added Ernie Bonham as field operations manager. Bonham is responsible for monitoring the mentoring program. He spent 19 years at Kearney Electric as general foreman and field operations manager. » Land Advisors Resort Solutions hired Ben Jenkins, who has more than 15 years of experience and $3M in resort sales. He will be responsible for strategic direction, new client acquisition, sales leadership and project feasibility. He previously was vice president of Sales Development for DMB Realty Network.
» The Phoenix office of Jones Lang LaSalle promoted Derek Ruterman to vice president, expanding his role in the firm’s Project and Development Services (PDS) Group. Formerly a project manager for JLL, Ruterman manage key PDS projects and also help the company capitalize on new opportunities and manage a growing pipeline of jobs in Arizona and Nevada.
» SRS Real Estate Partners hired Susan Riddle as marketing coordinator. She will be responsible for executing the national and local marketing strategies for the Phoenix office including broker transaction support, SRS identity building, and lead generation initiatives. She previously was with Rowland Constructors.
» Frank Scopetti, senior vice president of McCarthy Building Companies, was promoted to business unit leader of the Water Services team in the Southwest Region. Scopetti is responsible for all aspects of the Southwest Region’s water/ wastewater treat-
» Cassidy Turley BRE Commercial added Thomas C. Weinhold to the Healthcare Practice Group as senior vice president. Weinhold has more than three decades of brokerage experience with emphasis focusing on healthcare real estate.
Riddle
47
aFtEr HOUrs
Knowing more about the people we work with is the fun side of the business. It helps start conversations and strengthens business relationships. To nominate a colleague, request an After Hours form from Peter Madrid, peter.madrid@azbigmedia.com. PHOTOGRAPHY CORY BERGQUIST PHOTO COLLAGE MOHAMMED MUNIR
monica Perez Project Manager, Archicon Architecture & Interiors Born in Phoenix Attended Phoenix College, where she received an AAS in Drafting and CAD Technology; attended Arizona State Univ., where she received a B.I.S. in Architectural Drafting and Urban Planning Has been with Archicon for 3½ years Has a 17-year-old son, Nicholas, who graduated from Brophy College Prep in May
responsibilities
Oversees and executes various phases of tenant improvement projects from the initial design concept to construction administration.
What did you think you’d be when you were growing up?
As an adolescent and through my early teenage years I was a huge tomboy and thought I was going to be a professional kick boxer or a big-rig mechanic. My father was a truck driver, which influenced the mechanic career.
What accomplishment are you especially proud of?
Raising an intelligent, respectful young man is my defi nitive personal accomplishment. I am also the only person in my family to have a college degree.
What would people be surprised to know about you?
Favorites
Activities: Full-contact sports have always interested me, although I played team sports all my life, soccer being my preference.
Th is is my third season playing banked roller derby for the Arizona Derby Dames, the only all-woman banked track roller derby league in Arizona. I play for the Bombshells as well as the all-star team AZDD Hot-Shots. My name is “The Lap Dancer # $20 HOLLA!”
Destinations
advice
My son and I had a blast surfi ng the North Shore in the warm waters of Hawaii and devoured the diverse cuisine in London. I would like to hike Machu Pichu with my with son before he goes off to college.
Received: “Lying to ourselves is more deeply ingrained than lying to others.” – Dostoyevsky. In other words, “Being honest to yourself and others will grant the respect you deserve in every aspect of life.”
to share
“Whatever you want to do, do it now. For life is time and time is all there is.” 48 | July-August 2012
2012
INSIDe
50 tI to the rescue a resurgence in refurbishing and renovating of projects
54 ABA Member Projects 60 Q & A with Mark Minter 62 ABA Members
aBa BY DON HARRIS
One of The Weitz Company’s signature TI projects (left) is the offices of Polsinelli Shughart at CityScape. WESPAC Construction’s TI of the Lumension reception area (above).
TI to the Rescue
tenant improvement projects provide a much-needed boost to general contractors as the industry bounces back from a soft economy
C
ontractors are adopting what might be considered business-as-usual operations as they work with clients that are opting for tenant improvements instead of putting up new buildings. Pushed to the limit in today’s still-struggling economy, general contractors often take on building renovations and complete the work while the client’s employees remain on the job — hence, business as usual. Such projects often require doing some of the work and scheduling the delivery of materials and products in off-hours to minimize disruption. Even general contractors that formerly specialized in major industrial and commercial projects and residential builders that have seen their market dry up have turned their efforts to TI. TI projects the past year include a former Honeywell facility in Glendale, an unfinished former Countrywide Financial building in Chandler, three law firms in Downtown Phoenix, office improvements in Scottsdale, medical facilities in Mesa, regional headquarters for two hotel chains in Scottsdale, State Bar of Arizona offices, and two Maricopa County Community College projects. With an abundance of available Class A office space in Metro Phoenix and continuing tight budgets, it becomes an obvious costcutting decision for businesses to consider tenant improvements as a way to enhance productivity as well as their bottom line. A benefit of clients such as law firms moving into Class A office space is that “A-minus” and “B-plus” spaces open up, needing to be retrofitted and upgraded. “There is definitely an art to properly renovating occupied buildings,” says Jim Kurtzman, vice president of client development for hardison/downey construction, inc. “Most of these projects are 50 | July-August 2012
being built at night so as not to disturb adjacent existing tenants with noise, odors, utility shut downs, safety, ingress and egress.” Kurtzman says many so-called TI projects require asbestos abatement and upgrades to outdated electrical, mechanical and safety systems. Roz Lipsey, president and CEO of Jokake Construction, says it makes financial sense to buy a commercial building or facility at a relatively low cost and put dollars into its upgrade or renovation. “Several of our clients are also ‘repurposing’ the buildings that they have bought,” Lipsey says. “For instance, one client bought an old movie theater and we renovated it into a healthcare clinic. They could not have built a new healthcare clinic in that part of town for less money.” More than 90% of Jokake’s work is in occupied facilities, including hospitals, commercial office buildings, banks, school campuses, data centers, and hotels. “In these environments, you need to understand the existing building, facility, or campus infrastructure and how the renovation will integrate into the infrastructure of the old facility,” Lipsey says. “In addition, we are operating in and among our clients’ operations, their employees and their customers, so safety, site access, and avoidance of disruption to the client is key.” Lipsey says her firm’s goal in occupied facilities is to eliminate disruptions so their clients “can operate under the adage of business as usual, even though there may be a major renovation happening in their space.” At D.L. Withers, Tiffany Mancuso, director of business development, says her firm’s TI projects range from $500,000 to approximately $4M. Public sector clients had the money to do new con-
aBa
struction four years ago, but today some of those projects have been shelved, she says. “Now, they’re shuffl ing the deck, using current inventory,” Mancuso says. “For the past few years, municipalities have been scrambling to find existing space to remodel.” Projects that formerly took four-to-five months to complete are on a much tighter schedule. Perhaps 45 days, to save money, she says. Kelly Billings, senior marketing and communications manager at The Weitz Company, says TIs have become more popular in both the public and private sectors. “The metro area is saturated with vacant space,” Billings says. “Why build when it’s already built for you?” She adds: “In the public sector where budgets are tight and fiscal responsibility is important, renovating an existing space allows tenants to get a new space without the perception of overspending. And, in the private sector, businesses are really seeing great deals on leasing new space. Property managers want to get that space leased, and some of these offers have been too good to pass up.” Weitz has seen a big increase in TIs in recent years. “That has really kept us busy,” Billings says. Jim Zodrow, vice president of tenant improvements at WESPAC Construction, says the firm has been in the TI field for 18 years. “It’s always been our bread and butter,” Zodrow says. “TI has become a bigger percentage of our overall workload as new construction slowed down.” Joe Hitzel, president of SAB (Southwest Architectural Builders), says the TI market is still strong, in part, because major potential
52 | July-August 2012
clients are waiting for the market to bottom out. “They missed it,” Hitzel says. “It happened about a year ago. We are very close to the lowest lease rates in Phoenix’s reset economy. Lease rates are about 40 percent lower than they were in 2008.” Even so, tenant improvement projects remain a very important component of the Metro Phoenix economy. “It’s the beginning of Phoenix’s rise out of this economic mess,” Hitzel says. “We need to consume and fi ll the vacant space before developers feel comfortable in constructing new projects. TIs are the first to consume that vacancy.”
Universal Technical Institute, Jokake Construction
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aBa: mEmBEr PrOJECts Sargent Aerospace & Defense New Office/ Manufacturing Facility in Tucson
Sargent Aerospace & Defense New office/ Manufacturing facility Developer: Sargent Aerospace General Contractor: Chestnut Construction Company Architect: Gromatzky Dupree & Associates Location: 5600 W. Coca Cola Dr., Tucson Size: 278,000 SF Value: $7.815M Start/completion: 3Q 2010/2Q 2011 Subcontractors: Magnum Paving, Achilles, Santa Rita Landscaping, Geronimo Glass, Valenzuela Drywall, Avila Concrete, Premier Metals, Taylor’s Demolition, Millwork by Design The project was a redevelopment of an existing site and included demolition of the existing building and re-grading a site for new parking. The new building is rectangular, maximizes the site area and creates a connection to the existing building. The project created a campus setting with an open air employee patio/break area.
town & Country: Major A, Shops A and Sitework Developer: RED Development and Town & Country Camelback, LLC General Contractor: Chasse Building Team Architect: Butler Design Group Location: Camelback Road and 20th St., Phoenix Size: 60,973 (combined) Value: $3.2M Start/completion: 4Q 2011/2Q 2012 Subcontractors: Creative Masonry, Ganem Construction, ACE Asphalt, MJB Electric, Saguaro Steel This project includes two retail buildings and site improvements at Town & Country shopping center along the Camelback Corridor. Phase 1 includes Major A (future Nordstrom Rack) at the site that was previously Bookstar. Phase 2 includes a new retail building that will include tenants such as Potbelly Sandwich Shop, Five Guys and Café Rio. In addition to the new buildings, the parking lot was newly renovated at the NEC corner of the shopping center. 54 | July-August 2012
the Avenue of the fountain Developer: The Avenue of the Fountain LLC General Contractor: Adolfson & Peterson Construction Architect: RSP Location: Saguaro Blvd. and Avenue of the Fountains, Fountain Hills Size: 70,561 SF Value: $10.3M Start/completion: 3Q 2012/4Q 2013 Subcontractors: List was not yet available at press time. First phase of the entertainment/retail project in the Town Center area of Fountain Hills will consist of three buildings. The project will include a 12-screen theater (60,983 SF), restaurant (2,200 SF) and retail section (7,378 SF). The Avenue of the Fountain in Fountain Hills
aBa: mEmBEr PrOJECts CityScape Developer: RED Development General Contractor: Hunt Construction and The Weitz Company Architect: Callison Location: 1 E. Washington, Phoenix Size: 1.8 MSF Brokerage Firm: CBRE Value: $900M Start/completion: 1Q 2007/3Q 2012 Subcontractors: HACI Mechanical, WJ Maloney Plumbing, Climatec (EMS Controls and Smoke Control with web accessible tenant override) CityScape is a high-rise, mixed-use development in Downtown Phoenix incorporating office, retail, residential, and a hotel. The project covers three downtown Phoenix city blocks and is situated between 1st Ave. and 1st St., between Washington and Jefferson streets.
Paradise Valley Community College, Kranitz Student Center renovation and Addition Developer: Maricopa County Community College District General Contractor: Jokake Construction Services Architect: SmithGroupJJR Location: 18401 N. 32nd St., Phoenix Size: 67,000 SF Value: $6M Start/completion: 2Q 2012/2Q 2013 Subcontractors: D.P. Electric, Midstate Mechanical, Western States Fire, Progressive Roofing The project includes an addition of a 12,000 SF student services and community meeting facility, and multi-phased renovation of the existing 45,000 SF student center. The facility includes student dining, counseling, admissions, financial aid, disability services and veterans services. Renovation includes major mechanical upgrades, interior finishes, structural modifications, plumbing, electrical and fire suppression upgrades. CityScape
Barry Goldwater High School Modernization Project Phase III Developer: Deer Valley Unified School District General Contractor: McCarthy Building Companies Architect: ADM Group Inc. Location: 2820 W. Rose Garden Ln., Phoenix Size: 118,000 SF renovation; 500 SF addition Value: $9.8M Start/completion: 1Q 2012/3Q 2012 Subcontractors: McCarthy Mechanical, Irontree Plumbing, Allied Accoustics, Pueblo Mechanical, Urban Electric, Foothills Fire Protection, Twin City Hardware, Progressive Roofing, Stone Cold Masonry, ISEC Phase III of this major renovation includes a 118,000 SF remodel of Buildings 400, 700, 800, 900 and 1,000, which includes remodel of performing arts, administration, science classrooms, gym and extensive site and way finding improvements. Also includes new HVAC, lighting, ceiling grid, paint, millwork and flooring.
ASU Interdisciplinary Science & technology Building 4 Developer: Arizona Board of Regents General Contractor: Sundt Construction Architect: Steven Ehrlich Architects and HDR Architecture, Inc. Location: 781 E. Terrace Rd., Tempe Size: 297,000 SF Value: $114M Start/completion: 1Q 2010/1Q 2012 Subcontractors: Wilson Electric, Dynamic Systems, KT Fabrication, Elward Construction Co., Sundt Concrete, Sundt Civil, TP Acoustics, PCI, Brothers Masonry, ISEC, Pete King Construction Co., RCI Systems ISTB 4 is an 8-story building with three missions: Research — It contains 166 laboratory modules inclusive of metals-free, special chemistry, wet and computational spaces, as well as microscopy suites; Outreach — The center of the building contains galleries, classrooms, a 245-seat auditorium, and a meteorite vault; and Administration — Offices and meeting rooms. ASU Interdisciplinary Science & Technology Building 4
Paradise Valley Community College, Kranitz Student Center Renovation and Addition
56 | July-August 2012
Proud Builder of Sun devil Country SinCe 1969
Clockwise from top left: Interdisciplinary Science & Technology Building 4; Lattie F. Coor Hall; The Biodesign Institute, Building A; Walter Cronkite School of Journalism and Mass Communication; The Biodesign Institute, Building B
2620 S. 55th Street, Tempe, Arizona 85282 (480) 293-3000 www.sundt.com Arizona Contractor License Nos.: ROC068012-A; ROC068013-B01
aBa: mEmBEr PrOJECts
ASU Student Recreation Center Phoenix Biomedical Campus — Health Sciences Education Building
Phoenix Biomedical Campus — Health Sciences education Building Developer: Arizona Board of Regents General Contractor: DPR Construction • Sundt Construction (Joint Venture) Architect: CO Architects, Ayres Saint Gross Location: 435 N. 5th St., Phoenix Size: 268,000 SF Value: $129M Start/completion: 3Q 2010/3Q 2012 Subcontractors: JJR, Kaplan Gehring McCarroll Lighting, John A. Martin & Associates, AEI Engineers, Dibble Engineering, Transsolar Energietechnik, Professional Service Industries, Rolf Jensen & Associates, Lerch Bates, The Sextant Group, Davis Langdon, Sun Valley Masonry, University Mechanical & Engineering Contractors, Twin City Hardware, KT Fabrication, Cannon-Wendt Electric, BarrettHomes Contractor, Otis Elevator Co., Kovach Properties, Western States Fire Protection HSEB is part of the 28-acre Phoenix Biomedical Campus to be used by the University of Arizona College of Medicine-Phoenix, the UA College of Pharmacy, and the UA Mel and Enid Zuckerman College of Public Health, as well as by Northern Arizona University’s College of Health and Human Services programs.
DPr Construction Phoenix regional office Owner: DPR Construction General Contractor: DPR Construction Architect: SmithGroupJJR Location: 222 N. 44th St., Phoenix Size: 16,000 SF Start/completion: 1Q 2011/4Q 2011 Subcontractors: KEMA, PK Associates, Climatec, Suntec Concrete, Dickens Quality Demolition, Wilson Electric, Benson Security, Workspaces, KT Fabrication, Carter’s Inc., Kovach, Arizona Professional Painting, Bel-Aire Mechanical, Progressive Roofing, KYI Tile DPR converted an empty community eyesore into a showcase for living and working sustainably in the desert environment. This adaptive re-use project is an example of challenging standard design assumptions to create what is on track to be the first building in Arizona to operate at net-zero efficiency. 58 | July-August 2012
DPR Construction Phoenix Regional Office
John C. Lincoln Central Utility Plant Owner: John C. Lincoln General Contractor: Gilbane Building Company Architect: Orcutt | Winslow Location: 3rd St. and Dunlap, Phoenix Size: 15,500 SF Value: $13.6M Start/completion: 3Q 2011/2Q 2012 Subcontractors: Aulerich & Assoc., Waste Management, Sentinel Maintenance, Contractors & Builders, R.A.M.M. Engineering, Suzie’s Temp Fence, American Cleaning Systems, Dickens Quality Demo, Jones Concrete Construction, Suntec Concrete, Sun Valley Masorny, Bell Steel, Pioneer Roofing, Climatic, Cannon & Wendt, ISEC, AMD, WD Manor Gilbane is providing CMAR services for the new central utility plant on the John C. Lincoln campus. The project includes the demolition of an existing medical office building. The new plant encompasses 15,500 SF with a 7,900 SF enclosed building.
ASU Student recreation Center Owner: Arizona State University General Contractor: Gilbane Building Company Architect: Studio Ma Location: ASU Tempe campus Size: 84,500 SF Value: $21M Start/completion: 2Q 2012/3Q 2013 Subcontractors: DQD, Valley Rain, Siteworks, Code One, Schuff Steel, Kortman, Suntec, TD Ind., ThyssenKrupp, Div 9, Kovach, Tempe Mech., TP Acoustics, Diversified, Aero, Stout, IES, ISEC The expansion of the Student Recreation Center (SRC) spans 84,500 SF with an additional 18,800 SF of exterior covered area. The project includes a 2-court gym, a multi-activity court gym and a strength and fitness area. The design is targeting LEED Gold Certification.
aBa: Q & a PHOTOGRAPH BY CORY BERGQUIST
Q&A
Executive Director Mark Minter
Q
: Has the recent economic slowdown solved hiring problems in the construction industry? A: No. In 4Q 2011 and 1Q 2012 contractors have reported an uptick in volume and employment opportunities. Unfortunately, they are also reporting that it is difficult to find qualified and experienced workers in both management and craft positions. It is possible that the recession in Arizona has lasted so long that qualified workers have left for other states or stayed in Arizona and gone to work in other industries. As the economic recovery continues skilled employee shortages will continue to be an huge problem.
Q
: Has there been any positive legislative action benefitting the construction industry? A: The passage of HB 2830 is a positive item for contractors in the energy sector of the industry. HB 2830 allows public agencies to enter into energy savings contracts to upgrade and improve existing facilities. Currently, if an agency wanted to upgrade a building for energy saving purposes they would have to have the project designed, built and paid for in the current fiscal year. Th is new law allows agencies to use a single contract to design, building, operate, maintain and finance the project. The complete cost of the upgrade can be paid for from future energy savings. Th is works well for agencies that have little or no money for capital improvements and creates a huge market for contractors.
Q
: How will the outcome of the November election affect Arizona’s economy? A: Regardless, the outcome of the November elections Arizona can expect an improving economy. Th is is a great state in which to live. People and companies will continue to move here to enjoy the climate, environment and opportunities present here. I have recently talked to several new transplants to Arizona. One person had lived around the U.S. and in several foreign countries. He was extremely excited about moving to Arizona and all the wonderful opportunities there are and fun things to do. He confided to me that this was his last move.
Q
: How is new technology impacting contracting? A: Technology comes at us from so many directions simultaneously that it is often hard to sort out the impacts. New technology is a marketplace opportunity for certain contractors. As firms upgrade their technology they often need new or remodeled physical space. Hi-tech manufacturing, such as Intel, is also an opportunity. On the other side contractors need to keep pace themselves with technology and the abilities of their firms and employees. Technology has now spread to all levels of every firm. We expect instant response to communications from everybody. We also expect all firms to be up-to-date on new hardware and software to facilitate that communication. Good luck to the firm that skimps on technology in the future. They will become dinosaurs before they know it.
Q
: Is construction financing readily available? A: Construction financing is a challenge for the banking industry. If an owner has the right project in the right place at the right time, there might be funding available. But, banks are very selective. Metro Phoenix continues to have very high vacancy rates for office buildings. We are among the highest 2-3 metro areas in the country. Until vacancy rates come down, don’t expect easy lending for new office buildings. 60 | July-August 2012
Mark Minter is Executive Director of the Arizona Builders’ Alliance, a trade association of commercial and industrial builders including general contractors, subcontractors, suppliers and service companies. The ABA was founded June 1, 1994 as a result of a merger between the Associated Builders and Contractors and the Associated General Contractors. Prior to the merger Minter was with the AGC since 1977 in a variety of positions, including executive director, assistant director and Tucson branch manager. As Executive Director of the ABA his duties include overall operation of the alliance. He has worked extensively in the areas of labor relations, lobbying, government relations, safety and oversees educational programs.
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aBa: mEmBErs
I Jerry Mangone regional Sales Manager Sunstate equipment
J
erry Mangone, regional sales manager of Sunstate Equipment in Phoenix and a member of the Arizona Builders’ Alliance, helps to supply construction equipment to contractors around the Southwest. As a member of ABA, he has taken advantage of social connections to other people in the construction industry, accumulating the knowledge he needs to serve builders. Mangone was a beer distributor before joining Sunstate, so he knew nothing of the inner workings of a construction project. The personal connection to business insiders fostered by the ABA enabled him to adapt to his new field, he says. “It took a while, and if it wasn’t for the patience of a lot of good people, I wouldn’t have gotten there,” he says. Mangone’s education involved understanding the needs of his customers. Builders depend financially on punctual delivery of equipment, careful maintenance, and speedy responses when they request repairs, so rental prices on paper may belie the true cost if the equipment provider is slow or sloppy, Mangone explains. Knowing what his customers value lets him satisfy them. “Fortunately, most of our customers understand that price is certainly an important thing, but performance and the overall cost of getting their job done far exceeds that,” he says. The relationships Mangone has cultivated with others in the industry have also satisfied him in less tangible ways. “It’s fun to be out meeting people,” he says. “It’s fun to learn from people, to see ways to do things that you, left to your own devices, would have never figured out. That part of it is — it’s hard to describe how much fun it is.” The ABA organizes donations to projects that serve charitable causes, and Mangone says he feels personally fulfilled when he helps to build institutions for disabled children, seniors, and battered women by donating equipment. “I’m a strong believer that anything you can do to give back to the community, regardless of whether it’s with ABA or some other organization is something that is almost part of being alive.” 62 | July-August 2012
ndustry associations such as the Arizona Builders’ Alliance exist to provide material support to its members, including training workshops and legal guidance. Lorraine Bergman, owner of Caliente Construction in Mesa and vice president of the ABA, praises the programs offered by the organization but emphasizes the less tangible benefits of her experience at the organization. Lorraine and her husband, Tom, founded Caliente in 1991, though she did not become personally involved with the management of Lorraine Bergman the company until around 2000. When he died of cancer in 2005, Bergman, as the new sole owner Caliente Construction owner of Caliente, needed to learn how to manage a commercial real estate firm. The ABA offered an executive training course for just that purpose. But more important was the emotional support she received from other members. “Members were very supportive of me taking the reins of the company, and they offered me support and guidance to help through some very difficult times,” she says. Getting involved with the ABA has allowed Bergman to bring the organization’s resources to bear on issues that affect her industry. As a member of the legislative committee, she corresponded with Arizona state lawmakers in 2002 as they debated a bill to change the process by which the state approves bids for public construction projects. During the recent economic downturn, she and the rest of the executive committee offered financial and legal classes that taught members how to do business differently in bad times.
P
reston Achilles, owner of Achilles Air Conditioning Systems in Tucson and president of the Arizona Builders’ Alliance since February, pointed to several benefits of membership, including the opportunity to learn about the industry, stay abreast of new technology, and make an impact on legislation. The opportunity to work with, and learn from, a variety of different businesses attracted Achilles to the office of president. “It’s a lot of work,” he says, but the job rewards him with useful knowledge about his business. His work as president exposes him to the Preston Achilles diversity of the industry; some members represent owner achilles air Conditioning Systems billion-dollar companies while others come from much smaller firms. Achilles has found regional differences as well between firms in the Phoenix area and those in the Southern Arizona chapter. “We’re pretty limited down here in how we see things,” he says. “You’re working with the best companies in the state, and they make you better.” The ABA allows member organizations to associate as equals and to focus on common interests, a contrast to the hierarchical nature of a construction project, Achilles explains. “They’re our bosses when we work for them, but when we work for ABA meetings we’re on the same level,” he says. “Information comes much more quickly” in the computer era, he says, greatly accelerating the pace of construction projects. ABA membership has kept Achilles’ air-conditioning business informed about new technology, including AutoCAD.
We Are Proud to Be a Member of the Arizona Builders’ Alliance At Delta, we recognize the value of our affiliation with the Arizona Builders’ Alliance in advancing the construction industry. Our in-house, ongoing training program includes an accredited four-year apprenticeship curriculum and spotlights professional milestones and safety excellence. You can consider Delta Diversified for any electrical contracting need, assured that safety and workforce excellence are deeply embedded in our company philosophy.
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