AZRE Jan/Feb 2019 by AZ Big Media

JANUARY-FEBRUARY 2019

ANNUAL

OUTLOOK

INSIDE:

Master-Planned Communities p. 46

BOMA p. 58

The wave rolls on

s the calendar turns to 2019, there is much to be excited about in the Valley. The state economy is riding a sustained period of growth, and that has meant booming business for the commercial real estate industry. The biggest question coming from industry professionals is, “When will the slide begin?” Based on feedback from the market experts we talked to as we prepared our 2019 Annual Outlook, that slide will not begin in 2019. All of the commercial real estate sectors expect continued growth in the coming year, and that growth and activity will be spread out across the Valley. West Valley is still red-hot for industrial growth, Central Phoenix will see new mixed-use projects come to life and the East Valley is awash in activity in all sectors. Some of the things we’re looking forward to in 2019 are the completion of transformative projects like Block 23 in downtown Phoenix, which will bring the first Fry’s grocery store to the area, and The Local in Tempe, which will bring Whole Foods to Mill Ave. Another economic force that will shape 2019 is the opening of the South Mountain portion of the Loop 202 freeway. Some projects haven’t even started yet, but will also be on our minds in 2019. To the south, two hybrid vehicle plants are expected to begin construction, with Lucid Motors and Nikola Motors poised to turn Pinal County into a hub of electric automobile production. While those two developments are game-changers, the new year could see even more substantial economic development activity in Pinal County. This issue shows examples of how the industry is evolving as it grows, from high-tech building techniques by one of the most innovative companies in the business, to home builders finding ways to bring new communities to land parcels that had been vacant for decades. The planners, designers, builders and brokers in Arizona are enjoying their ride on this current, upward-flowing wave, but they are already preparing to stay ahead of the slide.

President and CEO: Michael Atkinson Publisher: Cheryl Green Vice president of operations: Audrey Webb EDITORIAL Editor in chief: Michael Gossie Associate editors: Steve Burks | Alyssa Tufts Interns: Brooke Miller | Lurissa Carbajal Contributing writers: Eric W. Emmert | Suzanne Kinney Courtney LeVinus | Cheryl Lombard ART Art director: Mike Mertes Design director: Bruce Andersen MARKETING/EVENTS Marketing & events manager: Cristal Rodriguez Marketing specialist: Gloria Del Grosso Marketing designer: Patrick Griffin OFFICE Special projects manager: Sara Fregapane Executive assistant: Mayra Rivera Database solutions manager: Amanda Bruno AZRE | ARIZONA COMMERCIAL REAL ESTATE Director of sales: Ann McSherry AZ BUSINESS MAGAZINE Senior account manager: David Harken Account managers: April Rice | Kim Bailey AZ BUSINESS ANGELS AZ BUSINESS LEADERS Director of sales: Sheri Brown HOME & DESIGN EXPERIENCE ARIZONA | PLAY BALL Director of sales: Donna Roberts RANKING ARIZONA Director of sales: Sheri King

Steve Burks Associate editor, AZRE steve.burks@azbigmedia.com

2 | January-February 2019

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. ©2019 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.

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CONTENTS

FEATURES 2 Editorâ&#x20AC;&#x2122;s Letter 6 Trendsetters 10 Executive Profile 12 After Hours 14 New to Market 16 Big Deals

20 Legislative Update

24 Annual Outlook

46 Master-Planned Communities 52 Utilities & Energy

56 Retail

58 BOMA

On the cover: The Stewart

4 | January-February 2019

GO TO store.azBIGmedia.com to purchase subscriptions, digital issues and plaques

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TRENDSETTERS HIGH TECH finds home in Tempe Tempe is once again a top tech submarket in the U.S., according to the CBRE 2018 Tech-30 report that measures the tech industry impact on North American office markets. The city’s continued strength as a top tech submarket is bolstered by strong demand from tech companies that are looking beyond traditional office markets for their next location. Here are some key findings from the report that helped position

TEMPE AS A TOP TECH SUBMARKET: ■ Average office asking rents in Tempe rose 15.8 percent annually from Q2 2016 to Q2 2018

Valley cashes in as financial services hot spot New and increasingly sophisticated office users are transforming Phoenix’s financial services landscape from a once predominantly call center market into a diverse operational hub, according to the recently released JLL Financial Services Operations Center Report. Compared to even a few years ago, the Valley is now home to a wave of financial services companies — to include banking entities and insurance companies with banking departments — who are choosing to relocate or expand in secondary cities like Phoenix over established headquarters markets. In Phoenix, financial services companies in the past 24 months have completed 88 deals totaling more than 1.7 million square feet of office space. That equates to 30 percent of all office absorption in the market in that timeframe.

AMONG THESE NOTABLE TRANSACTIONS ARE:

• American Express, with a two-building, 369,996-square-foot expansion at its Desert Ridge campus in North Phoenix. • Freedom Financial, leasing 300,000 square feet in two buildings at the new Rio2100 in Tempe. • Vanguard, expanding by 127,787 square feet at McDowell Mountain Business Park. • Allstate, completing two subleases totaling 100,622 square feet at Allred Park Place in Chandler. • Northern Trust, expanding by 75,000 square feet at Discovery Business Campus in Tempe. • Liberty Mutual, leasing 102,121 square feet at Mach One within Chandler Airport Center.

6 | January-February 2019

■ Tempe ranked 5th among top tech submarkets for office rent growth ■ Rent growth in Tempe has outpaced the broader Phoenix market ■ Tempe ranks 4th among top tech submarkets for net absorption Some additional overall market findings: ■ Firms continue to be attracted to Tempe, South Scottsdale and Downtown Phoenix, with Chandler quickly becoming an alternative to Tempe and South Scottsdale for its affordability and space ■ Firms HQ’ed in the top four tech markets have taken nearly 900,000 SF of space over the last five years

GRAYCOR TRANSFORMS

BIG BOX

Earlier this year, Sam’s Club announced it was closing 50 of its big box warehouse stores around the country, including four in Arizona. Graycor Construction Company, along with developers DPC Companies and Confluent Development, saw an opportunity in these empty spaces and made the most of it. Graycor recently completed the redevelopment of one of the Sam’s Club locations in Phoenix, transforming it into HUB 317, a 225,000 square foot, fully speculative, Class A distribution center. HUB 317 is located on 12 acres at 317 S. 48th St. in Phoenix, minutes from the Loop 202 and 143 freeways and Sky Harbor International Airport. The project combines the renovation of a 115,286-square-foot former Sam’s Club building and Go Kart Track location with 109,645 square feet of new tilt-up industrial construction. “This is what DPC is known for – taking outmoded projects and transforming them to modern-day opportunities for occupancy,” said Todd Ostransky, Graycor Construction Company Vice President of the Southwest Division. The project architect for HUB 317 is Ware Malcomb. Ken McQueen and Chris McClurg with Lee & Associates serve as the project’s exclusive leasing brokers.

Apartment sizes shrinking as rents go up

Renters’ living habits changed over time, as did the floor plans of rental apartments. According to analysis from RentCafe, the average size of a new apartment completed in 2018 in the U.S. is 941 square feet, 52 square feet less than the size of an apartment built ten years ago. This analysis looked at apartment sizes and how they vary from state to state. According to the data from Yardi Matrix, over the past decade the average rent for new apartments went up by 28%, even though the size of the units is shrinking.

ACCORDING TO THE DATA:

■ Phoenix and Glendale took two spots in top 20 cities with the smallest rental apartments in the nation. ■ In 2018, the average apartment size in Phoenix is around 783SF, while renters in Glendale can use up to 781SF. ■ While apartment size in Phoenix decreased by 19% over the past decade, the rent went up by 36%: from $735 in 2008 to $998 in 2018.

City

Average Size (SF)

Seattle, WA

711

Manhattan, NY

733

Chicago, IL

733

Washington, DC

736

San Francisco, CA

737

Tucson, AZ

738

Los Angeles, CA

771

Glendale, AZ

781

Phoenix, AZ

783

Minneapolis, MN

785

Wichita, KS

787

Detroit, Ml

791

Cleveland , OH

796

Mesa, AZ

801

Philadelphia, PA

801

Portland, OR

802

Albuquerque, NM

804

Pittsburgh, PA

811

Toledo, OH

811

El Paso, TX

812

The 2019 Executive Committee of NAIOP Arizona is Molly Carson, Chairman, Ryan Companies US, Inc.; Jim Wentworth Jr., Vice Chairman, Wentworth Property Company, LLC; Cathy Thuringer, Treasurer, The Trammell Crow Company; Rusty Kennedy, Programs Chair, CBRE; Danny Swancey, Secretary, ViaWest Group; Andrew Cheney, Immediate Past Chairman, Lee & Associates Arizona; and Larry Pobuda, Immediate Past Chairman once removed, The Opus Group.

Presents the 26th Annual Best of the West Awards The Best of the West Awards competition began in 1993 to recognize outstanding contributions to the image, lifestyle and economic development of the West Valley. Awards are presented in the categories of Economic Engine, Quality of Life within the Community and Education, and Excellence in Innovation. In addition to these awards, WESTMARC is also proud to present the West Valley Regional Advancement Award, Inspiration in Leadership and President’s Choice. Inspiration in Leadership Award Herman Orcutt, Orcutt/Winslow, retired West Valley Regional Advancement Award Sharon Harper, Plaza Companies WESTMARC’s President’s Choice Cheryl Covert, City of Avondale Economic Engine Award ISM Raceway Quality of Life Enhancement Award in the Community Abrazo West Campus Quality of Life Enhancement Award in Education Midwestern University

NAIOP selects new board The Arizona Chapter of NAIOP, the Commercial Real Estate Association, elected officers and board members for 2019 at its November 6 board meeting.

WESTMARC

Excellence in Innovation Award City of Surprise - AZ TechCelerator Global Concierge Services Program Chairman Molly Carson

New 2019 Board Members are CJ Osbrink, Newmark Knight Frank; Danielle Feroleto, Small Giants; and Cooper Fratt, CBRE, representing the Developing Leaders. Returning members of the Board of Directors include Phil Breidenbach, Colliers International; Bryon Carney, Cushman & Wakefield; Keith Earnest, VanTrust Real Estate LLC; Jeff Foster, Prologis; Tom Jarvis, Willmeng Construction; John Orsak, Lincoln Property Company; Darren Pitts, Velocity Retail Group; and Candace Rosauro, Jokake Construction.

Honorable Mention Economic Engine Award City of Surprise Railplex Quality of Life Enhancement in the Community Mission of Mercy Quality of Life Enhancement in Education Arizona Charter Academy Excellence in Innovation Speak Up, Stand Up, Save a Life Conference 7

TRENDSETTERS The Tenant

Experience Gap A new study done by Building Engines, a property management firm, sheds some light on the considerable disconnect between what property managers prioritize and what tenants really expect. The study was based on surveys of over 600 CRE professionals and tenant employees who work in multi-tenant CRE buildings across the United States. The report’s findings uncover surprising disparities in four aspects of the tenant experience; investment in amenities, communication, security, and access control, and CRE talent.

75 STRENGTH

A GLIMPSE INTO THE KEY FINDINGS:

IN NEIGHBORS An Arizona-based real estate crowdfunding company is finding strength in numbers. Thanks to new laws in Arizona, Neighborhood Ventures has opened up the world of commercial real estate investing to nonaccredited investors. The new laws allow Arizona residents to invest a minimum of $1,000 in projects. Already, Neighborhood Ventures has two projects funded by more than 100 people each. It started in June of 2018, when Neighborhood Ventures closed on Venture on Wilson, a 12-unit apartment project in downtown Tempe. A total of 104 people invested in the deal, raising $500,000. The investment plan calls for new appliances in all units, upgraded flooring, cabinetry, countertops, fixtures and common areas. Upon completion of the renovations, Neighborhood Ventures expects to bring all rents in line with the market and sell the property within three years. The target preferred return for crowdfunding investors is 12 percent each year. Venture on Marlette is a very similar project to Wilson. Neighborhood Ventures needed 125 investors to raise the target of $600,000. Like the Wilson project, Marlette is a 12-unit complex in Central Phoenix and will undergo similar improvements. They will renovate and hold Marlette for three years before selling with a goal of a 12-percent yearly return for the investors. “It’s clear there’s a strong demand for crowdfunding projects that let people invest in their communities,” said Neighborhood Ventures co-founder Jamison Manwaring. For information, visit neighborhood.ventures.

8 | January-February 2019

% of CRE professionals

are confident that building occupants receive important building information, but only 25 percent of occupants agree.

There are gaps in how property managers currently communicate and how tenants expect to receive information in the future. For example, of building management teams communicate with tenants via phone today, while only 4 percent of tenant employees plan to use this method in the future.

80 30

% of CRE professionals dedicate

at least half of their time to improving the tenant experience, but only 28 percent allocate at least half of their operating budget toward the same goal.

Buildings are under-investing in cybersecurity. Only

% have a

cybersecurity program in place today.

For the complete report, visit buildingengines.com

2019

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EXECUTIVE PROFILE

Team-first

Garlick's focus doesn’t change despite executive title By STEVE BURKS

here’s a word in his official job title that executive managing director and market leader for Newmark Knight Frank’s (NKF) Phoenix office, Mike Garlick, is still getting used to embracing – ‘executive’. “I don’t see myself as the ‘executive’ type,” said Garlick. “I’m very devoted to my staff, because they are the people that do so much of the work. “Yes, I’m an executive, yet, really, my main goal is to create a work environment that’s a little different – a fun and collaborative office space for our professionals to come in to every day.” Garlick was awarded the executive managing director title one year ago, in January of 2018. He had spent the previous four years at NKF, working alongside his brokerage team – Michael McQuaid, Chris Krewson, Jimmy Hoselton and Janel Wangsness. That team is still robust as ever, even with Garlick assuming his executive role. “When I was tapped for the job, I said ‘As long as I can maintain my team and my production, I’d love to do it’,” Garlick said. “I’m excited about the direction that NKF is going in. I’m a team-oriented guy, a collaborative guy and still a player-coach. My livelihood and passion are rooted in my team, so it is important to me to continue to build and grow my business in that avenue as well.” NKF has a unique management structure, where executives, like Garlick, can often continue to work

10 | January-February 2019

in broker roles. Granted, Garlick does have some added responsibilities, such as an emphasis on recruiting potential new brokers, yet he still maintains his focus on the needs of his clients. “I understand what it means to be in the trenches, which is an important differentiator to clients, brokers and recruits, alike. My goal is to grow the office with intention and bring on collaborative, talented brokers; we’re very strategic with who we bring on.” “Recruiting can be a challenge, but it is an exciting challenge,” Garlick said. “All of the brokers I’m recruiting are my peers whom I respect. I have a relationship with 95 percent of the recruits, so approaching them is the easy part.” Garlick’s team-first attitude can be traced back to his days at Phoenix Brophy Preparatory, where he was a two-year starter on the Broncos soccer team. After he graduated from the University of Arizona, Garlick, urged by his father, started his first job in 1993 as an office researcher in the commercial real estate industry. In the days before the internet, Garlick tracked office data by hand, making calls to brokers and compiling a quarterly report of office listings over 10,000 square feet as well as recording the changes in absorption. “I would get in my car and drive to every single office building in the city over 10,000 square feet and check the sign to see if it was the same person listing it,” Garlick said. “I would drive

the market, the entire market, and then I would come back to the office and make my calls.” Garlick’s proven attention to detail and his work ethic helped him to continue to move up in the industry. He made the move from researcher to runner – a junior position – for a leading brokerage team. After two years as a runner, Garlick became a broker and, ultimately made the move to a new brokerage firm. Garlick, an associate, became a principal in just 14 months, the firm’s fastest associate-to-principal transition in the history of its Phoenix office. In 2014, Garlick and long-time team members, McQuaid and Krewson, were recruited to NKF, where they grew their team by two more. Garlick’s positive, friendly personality; natural people skills; and perception as a leader within the office made him an excellent fit for the executive managing director position, as the position is peoplecentric and has an important focus on recruiting brokers.

AFTER HOURS

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Meszaros finds his escape outdoors By STEVE BURKS

s a self-described “third generation Arizona real estate guy,” Jason Meszaros can’t remember a time he wasn’t involved in real estate in some way. “I’ve professionally been active in the real estate market for 25 years, but I feel like I’ve been in it my entire life,” said Meszaros, who is the Senior Vice President and Managing Regional Director for Irgens. His grandfather, Julius, and his father, Richard, were active in the Valley real estate market dating back to the 40’s. “From an early age I can remember driving around properties in the back seat with my father and grandfather, and heated debates at the dinner table. It feels like I’ve had a 46 year education on the Phoenix Market.”

12 | January-February 2019

A key part to a long, successful career in just about any business is finding a way to escape work. For Meszaros, his longtime involvement in the Scottsdale Charros, where he’s been active for 10 years, is a great way to focus on something other than work. Also, being outdoors has proven valuable to Meszaros during his career, but he doesn’t leave work completely behind when he ventures out for a hunting or flyfishing trip. Meszaros is an avid flyfisherman and enjoys taking his family and friends to flyfish in places like Lee’s Ferry near Page, where he has a boat. He also enjoys taking clients out for weekends on the water, preferring a couple days in the great outdoors to a four-hour round of golf. “If you have never flyfished and have never been to that part of our state, they will have an experience of a

lifetime. It’s a win-win-win,” Meszaros said of Lee’s Ferry. “I love taking people up there. You really get to know someone and I get to expose them to something that’s foreign to them.” Meszaros said many of the people he’s taken on fishing trips have become clients and friends. “I find it to be a more ‘real’ networking experience,” said Meszaros. “I always say, it’s one thing to play golf for four hours with someone and then in five months, he might remember that you played with him. When you go on a 3-day fishing trip, you’re friends forever.” Meszaros said his fondest moments while fishing come when his kids land a fish, “it’s very rewarding when I can take them out and they can do it on their own.” He did, however, have a favorite catch of his own while fishing in Idaho on the Teton River. Meszaros and a friend were casting in a fast-running, treacherous part of the river and weren’t really expecting much action, he was using very light line and a small fly. “I was just hoping to get a bite on anything and I ended up catching one of the largest trout I've ever caught,” Meszaros said. “we fought in the rapids for almost 20 minutes but once it was landed, it was one of the most memorable experiences.” For Meszaros, fishing and being outdoors have been extremely rewarding and he and some friends came up with a way to turn their interest in the outdoors into a philanthropic endeavor. In 2007, Meszaros and a group of friends started Arizona Trout Camp. “We cap it out at 100 every year,” Meszaros said. “We’ve grown it from kind of a bootleg thing where 35 of us made it the first year and raised $4000. Now, we donate over $50,000 every year to New Pathways for Youth.” Trout Camp is a 3-day experience at Cyclone Lake, a private lake on the White Mountain Apache Indian Reservation near Pinetop. Participants get all of the food, drinks and fishing they can handle for one $500 fee for the weekend, which usually sells out quickly. To learn more about Arizona Trout Camp and New Pathways for youth, visit aztroutcamp.com.

ARIZONA’S AUTHORITATIVE MID-YEAR UPDATE & FORECAST

Save the Date! August 1, 2019 AZRE magazine will host a panel of Arizona’s top commercial real estate experts, yielding in-depth discussions of economics, development and state of the industry. Highlights include market analysis, all-star broker panels, networking and a cocktail reception.

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NEW TO MARKET A

MIXED USE A WINERY SUITES OF SCOTTSDALE DEVELOPER: Fassco Development GENERAL CONTRACTOR: Haydon Building Corp. ARCHITECT: DPA Architects, Inc. LOCATION: 6961 E. 1st St., Scottsdale SIZE: 52,000 SF VALUE: WND START/COMPLETION: 3Q 2018-2020

14 | January-February 2019

MULTIFAMILY B 24 JEFFERSON DEVELOPER: Hines GENERAL CONTRACTOR: Whiting Turner ARCHITECT: SmithGroup LOCATION: NW corner of Jefferson and Third streets, Phoenix SIZE: 480,000 SF VALUE: WND START/COMPLETION: 1Q 2019-4Q 2020

HEALTHCARE C AVANTI SENIOR LIVING DEVELOPER: Drive Development Partners GENERAL CONTRACTOR: Adolfson & Peterson Construction ARCHITECT: PRDG Senior Living Architecture LOCATION: Peoria SIZE: 80,000 SF VALUE: $15 million START/COMPLETION: Nov. 2018-3Q 2019

HOSPITALITY D CAMBRIA HOTEL DEVELOPER: True North Studio, LLC and Choice Hotels International, Inc. GENERAL CONTRACTOR: UEB ARCHITECT: DAVIS LOCATION: 222 E. Portland St., Phoenix SIZE: 127 rooms VALUE: WND START/COMPLETION: 4Q 2018-4Q 2019

EDUCATION E OTTAWA UNIVERSITY STUDENT HOUSING FACILITY DEVELOPER: NOVO Development GENERAL CONTRACTOR: Wespac Construction ARCHITECT: HKS LOCATION: 15950 N. Civic Center Plaza, Surprise SIZE: 73,461 SF VALUE: $19.9 million START/COMPLETION: Nov. 2018-Nov. 2019

HEALTHCARE F ACOYA SCOTTSDALE AT TROON DEVELOPER: Ryan Companies US, Inc., Cadence Living GENERAL CONTRACTOR: Ryan Companies US, Inc. ARCHITECT: Ryan A+E LOCATION: 10455 E. Pinnacle Peak Pkwy, Scottsdale SIZE: 198,000 SF VALUE: WND START/COMPLETION: Nov. 2018-mid-2020

BRINGING BEAUTY to building By STEVE BURKS

or Jorge Pérez, art is more than just things that can fill up walls and rooms or add color to spaces that beg for more color. The Related Group’s chairman, CEO and co-founder views art as a vital part of his life and his business empire. “I’m a big art collector, so I believe that transferring that beauty into the buildings that we do improves not just the building, but people’s lives,” said Pérez. “That is something that separates us from the rest of the developers.” Pérez and Related Group announced in late November that they were planning on investing roughly $500 million on residential projects in the Phoenix market. While the precise locations of those projects was not quite ready to be released to the public, Pérez said they will be in downtown Phoenix, downtown Tempe, downtown Scottsdale and in the Deer Valley submarket. His plan is to have three projects underway in 2019, with the fourth close behind. Related Group is renowned for best of class condominium and apartment complexes. That reputation was earned over more than 30 years of operations which began in Miami and have now spread around the globe. Related Group projects are at the forefront of architectural innovation and design. No two projects are alike, as Pérez challenges his company to make each project better than the last. “We take each site individually and say, ‘what are we going to deliver here and how is it going to be unique, not just for the sake of being unique, but unique for the sake of being better,’ “ Pérez said. “We don’t deliver projects, we help neighborhoods become better.”

16 | January-February 2019

At the heart of Related Group projects is original artwork. Related Group has two, full-time curators in art director Patricia M. Hanna and curatorial associate Anelys Alvarez. They have curated a corporate collection of more than 500 pieces, which is constantly changing as they acquire new art and place art in Related’s projects. Works by Fernando Botero, Jaume Plensa, Julio LeParc and Fabian Burgos are proudly displayed at Related developments, complementing each building’s unique character and often serving as public fixtures of the community landscape. Pérez said his company seeks out contemporary artwork from around the world for its projects, which is something that very few developers do. “I go out and look at some beautiful jobs and all of the sudden I see prints that you can buy for $10 up on the walls,” Pérez said. “Not only do we bring art into the building, we educate the tenants about the art. We publish books called Provenance, which talk about the art, the artists, to educate people as to why we’re spending the kind of money that we’re spending for art in their buildings.” Related Group not only spends money on finding art for its buildings, it spends large amounts of money on large murals for the exterior of its buildings. Some of the more recent examples of large murals on Related projects are the Icon Midtown in Atlanta, and the SLS Brickell and the Brickell Heights building, both in Miami. Atlanta artist Hense was commissioned to paint a 95-feet, by 65-feet mural on the Icon Midtown. At SLS Brickell, German artist Markus

BIG ART: Clockwise: Icon Midtown in Atlanta, SLS Lux and SLS Brickell in Miami feature large-scale murals or art installations by world-renowned artists like Markus Linnnenbrink, Fabian Burgos and Ana Martinez.

Linnenbrink created a 10-story mural in his famous ‘drip painting’ style. At Brickell Heights, Fabian Burgos created a mural that covers the north and south facades of the parking garage for the building. Related also commissions sculptures and interior installations for its projects. One of its most recent commissions is a light installation at the SLS Lux in Miami by artist Ana Martinez. Venturing into the Phoenix market will give Pérez and his company a clean canvas to work from. Related is wellknown for its use of the world’s top architectural firms like Arquitectonica, OMA (which was founded by Rem Koolhaas) and Pelli Clarke Pelli. Pérez also puts a premium on interior design and landscaping for all of his Related Group projects. In all of the projects that Related Group does, pride in the product is abundantly clear. “We have a job in Tampa, it’s a beautiful job and the job is done, but we’re going over there and we’re going to spend an extra million dollars in architecture and art touches just so the building reaches the level of what we love and can be proud of,” Pérez said. “99 percent of developers would not do that. We are just very proud of what we do, it’s like our children, when we finish those buildings.” For Pérez, the projects he plans in Arizona will be built with the same attention to detail that has been so successful for Related Group. The projects will be unique and be something that both the builder and the buyer will be proud of for years. “If you look at surveys on a person’s greatest joy or something they are most proud of, first is family, then it is between their job and the place that they live, their home,” Pérez said. “So it’s very important for us to make homes that are as satisfying and gratifying as possible. “There’s so much pride in delivering that kind of product and I think that’s part of our DNA.” 17

MULTIFAMILY/SALES

$99.1M | 346,500 SF

CITRINE 4900 N. 44th St., Phoenix BUYER: N/A SELLER: Simpson Housing BROKER: N/A

$99M | 742,178 SF

ARRAY SOUTH MOUNTAIN 13229 S. 48th St., Phoenix BUYER: Bridge Investment Group Partners LLC SELLER: Fairfield Residential BROKER: CBRE

$90M | 350,000 SF

CRESCENT HIGHLAND 4626 N. 16th St., Phoenix BUYER: Greystar Real Estate Partners SELLER: Crescent Communties BROKER: CBRE

$59M | 480,414 SF

AVANA GILBERT 3225 E. Baseline Rd., Gilbert BUYER: Greystar Real Estate Partners SELLER: Acacia Capital Corporation BROKER: CBRE

$58M | 444,588 SF

AVANA CHANDLER 3800 W. Chandler Blvd., Chandler BUYER: Greystar Real Estate Partners SELLER: Acacia Capital Corporation BROKER: CBRE

RETAIL/SALES

$44.7M | 232,577 SF

PALM VALLEY PAVILIONS WEST 1380-1474 N. Litchfield Rd., Goodyear BUYER: DRA Advisors LLC SELLER: SITE Centers BROKER: Newmark Knight Frank

$15.6M | 130,333 SF

AT HOME 15255 N. Northsight Blvd., Scottsdale BUYER: At Home SELLER: Walmart, Inc. BROKER: Velocity Retail Group

$14.1M | 112,211 SF

AT HOME 1891 E. Williams Field Rd., Gilbert BUYER: VEREIT Real Estate LP SELLER: At Home BROKER: N/A

18 | January-February 2019

$11.1M | 76,122 SF

THE SHOPPES AT HIGHLAND VILLAGE 1133 N. Ellsworth Rd., Mesa BUYER: First Commercial Real Estate SELLER: Glenwood Development Company BROKER: Cushman & Wakefield

$10.2M | 25,000 SF

SCOTTSDALE AIRPARK 8053 E. Raintree Dr., Scottsdale BUYER: Gil Zahavi SELLER: The Mack Company BROKER: CBRE

It’s the big deals and the brokers who close them that make the market an interesting one to watch. Here are the top notabe sales for the months of November and December. Sources: Daniel Zawisha at Cushman & Wakefield Research.

OFFICE/SALES

$41.4M | 190,419 SF

MISSOURI FALLS 645 E. MISSOURI AVE., PHOENIX BUYER: El Dorado Holdings, Inc. SELLER: N/A BROKER: CBRE

$28M | 225,000 SF

$21.25M | 132,263 SF

BURGBACHER BUILDING 3141 N. 3rd Ave., Phoenix BUYER: Holualoa Companies SELLER: Jerry & Vickie Moyes Trust BROKER: N/A

RED MOUNTAIN CORPORATE CENTER 4801 E. Washington St., Phoenix BUYER: Alidade Capital LLC SELLER: N/A BROKER: HFF

$25M | 81,894 SF

$17.25M | 86,000 SF

KIERLAND CORPORATE CENTER II 7033 E. Greenway, Scottsdale BUYER: Ascentris, LLC SELLER: Parallel Capital Partners BROKER: Cushman & Wakefield

LAND/SALES

PRINCESS & PERIMETER II 17550 N. Perimeter Dr., Scottsdale BUYER: Edgewood REIT SELLER: N/A BROKER: Lee & Associates

INDUSTRIAL/SALES

$30.2M 21,433,624 SF

E. QUEEN CREEK RD., QUEEN CREEK BUYER: N/A SELLER: N/A BROKER: N/A

$27M 6,817,140 SF

1002 W. PETERS RD., CASA GRANDE BUYER: Centrix Builders Inc. SELLER: N/A BROKER: N/A

$24M 16,536,625 SF

NE COOPER RD. & JUDD RD., FLORENCE BUYER: N/A SELLER: Najafi Companies BROKERS: N/A

$14.8M 6,098,400 SF

10048 S. 59TH ST., LAVEEN BUYER: David J. McHenry Family Trust SELLER: Anthony Jerome La Salvia BROKER: N/A

$12.3M 4,976,730 SF

N. PERRYVILLE & W. CACTUS RD., SURPRISE BUYER: Lennar SELLER: Land Solutions Inc. BROKER: Arizona Land Advisors

$72.7M | 540,349 SF

OPUS GOODYEAR CROSSING 16811 W. Commerce Dr., Goodyear BUYER: Lexington Realty Trust SELLER: Opus West Corporation BROKER: N/A

$10.625M | 192,158 SF

PAPAGO INDUSTRIAL PARK 430 N. 47th Ave., Phoenix BUYER: N/A SELLER: ITC BROKER: Cresa

$7M | 85,986 SF

BUILDING 1 2110 E. Raymond St., Phoenix BUYER: Mapletree Investments Ltd. SELLER: Norges Bank Investments Management BROKER: N/A

$6M | 75,975 SF

FOSSIL CREEK 302 E. University, Phoenix BUYER: Mapletree Investments Ltd. SELLER: Norges Bank Investments Management BROKER: N/A

$4.5M | 58,817 SF

BUILDING 16 4137 W. Adams St., Phoenix BUYER: West Adams Holdings LLC SELLER: First Industrial Realty Trust, Inc. BROKER: N/A 19

LEGISLATIVE UPDATE

Water a key issue ???????

for 2019 legislature

here is an old saying in Arizona that “whisky is for drinkin’ and water is for fightin’.” A more modern round of contentious water discussions has been taking place throughout Arizona for more than a year. The hope is that the Arizona Legislature will act in the upcoming 2019 session on the issue of water and its impact on economic growth in our state.

THE HISTORY To fully understand the impact of water on modern era economic development one must look at the history of the subject. In 1922 seven Colorado River Basin states, including Arizona, created a compact that determined river water allocation in the arid western states. In 1980, Arizona passed legislation that set standards for responsible groundwater use and preservation in the Groundwater Management Act. The Groundwater Management Act of 1980: • Created the Arizona Department of Water Resources. • Required developers building in active management areas to demonstrate an assured water supply lasting at least 100 years for new growth. • Established a program of groundwater rights and permits. The net effect of Arizona taking responsibility for its water management has been economic growth throughout the state. 20 | January-February 2019

economies would face restrictions. As Lake Mead water levels fall, Arizona municipalities may impose additional water restrictions and in some cases rationing could occur. For obvious reasons, water is crucial for the attraction, retention, expansion and long-term viability of business in Arizona. Our state must act quickly and decisively.

Eric W. Emmert AAED

THE PROBLEM The U.S. Bureau of Reclamation is responsible for the management of Hoover Dam and the release of Colorado River Water. Lake Mead’s water level is currently at 1079 feet. Should water levels drop below 1075, a shortage declaration is initiated. Arizona and Nevada would face reductions in the amount of river water each state is allocated. California, despite being a member of the compact, would not face water allocation reductions until lake levels drop further. This shortage declaration could come as quickly as 2020. A reduction in river water allocation will make management of Arizona’s water even more important.

THE IMPACT ON ECONOMIC DEVELOPMENT Reductions in water allocation would impact the state in different ways. Rural Arizona agrarian

THE SOLUTION The Arizona Legislature needs to pass a Drought Contingency Plan or DCP. A DCP will allow Arizona to work collaboratively with other states dependent on the Lower Colorado River Basin, so that when water levels in Lake Mead reach critically low levels, no single state feels the brunt of a water shortage. In recent months, Arizona lawmakers have held hearings throughout the state to better understand the needs of each region. The high country, metro areas, farming communities and rural municipalities all have different water needs. A DCP has the potential to unify the state’s diverse interests while respecting the needs of each region. The Arizona Association for Economic Development AAED is calling on the Legislature to make passage of a DCP an early priority of the upcoming session. Eric W. Emmert is VP of Dorn Policy Group, Inc. AAED’s Public Advocate and AAED Member

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LEGISLATIVE UPDATE

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The Stewart: With a view of The LINK PHX under construction. (Photo by Mike Mertes, AZ Big Media)

Apartments are meeting rising demand, or so it would seem

he apartment industry continues to play a role in helping reshape and bolster Arizona’s economy by housing its workforce. The University of Arizona projects that nearly 10,000 apartment units will be built each year (from 2018) through 2030, generating $1 billion in constructionrelated activity. Nearly 12,000 jobs will be created by the new developments; $148 million will be generated for state and local governments through taxes and development fees with a total economic contribution of $1.7 billion per year. During the past 10 years, the Valley has experienced a renaissance in apartment development. Fueled in large part to years of inactivity during the Great Recession and a surge of families, Millennials, and emptynesters alike are moving back to the

22 | January-February 2019

Courtney LeVinus AMA

urban cores to be closer to the activity. Once empty lots are now being transformed into mixed-use, midrise, or in some cases high-rise developments. But even with all the apartment construction activity in the pipeline or planned for the next decade, the state is still not meeting demand.

In order to help meet the demand and to provide a quality workforce and affordable housing options, the Arizona Multihousing Association in 2019 will continue to look to the Arizona state legislature to pass pragmatic policies so that rental property owners can develop and operate on a level playing field. This must occur throughout the various municipalities to ultimately reduce the cost of housing for working families. Workforce housing is a critical pillar of the state’s economy as large employers seeking to relocate here often cite housing affordability as a key component in their decisionmaking process. Communities around the country are realizing that simply ignoring the signs of a dwindling housing supply can have strong economic implications and the damage can become seemingly irreversible when the lack of supply becomes a crisis. Take Silicon Valley as the example. Part of what makes Arizona an attractive destination for large employers is our state’s unique access to quality affordable housing options. Unfortunately, burdensome and sometimes overreaching local landuse restrictions, design guidelines, and discretionary review processes combined with rising land costs and shortages of skilled labor have jeopardized Arizona’s longstanding “affordable” designation. While Arizona may not be at the brink just yet, we must look to the state for innovative solutions to prevent a new housing crisis. Whether it’s policy aimed at reducing government-imposed cost burdens at the state or local level or enacting new policies designed at encouraging new affordable housing developments, the state must take action now in order to prevent a future housing shortage. Courtney LeVinus is CEO of the Arizona Multihousing Association. For more information on the AMA visit arizonamultihousing.org.

Prospects for school finance reform in 2019 I

t is clear the “Red for Ed” movement to increase teacher pay has had an impact both with the recent state elections and on public policy both last year and most likely next year as well. It is probable that Governor Doug Ducey’s greatest legacy as a newly elected two-term incumbent will be in this policy area. Before discussing what may happen, we need a quick review of what has occurred to date. The State has added more than $1.3B in new on-going K-12 funding which is on top of population and inflation adjustments. Just two components of this were the passage of Prop 123 some time ago related to State Trust Land disposition reform and the Prop 301 sales tax renewal by the Legislature last year which will help increase teacher pay 20% by 2020. The 20% increase in teacher pay over three years is expected to bring our teacher pay rank from 40th in the union to 16th which is a HUGE improvement. This is $56,600 as the average pay per teacher by 2020. The greatest on-going challenge in funding teacher pay is that escalating health care costs and pension liabilities eat into these salaries unduly. The biggest on-going challenge for the taxpayer is this added $1.3B in funding did NOT also include accountability or school performance reform measures. The problems with our school finance system are well documented over the years as many students are moving beyond their district lines to other better performing schools that are both charter and other public schools when their parents are paying property taxes in the district they geographically reside. This leads to a mis-match in funding and is inefficient when some school districts should be consolidating or selling their under-utilized or vacant school facilities. This has led many school reform experts to advocate for “backpack funding” where the monies allocated locally and by the

Tim Lawless

BOMA and CREED

state to “equalize” should more follow the student and their school of enrollment than flow to school districts and their inefficient overhead administration. The calls for equity are also made more difficult when more affluent school districts approve local voter bonds and overrides for additional M&O and capital construction. Due to a property tax “split roll” system where businesses pay by formula 80% more in property taxes via an uncompetitive assessment ratio, it is clear the business community has a significant financial investment and vital stake in educational outcomes/ student achievement. Hence, there are certain principles that should guide any further future reforms. In short, funding should better follow the student as much as possible which is only fair under an open enrollment system. We also need to eliminate or lessen the growing funding disparities between more affluent and less affluent wealth school districts as the status quo will only make the system more ripe for litigation. Most importantly, the business community should not agree to a tax increase such as a .4% increase in the state sales tax rate unless it is accompanied with significant performance and accountability reforms and does as little

harm to our tax system and economy. The greater this revenue influx, the more significant the demand for reform should be. Going beyond a more modest sales tax increase should also result in property tax reform for commercial properties that have among the highest effective tax rates in the country. The prospects for reform this year seemed high at the crest of the “Red for Ed” movement but seem to have lessened somewhat after the teacher pay package and the election. What could rebuild this push, however, is a growing state surplus that is now expected to be $1.1B of which $900M is considered one-time but the $200M balance could be used for on-going base increases. The Governor’s State of the State address in January will largely “set the table” and it will take a few months for the State Legislature to respond and put their own imprint on the shape of this accountability and increased funding reform but the time to act is now upon us. If modest steps are undertaken on the school performance side or reform is more piecemealed, the chances of passage are high next year. If, however, there is a push for wholesale systemic K-12 finance reform, it is more likely this year will be only for education of legislators and that the heavy lifting would wait until early 2020 as this is a very thorny and complicated area that requires much giveand-take and compromise. The business community has a vital stake in K-12 performance outcomes and the resultant economic well-being and future employment prospects of our children. We need to make sure, however, that ever-increasing expenditures will result in higher academic achievement to make this happen. Timothy Lawless is President of CREED and executive director of BOMA of Greater Phoenix. 23

ANNUAL OUTLOOK

THE SEQUEL

Valley’s CRE industry expected to maintain momentum By STEVE BURKS

ften, sequels don’t live up to the high expectations set by their predecessors, but when it comes to the general health of the commercial real estate market in Greater Phoenix, another year like 2018 is very welcome. All of the major economic signs point to another positive year for the market, with strong population growth, solid job numbers and a very business-friendly environment. There are very few factors that seem to be working against continued growth in the overall economy and in commercial real estate. One factor is the shrinking availability of land to develop in

24 | January-February 2019

the central core of Valley cities. Another, more pressing, issue is the cost of doing business for a developer. “The biggest challenge I see is construction costs,” said Rommie Mojahed, director of retail leasing & sales investments for SVN | Desert Commercial Advisors. “With all the new development and demand, the labor pool has been shrinking and the construction costs have been increasing. With the land cost up and the construction costs, it could be a real challenge for developers.” But those factors won’t likely be enough to stall Arizona’s growth, as each of the sectors appear set for continued success.

ANNUAL OUTLOOK INDUSTRIAL The industrial outlook for 2019 was summed up by Cushman & Wakefield’s executive managing director Will Strong thusly: “I never thought I would say it, but it’s actually cool to be an industrial guy.” The Central Airport and the Southwest Valley are the hot submarkets for industrial products. Goodyear will see a lot of new, largescale industrial activity, as will the Loop 303 and the new South Mountain 202 corridor.

“The development pipeline feels about right and the industrial market is best served to avoid the historical inclination to over build and repeat the boom and bust cycle Phoenix can quickly experience. Metro Phoenix is well situated with the availability of best in class facilities either recently completed, under construction or in the planning stages to compete well with other markets for regional user requirements of all sizes.” –Jeff Foster, vice president and leasing officer in the Phoenix market for Prologis

26 | January-February 2019

THE TOP TEN ISSUES AFFECTING REAL ESTATE 2017-18  Political Polarization and Global Uncertainty  The Technology Boom  Generational Disruption  Retail Disruption  Infrastructure Investment  Housing: The Big Mismatch  Lost Decades of the Middle Class  Real Estate’s Emerging Role in Health Care  Immigration  Climate Change Source: The Counselors of Real Estate

OFFICE Metro Phoenix added 18,300 office sector jobs, year over year, through the third quarter of 2018 and the market is expected to continue to be healthy in 2019. The hot submarkets heading into 2019 are north Tempe along Tempe Town Lake, and the Price Corridor in Chandler. Of the just over 3 million square feet of office product currently under construction, 1 million of that is in North Tempe and 872,954 is in the Price Corridor. The Southeast Valley along the Loop 202 is expected to continue to be the most active submarket for new office products.

“Job growth is expected to continue, fueled by affordable living and favorable tax environments for businesses. This translates directly into office leasing demands. Vacancy rates will continue to decrease in existing office product.“ Sean Spellman, managing director at Cushman & Wakefield

SOUTH MOUNTAIN FREEWAY: Estrella Drive Roundabout. (Photo courtesy ADOT)

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HOUSING (Multi-family and single family) The Metro Phoenix market added 65,000 jobs, year over year through the third quarter, unemployment dipped below 4 percent and Maricopa County remains the top destination for new residents in Arizona. The overwhelming majority of new multifamily products will remain in the luxury category in 2019. New, high-end global players like The Related Group are making their way to the Phoenix market, which will only raise the quality of product being built in the near future.

“The two most likely challenges for 2019 are rising interest rates and cost of living. As cost of living continues to rise and takes a toll on peoples’ overall earnings, rent growth will slow, which could cause cap rates to rise as buyers see less upside on rent growth.” –Kimberley Rollins and Dallan Randall, Rollins & Randall Multi-Family Group at Commercial Properties Inc. 28 | January-February 2019

RETAIL The greater Phoenix retail market had a solid 2018 and appears poised to continue that momentum into 2019. The new year will see continued positive net absorption over the 2 million square foot mark, as well as more than 1 million square feet of new space. This will likely cause the vacancy rate in the Phoenix market to continue its downward trajectory below the 7 percent mark. The East Valley will be home to the vast majority of new retail space, with nearly 400,000 square feet projected.

“Post-recession, Phoenix has lagged behind the other regional markets and was one of the slowest recovering major markets in the U.S. Phoenix didn’t really find its pace until the last few years.” –Dave Cheatham, president, and Darren Pitts, executive vice president, Velocity Retail Group. For a more complete annual outlook for 2019, visit azbigmedia.com

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Source: Colliers International

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ANNUAL OUTLOOK

SHAPING THE VALLEY

30 | January-February 2019

A look at the companies behind some of the biggest projects of 2019

By STEVE BURKS

n 2019, the Valley will see visions become reality, as several notable projects are completed. Game-changing buildings will begin filling up at Block 23, The Watermark and The Grand Building 2, transforming the

skylines around the Valley. Here is a look at the companies behind many of these developments. From planners, to land brokers, to the architects, designers, builders and advisors; these companies are driving commerical real estate forward in 2019.

ANNUAL OUTLOOK CLIFTON LARSON ALLEN

CLA offers a traditional accounting, tax reporting and compliance perspective, as well as industry-specific real estate services as well as assistance in raising capital. In 2019 we are looking forward to assisting business owners, investors, fund managers and real estate developers who are taking advantage of Opportunity Zone tax benefits and other strategies influenced by Tax Reform.

COLLIERS INTERNATIONAL ARIZONA

With 65 brokerage professionals who worked on $2 billion worth of commercial real estate transactions in 2018, Colliers International hopes to continue positively influencing our clients in their quest to make good business decisions. The Arizona economy is poised to continue its strong performance into 2019 and beyond, and we are committed to helping businesses take full advantage of the opportunities created.

ASPIRANT DEVELOPMENT

Scottsdale-based Aspirant Development enters 2019 as bullish as ever on the transformation of downtown Phoenix. Its iconic downtown high-rise apartment located at the corner of Central Ave and McKinley – The Stewart – began leasing in late December of 2018. Look for another Aspirant residential high-rise to break ground at 3rd Ave and Fillmore in early 2019, with additional downtown projects in the pipeline.

BALFOUR BEATTY

Balfour Beatty has been entrusted to construct state-of-the-art developments for some of the most noteworthy resorts, healthcare facilities, and public venues in the Grand Canyon State that include the Scottsdale Fairmont Princess, the Phoenix International Raceway, the Soleri Bridge and Plaza, and coming soon, the luxurious Copperwynd Resort and Club expansion.

BURCH & CRACCHIOLO

Burch & Cracchiolo played an integral role in several high profile deals in the Valley in 2018 such as Marina Heights in Tempe and Nationwide’s Cavasson in Scottsdale. 2019 has ushered in a new practice area for the firm in Intellectual Property and Patent Law. Seasoned IP attorney Sue Chetlin recently joined the firm which notably adds to the broad menu of legal services the firm can offer clients. 32 | January-February 2019

BALFOUR BEATTY: Mountain Shadows

BUTLER DESIGN GROUP

2018 was another remarkable year for BDG. We became an employee-owned ESOP, were named NAIOP’s ‘Firm of the Year’ for the 13th time and designed and/or have started construction of over eight million squarefeet of projects. Some featured projects include: Creighton University Health Sciences, SkySong 5, Freedom Financial headquarters, Nationwide’s Rivulon and Cavasson projects, McKesson headquarters, PV 303, and Lincoln Logistics 40.

CBRE

In 2017, CBRE settled in to its new Workplace360 office at the Esplanade in Phoenix. Powered by technology, the paperless and free-address space embraces flexibility, mobility and productivity. Looking ahead in this ever-evolving digital economy, CBRE will continue to invest in technologies that strengthen our ability to achieve superior outcomes for every client we serve.

DLR: Maricopa County Attorney’s office complex

ANNUAL OUTLOOK CUSHMAN & WAKEFIELD

HAYDEN BUILDING CORP

JLL

In 2019, DLR Group | WRL’s integrated design team of architects, engineers, interior designers and planners will continue to see growth in their multi-sector practice including fast-tracked data center projects similar to the recently opened EdgeCore Internet Real Estate data center in Mesa. Further growth will be seen in the Workplace and Civic studios, including the adaptive reuse project for Maricopa County Attorney’s office complex, revitalizing the Phoenix urban core.

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In 2019, Cushman & Wakefield will continue to strive to always exceed our client’s expectations. As a leading global real estate services firm that delivers exceptional value by putting ideas into action, we will continue to provide our clients with an integrated real estate services platform that creates creative solutions to prepare them for what’s next.

DLR GROUP

Gensler Phoenix transitioned its leadership this year, marking a new era for the growing 60-person office, now led by Co-Managing Directors, Dawn Hart and Martha dePlazaola Abbott. 2018 was a balanced year of architecture and interiors work, including the completion of notable projects such as the Renaissance Phoenix Downtown Hotel, CBRE Phoenix Workplace 360, and the transformation of the Arizona Center. RED DEVELOPMENT: Block 23

34 | January-February 2019

In 2018 Haydon Building Corp continued to leverage its unique company structure as a full-service Commercial Building, Heavy Civil, and Landscaping contractor to expand our presence in our core markets and to provide exceptional service and value to our clients. In 2019, we look forward to expanding those capabilities to provide a turnkey solution to our private sector clients.

hardison/downey is coming off its biggest volume year in company history in 2018, and is set to have another record breaker in 2019. We are breaking into new markets with our recently established civil division. Market rate apartment and student housing construction will remain a big contributor to our business in the coming year. 2019 marks a year of transition for our firm, with Justin Newman taking over as President on January 1st.

Hensel Phelps is still growing; adding 83 new staff members in 2018 alone. The Maricopa County Intake, Transfer and Release and Southwest Airlines Hangar at Sky Harbor Airport projects saw great progress in 2018 and will be complete in 2019. Work on PSHIA Sky Train Stage 2 at Sky Harbor will continue and Valley Metro’s first design-build project, the Operations and Maintenance Center Expansion will break ground in 2019.

Building on a history of rapid and successful growth in the Valley, JLL continues to evolve its Phoenix presence. Over the past two years, the firm has added key new brokerage service lines as well as value-add services to further assist clients in creating rewarding opportunities. Among these service lines are: valuation and property tax, capital markets financing, lease administration and financial analysis.

Kapture Prefab offers streamlined production of major components for large-scale commercial building projects, and helps address our chronic shortage of skilled labor. Talented architects and engineers develop expedited processes to build components – including exterior panels, interior walls, headwalls, bathroom pods, framing with electrical and plumbing systems – on horizontal surfaces within a contained, safe environment.

Land Advisors is poised for an outstanding 2019. Our current brokerage pipeline is historically strong, our growth across the country continues (we opened Charlotte in 2018 and expect to open another 1-2 offices in 2019), we added a Development Finance business line (Launch DFG), and we are seeing significantly increased production from Land Advisors Capital. Our production is balanced across our entire network of offices.

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ANNUAL OUTLOOK LAYTON CONSTRUCTION

PONO CONSTRUCTION

RYAN COMPANIES US

Pono Construction looks forward to another successful year in aiding Grand Canyon University fulfill their growing needs. Last year wrapped up with two dorms at approximately 241,000 square feet apiece, as well as a new 797,000 SF parking garage. In 2019, we will construct three new dorm buildings, and another new parking garage at approximately 633,000 SF. We anticipate another busy season with what is penciled out for 2019.

In 2019, Ryan will continue to successfully leverage our collective insights of construction, architecture + engineering, development, capital markets and real estate management services. Given our current pipeline, we expect our volume in all service lines to grow in 2019. We will continue to pursue office and industrial build-to-suits, while we find steep growth in senior living, multi-family and industrial projects.

In the last 12 months alone, Lincoln Property Company has delivered the 40’ clear height Lincoln Logistics 40 industrial project, breaking ground on the Class A Grand Building Two at The Grand at Papago Park Center, and announcing Union, the 1.35 million-squarefoot Class A office development in Mesa’s Riverview District. Concurrently, it has grown its local property management portfolio to almost 10 million square feet.

RED DEVELOPMENT

SAINT HOLDINGS

MARK-TAYLOR

RSP ARCHITECTS

2018 was a banner year for Layton Construction at both the local and national level. Building on significant increases in the hospitality, industrial, office, tenant improvement and public sector markets, Layton’s Arizona revenues increased by 50 percent from 2017 to 2018. With a strong backlog of work and exciting opportunities on the horizon, 2019 looks even better.

LINCOLN PROPERTY COMPANY

Mark-Taylor’s focus for 2019 is providing our team members the resources to become the most admired brand in the industry. We’ll continue to focus on recruiting and retaining the most competent, professional, and highly rewarded employees in the industry. We’ll emphasize training to ensure that our teams are the most financially sophisticated within the industry and have been acutely trained in attention to daily operating details.

MCCARTHY BUILDING COMPANIES

McCarthy Building Companies’ Southwest Region anticipates big growth in 2019. Already in the planning stages, our construction teams are breaking ground on major airport, entertainment, lab, stadium, hospital, water and school projects this year. And, having the firm’s solar and water groups based out of Arizona, we are bringing our expertise in clean energy and clean water to communities from coast to coast.

PLAZA COMPANIES

Plaza Companies' momentum will continue at SkySong with the opening of SkySong 5 and the Elements Hotel. In early 2019, the initial phase of the revitalization of Park Central will be complete and groundbreaking for Creighton University Medical School and a 2,000-space parking deck will happen. On the medical office front, Estrella Medical Plaza II will open and the Banner Ironwood and Dignity East Mesa will be underway. 36 | January-February 2019

RED has 35 properties totaling 19 million square feet in 11 states. One of the most highprofile developments underway in the Valley is RED’s Block 23 in Downtown Phoenix that is on-track for completion later this year and will be home to the area’s first grocery store by Fry’s. In Q1 of 2019, RED will also complete The Union Dallas, an 800,000 square-foot, mixed-use development.

2018 brought many exciting moments for RSP, including being honored as AZRE Magazine’s Architect of the Year. In the upcoming year the firm is enthusiastic for the opening of NAU’s Recital Hall, Hines’ Offices at Chandler Viridian to begin welcoming tenants and Westin Tempe to start going vertical. The firm is expanding both geographically (Baltimore and Miami) and into market sectors such as Mission Critical. PLAZA COMPANIES: Creighton University Medical School

With success in 2018 of attracting the large anchors of Lucid Motors and Nikola Motor Company to its Inland Port Arizona and Central Arizona Commerce Park and huge job creation of 10’s of thousands expected, Saint Holdings will be looking for partners and gearing up their 2,800-lot ‘Lake’ community in the heart of The City of Coolidge. The Lake community is planned and has a very strong development agreement in place.

SHEPLEY BULFINCH

Shepley Bulfinch has produced forwardthinking buildings and spaces that inspire living, learning, and healing working extensively across the disciplines of healthcare, education, libraries, civic, and mixed use. Current work includes The LINK PHX, a 257-unit residential tower under construction in Downtown Phoenix, as well as the soon to be complete 487 bed Banner University Medical Center Tucson.

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ANNUAL OUTLOOK UEB BUILDERS: The Stewart

SMITHGROUP

2019 is shaping up to be a tremendous year for SmithGroup (formerly SmithGroupJJR). The impact of SmithGroup’s design leadership was recognized by Fast Company, which honored the firm as one of their Design Companies of the Year. This momentum will continue into 2019 and beyond as the firm continues to work with forward-looking clients to create exceptional design solutions that allow them to solve their most complex design challenges.

SUNDT CONSTRUCTION

In 2018, Sundt Construction built environments where its clients, employeeowners and communities continue to prosper. The firm finished numerous projects including the award-winning University of Arizona Biomedical Science Partnership Building, Ocotillo Water Reclamation Facility and Signal Butte Water Treatment Plant. In 2019, the company will complete building projects such as Harrah’s Ak-Chin Casino & Resort expansion and remodel.

UEB BUILDERS

UEB Builders is delivering two high-rise apartment projects in downtown Phoenix (The Stewart and the LINK PHX) and breaking ground on another high-rise and two marketrate apartment projects and a high-end hotel in the same area in 2019. Also in the pipeline are three student housing projects, from Flagstaff to Tucson, three self-storage projects, the Cambria Hotel and Helios Education Foundation building in Phoenix.

VEREIT

VEREIT is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S. VEREIT has a total asset book value of $14.1 billion including approximately 4,000 properties and 93.9 million square feet. VEREIT’s outlook for 2019 is positive as low unemployment and a healthy GDP continue to provide a positive economic backdrop.

VIVO DEVELOPMENT PARTNERS

VIVO Development Partners and its affiliates have been involved with the development of over 10 million square feet of retail, office, multi38 | January-February 2019

family and self-storage projects. VIVO’s focus heading into 2019 is Gallery Park, a +1 million square foot mixed-use development of regional importance located in the southeast Valley.

WENTWORTH PROPERTIES

Wentworth completed the development of Northern Trust Building 2 at Discovery Business Center, completed the redevelopment of nearly a half million square feet in two Tempe office buildings, and purchased and sold Chase Tower, Arizona’s tallest office building. In 2019 Wentworth will continue to look for additional development and management opportunities in Arizona and its expanding footprint of properties throughout the U.S.

WESPAC CONSTRUCTION

Wespac Construction has some great projects coming up in 2019. To name just a few: Donor Network Corporate Headquarters, student housing & student union for Ottawa University and the Boyer Spec Building at Tempe Rio2100. In 2018, Wespac wrapped up work on notable projects such as the

Discovery Business Center Building 2 for Northern Trust, Freedom Financial Phase 1 and The Peak Apartments.

THE WHITING-TURNER CONTRACTING COMPANY

Whiting-Turner heads into 2019 with four highprofile projects expected to be completed in the upcoming year. The first to come online will be the Offices at Chandler Viridian, a 250,000 square foot, Class A office building. Block 23, a high-rise, mixed-use development in downtown Phoenix that will bring the area its first Fry’s grocery store is also expected to be completed, as is The Grand Building 2, in Tempe.

WILLMENG

A 2018 Best Places to Work winner, Willmeng completed over 130 projects throughout the Southwest. Notable projects include Wentworth West 80, Banner Health Corporate Office expansion, Trammell Crow West 202 Logistics Center, and the 600,000 SF Northrop Grumman at Allred Park Place where they have more than 1 million SF under construction.

WE BUILD SOME SUITE SPOTS Constructing top places to stay across the U.S. â&#x20AC;&#x201C; including Cambria Hotel Phoenix Chandler-Fashion Center

ANNUAL OUTLOOK

By STEVE BURKS

he new generation of commercial real estate professionals are like computer upgrades for the industry. These future leaders were still in school or just starting their careers when the market bottomed out nearly a decade ago. They watched how the market leadership guided their respective companies out of these rough waters and into calmer, more prosperous ones. As the senior executives in the market reach the point where they’re ready to step back and let the next generation take over, a generation of young professionals are ready to take on that challenge. These are some of the professionals poised to upgrade the industry in Arizona and beyond.

EMILIE ANDREWS

DAVID BREEN

Manager of tenant coordination, Macerich Breen is currently working on Macerich’s redevelopment of Scottsdale Fashion Square and was placed in the role due to his unique background in construction and education, earning a master’s degree in Real Estate Development from Arizona State University. Breen is active in the community as a member of the Urban Land Institute’s Young Leaders Group and Valley Partnership Advocates program.

FRED BUELER III

Senior marketing director, Vestar Andrews envisions, directs and oversees the marketing for signature lifestyle center Tempe Marketplace, along with Vestar’s entire Arizona portfolio of nine power centers. At Tempe Marketplace, Andrews executes more than 300 unique events, programs and art installations each year. Currently, Andrews serves as a member of the Tempe Tourism Office Board of Directors.

Project director, Chasse Building Team Bueler earned his bachelor degree in civil engineering from ASU and has been in the building industry for 13 years, 10 with Chasse. Projects completed under Bueler’s leadership include the full campus re-build of Frank Elementary School in Tempe; the development of shopping center Edison Point in Maricopa and redevelopment of Town & Country Shopping Center in Phoenix.

CASEY BLAIS

TIM COLQUHOUN

Shareholder, Burch & Cracchiolo Blais is a problem solver who has handled hundreds of commercial and residential property disputes, including abatement lien foreclosures. Blais served as president of the Young Lawyers Division of the Maricopa County Bar Association in 2014, he’s been selected by Southwest Super Lawyers as a “Rising Star” from 2012-2018.

JENNA BORCHERDING

Office tenant advisor, JLL Market knowledge, client commitment and old fashioned hard work distinguishes Borcherding as a rising star. As part of a topranked local tenant rep team, she has helped close more than 850,000 square feet of office leases, placing companies like Deloitte, DLA Piper and Serendipity Labs. Borcherding was the 2017 NAIOP Developing Leader of the Year and a 2018 NAIOP Board Member. 40 | January-February 2019

Vice president of corporate banking, National Bank of Arizona Colquhoun supports public and privately traded companies with their financing needs in a variety of sectors. Tim joined NB|AZ in 2015 as a lender with over 10 years of banking experience. Tim is an Emerging Leader with the Arizona Bankers Association, an advisory board member for Arizona Microcredit Initiative, and active in NAIOP.

CHRIS EVANOFF

Associate, Fennemore Craig, P.C. After moving to the Valley from Ohio to work for two federal district judges, Evanoff ultimately worked on federal water policy issues affecting Phoenix. He brings these unique experiences to his real estate practice. Chris is active in Valley Partnership and serves as a board member for the Tom Londen Memorial Golf Tournament.

ANNUAL OUTLOOK

ADAM FINKEL

APRIL LUBENOW

COOPER FRATT

CLARE LYDON

CARRIE GARCIA

CULLEN MAHONEY

PHIL HAENEL

CASSANDRA NESHEIM

Principal, Tower Capital During his career, Finkel has been involved in the successful placement of close to $1 billion in debt and equity financing on behalf of his clients throughout North America. He has a diverse background in both finance, as well as commercial real estate leasing and sales. He is actively involved with the Urban Land Institute (ULI) and National Association of Industrial and Office Properties (NAIOP). First vice president, CBRE Fratt specializes in industrial sales and leasing and industrial tenant representation in metro Phoenix. In the last five years alone, he has closed more than 10 million square feet of combined lease and sale transactions, totaling nearly $806 million in value. Fratt has been heavily involved with NAIOP Arizona since his early days in commercial real estate. Fratt achieved the SIOR designation in 2018. Chief administrative officer, LGE Design Build Garcia has been with LGE Design Build for more than 15 years. She started as a receptionist and has grown into her role as Chief Administrative Officer and trusted advisor to the president and CEO, David E. Sellers. Her passion for people and focus on empathy have made her a tremendous leader who cultivates a culture of growth and excellence. Director, Cushman & Wakefield In 2018, Haenel won the Emerging Broker of the Year Award for Cushman & Wakefield having sold more than 2 million square feet of industrial buildings with a total consideration of more than $82 million in 37 separate transactions in 2017. Phil is a member of a four man team made up of Mike Haenel, Andy Markham and Will Strong. In 2018, the team finished as the top industrial team in the Phoenix office. 42 | January-February 2019

Project Engineer, UEB Builders Lubenow’s first development role has been spent as a project engineer for one of the first high-rise apartments to be built in downtown Phoenix (The Stewart). This is a massive undertaking — from the complex historical element of the Circles building at the project’s base to overseeing a large-scale project amid a CRE labor shortage and spike in material costs. Real estate representative, Opus Development Company, L.L.C. Lydon assists with all aspects of development in the Phoenix metro area from site selection and due diligence through project lease up. She has nearly four years of commercial real estate experience, most recently as an associate real estate manager at ViaWest Group. With Opus, Lydon’s experience includes working on Union Tempe and Longbow Gateway One. Senior associate in Phoenix Business Unit, The Trammell Crow Company Mahoney is involved in all facets of real estate development and investment from initial site acquisition and due diligence through project disposition. Mahoney’s experience spans office, industrial, multifamily and mixed-use developments. He is also active in the Arizona chapter of NAIOP as a Developing Leader member and chair for the Young Professional Group. Field operations coordinator & executive assistant, Wespac Construction Nesheim joined Wespac in January 2018 and has embraced the Wespac culture, going above and beyond as a true team player. Nesheim helps with recruiting, coordinates field operations for General Superintendent needs, monitors safety reports, daily superintendent reports, and also represents Wespac while assisting in Business Development ventures.

partnership collaboration trust

Construction Is Teamwork performance achievement profit

ANNUAL OUTLOOK

KYLE ORNE

JORDAN TAYLOR

NICK PEMPER

VICENTE TERÁN

Associate, Quarles & Brady Within the real estate realm, Orne handles all manners of real estate litigation including: disputes over leases, purchases and sale agreements, and title and lien issues; disputes between joint owners of real estate; and development disputes between owners, developers, and contractors. Before joining Quarles & Brady, Orne earned the top score in Arizona on the Arizona Bar Exam. Senior project manager, Skanska USA Pemper has a strong operation focus that allows him to thrive on projects with highly technical MEP systems and fast tracked schedules. Pemper is a LEED Green Associate (GA), which client’s leverage to incorporate greener construction methods. When Nick is not at work, you’ll find him with his wife and four kids all under the age of six.

SARAH PHILIPPE

Finance, True North Studio In 2014, Taylor successfully launched a real estate fund and raised all capital necessary to acquire properties all across the country. Taylor brought an infrastructure for property management to Phoenix-based True North Studio. Taylor’s role at True North revolves around the oversight of all financial aspects of projects. Project manager, Chasse Building Team Terán has been involved in or is currently involved in the improvement and modernization of Town & Country; the modernization of Madison Meadows School, which won a Top Projects Award from Engineer News Record; the new campus build of Frank Elementary School; the modernization and gymnasium addition for Cheyenne Traditional School; San Tan Pavilions; and Edison Point.

Business development, Sundt Construction Philippe serves as the business development representative for Sundt Construction’s Building Group, Southwest District. Philippe provides support to the district’s project executives, project directors and regional directors in client engagement and community relations. Prior to joining Sundt, Philippe was the senior development manager, distinguished events for the American Cancer Society (ACS) in Phoenix.

COLE WOODWARD

BYRON SARHANGIAN

Each of these future leaders brings something different and unique to the market, making for a stronger industry. This next generation of professionals is more connected and industry-savvy than its predecessors, which means they will need to be inventive to make their ideas stand out. The 22 people listed have already stood out among their peers by having a strong work ethic, a willingness to get involved in the community and displaying the personal characteristics that make good leaders. With these young professionals, the commercial real estate industry is in good hands moving forward.

Partner, Snell & Wilmer Sarhangian serves as Co-Chair of Snell & Wilmer’s Real Estate Practice Group and Opportunity Zone Industry Group. He has been ranked in Chambers USA: America’s Leading Lawyers for Business® in Real Estate from 2015-2019 and in The Best Lawyers in America® for Real Estate Law in 2019. He is currently representing investors, fund sponsors and developers with respect to the Opportunity Zone Program. 44 | January-February 2019

Project manager, CORE Construction Woodward is a key member of the CORE Construction team, currently leading a $40 million high school construction project from the ground-up in the East Valley. He has an impressive resume of other award-winning, multi-million-dollar projects, and also dedicates many hours of his free time to community service and philanthropic activity within the construction industry.

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MASTER-PLANNED COMMUNITIES

One of a kind Developments like Cadence might be hard to find in future By STEVE BURKS

y master-planned community standards, Cadence at Gateway isn’t large. At 464 acres and plans for just over 2,000 residences, Cadence is small in comparison to its neighbor to the north, Eastmark, which weighs in at 3,200 acres and a potential of 15,000 homes at build out. While Eastmark might be the biggest thing going in the East Valley, Cadence could be the last of the large, highquality, master-planned community developments, at least for a while. In single-family residential rich East Valley cities of Chandler, Gilbert and Mesa, which is where Eastmark and Cadence are located, available land parcels of over 400 acres are scarce, costs of development are high and the market is showing signs of shifting. “With limited raw land, communities the size of Eastmark are certainly highly unlikely, but at least a couple of very large developments are in the works now and will roll out over the next 24 to 36 months,” said Jim Belfiore, founder and president of the full service market research firm, Belfiore Real Estate Consulting. “Infrastructure-heavy projects are difficult to bring to market for developers.

46 | January-February 2019

MASTER-PLANNED COMMUNITIES

“Large-scale, master planned developments are now moving into Queen Creek, San Tan Valley, and Florence.” While it is uncertain the size of these large developments in the works, it’s unlikely in the current development climate that they will have all of the amenities and features that Cadence has. The heart of the development is The Square, which is an 8 acre community park modeled after Prescott’s downtown historic square. The community center features stateof-the-art fitness equipment, and a lot of it, and three pools, two for lounging or playing around in and one dedicated to lap swimming. There’s also ample outdoor play space, sports courts and fields and just cool spaces to gather or to sit alone. The community will have two commercial and shopping areas, 12 miles of trails and an elementary school within the development. That school is expected to be open for the 2019-2020 school year. 48 | January-February 2019

All of these amenities were possible because Harvard Investments got the timing right to do a project of this quality and scale. “It’s certainly a legacy for Harvard and our brand, that’s why we decided to invest in the vision of the square and the clubhouse and the pools and the big parks,” said Tim Brislin, Vice President at Harvard Investments, the developer for Cadence. “You’re just not going to find that level of finishes for a masterplanned community. In large part because the land isn’t available, but also the cost. The costs have escalated so high, just to do your normal water, sewer, street and some parks is about all you can afford now, without raising your price. “That was another key timing element. We were able to build this when we did, before the prices jumped up. That allowed us to do all of the other amenities.” The clock on Cadence began in 2010, when Brislin and his Harvard Investment leadership team of Craig Krumwiede, Chris Cacheris and

Katherine Astrom sat down with the sellers of the land that was once part of the General Motors Proving Ground. “A few groups had made a run at it and were just unsuccessful at figuring it out,” Brislin said. “It started to feel like, for the right property, we could start to think about raw land and putting something together for a new community as the market started to improve.” The seller, Phoenix businessman William Levine, was patient with Harvard and the transaction was completed two years and one month after that August 2010 meeting. A development of this size takes years of permitting, designing and getting the land properly zoned before any construction can begin. That long wait proved to be well-timed for Harvard, as Cadence came to the market in 2017 with a strong economy and lower development costs. “Would we have preferred to develop this in 2013, 14 or 15? Absolutely,” Brislin said. “But the market wasn’t ready and we had patient partners who wanted to wait for the right time.”

Early sales numbers would indicate that the market was indeed ready for Cadence. Since the grand opening of the development on October 20, Cadence has sold 25% of Phase 1. “There are a lot of ingredients that are coming together that are making our sales for Phase 1 so successful and we don’t see that changing through our next phase,” Brislin said. While Cadence may have hit the market at just the right time, Belfiore believes that future master-planned developments will need to adjust their product offering in order to attract the new generation of home buyers. “The move, in most areas — not all — is towards developments with lower-cost amenities, less infrastructure, and more focus

on entry-level, and first move-up housing,” Belfiore said. “People with existing, historically low mortgage interest rates are likely to stay put for a longer period of time until rates settle for a prolonged period of time, and

millennials and others with no home will drive demand. With mortgage interest rates rising, the market is already undergoing a transformation, one that is likely to last for the next 36 to 60 months.” 49

MASTER-PLANNED COMMUNITIES

Cornering the market in the East Valley By STEVE BURKS

he demand for single family homes in the East Valley communities of Chandler and Gilbert remains strong, but home builders are running out of room to build. “There isn’t an opportunity to go to a master-planned community any more, they don’t exist in Chandler or Gilbert, those are pretty much gone,” said Fulton Homes president Norm Nicholls. “Unless the state land decides to let loose, we’re running out in Mesa too.” In Chandler and Gilbert, there

50 | January-February 2019

are no more parcels of 300-400 acres for communities like Fulton Ranch or Power Ranch. Further out in east Mesa, there are two masterplanned communities currently rising from what was once the General Motors Proving Grounds. Those two developments, Eastmark and Cadence at Gateway, are 3,200 and 464 acres, respectively, which allows them to have sprawling parks, shops and restaurants, as well as amenities like resort-style pools and recreation facilities. The tradeoff for residents is a longer

commute, as available land can only be found far away from the city centers in the Phoenix metro area. The lack of large parcels of land does not mean that home builders aren’t very active in Chandler or Gilbert. To the contrary, there are a lot of new homes being built in those communities. As Chandler has nearly reached build out, home builders are taking a different approach. They are searching out properties that were zoned for commercial use, but are still sitting vacant. They buy those

SIRONA: Adjacent to Paseo Trail, an 18 mile walking and bike path connecting Chandler, Gilbert, Mesa and the greater Phoenix trail system.

small properties, usually in the 10-40 acre range, and have them re-zoned for residential use. “The City of Chandler, years ago, it just seemed like every land owner thought that their corner had to be a commercial corner,” said Nicholls. “It seemed like all four corners at every intersection in the city ended up being zoned commercial, but there was just no way physically possible that they were going to build all of those corners into commercial use.” Home builders like Fulton Homes, Mattamy Homes, Meritage Homes and

others have been busy buying these parcels of land at major intersections. Chandler has seen several undeveloped commercial corners rezoned to residential,” said David de la Torre, planning manager for the City of Chandler. “There are probably many more empty or undeveloped parcels that are currently zoned or planned for commercial that may never be developed as commercial due to the oversaturation of commercial currently in the market.” Fulton’s latest development in Chandler is one of those former commercial properties. Sirona, which is located on the northeast corner of Cooper and Pecos roads, is located on a piece of property that was unique. The city owned 10 acres that ran along the consolidated canal and Chandler Paseo

Trail, land that had no access points. Fulton purchased 13 acres and got them rezoned for residential use. Fulton then struck a deal with the city, planning and developing a park along the trail in exchange for five acres of that land, to raise their acreage to 18 and allow them to put 89 home lots in that property. “We’ve cleaned up that entire corner for the city,” Nicholls said. “It was a great thing for us because it gave us the chance to have an infill type subdivision and it was great for them because they were stuck with a piece of property they had no access too. Now they have a great little park along that consolidated canal that they didn’t have to pay for.” While Sirona doesn’t have the large amenities that most Fulton developments have, it is in a great location, close to the city center and the Loop 202. “We sold a dozen in the first seven days we were open, so it just shows you that the buyers want to be in these infill locations,” Nicholls said. “I wish I could do more in some of those communities, but for people who want to be in a smaller community, it’s a cute community.” These smaller residential developments typically feature smaller lots, which means small backyards and less maintenance requirements, something many homebuyers are looking for. Plus, for new houses in the redhot southeast Valley market, they are affordable to many new homebuyers. “With respect to the value that the new small-scale residential developments provide, the increase in residential units will help support existing retail developments that may currently be struggling,” de la Torre said. “The change in land use from commercial to residential has two positive effects; supporting existing retail and diversifying housing options for Chandler’s residents.” 51

UTILITIES & ENERGY

POWER SOLUTIONS Moving toward renewable energy creates challenges for the industry By STEVE BURKS

52 | January-February 2019

ur electricity needs continue to grow and how we generate electricity is changing, as well. Utility companies are diversifying how they get their electricity, with more renewable sources coming online each year. Burns & McDonnell is the No. 1 engineering and design firm serving the electrical power industry in the United States, according to Engineering News-Record. The company has been involved with more than 5 gigawatts of solar projects over the last 10 years in roles ranging from owner and engineer, development support, and detail design. One of the major issues Burns &

McDonnell help companies solve is connecting new solar power generating plants to the current power grid. “You have to interconnect the large, utility scale solar to the utilities grid, and there are studies that go along with that and an entire application process that has to be gone through and that’s one of the things that we get involved with,” said Robert Healy, regional business technology solutions group manager for Burns & McDonnell in Phoenix. “They have continuous numbers of people trying to connect to the grid, so they have to study it all of the time. All of these interconnections create congestion on the grid.”

When developers begin looking for land to build a renewable energy production plant on, they have to take a look at how much money it will cost to connect to the grid and if the current grid can handle the increased load. “If the studies show you have a very expensive interconnection to go through, most of the time that will make the projects not economically feasible,” Healy said. The cost to connect to the existing grid can prevent some energy producing developments, but Arizona continues to climb up the charts in terms of solar energy production. According to a report by the Solar

UTILITIES & ENERGY Energy Industries Association, Arizona added 3,633.9 megawatts of solar generating capabilities in 2018, moving up to No. 3 in the national rankings for solar production. The report stated that Arizona generates 6.66 percent of its electricity from solar, enough to power 544,000 homes. “Renewable energy in Arizona, and solar in particular, is a very reliable source of energy for us,” said Matt Brinkman, regional energy group manager for Burns & McDonnell. “However, we all know that the sun only shines during the day. That really pushes us toward needing a storage solution and batteries right now are the best and technically viable and most cost effective storage solutions at this time.” Brinkman said that other states working on increasing their power storage capabilities are benefitting from state-mandated requirements in California. The California Public Utility Commission has required investors in utilities to install batteries. This has created a marketplace for large-scale energy storage and allowed companies to invest in new storage technologies. “As a result of that, you’ve seen significant cost decreases in battery storage,” Brinkman said. “The issue with

batteries is lithium ion is the current best technology. It’s not expected to last the 20 to 30 years that a traditional energy generating asset would.” Arizona Corporation Commission proposed a clean energy overhaul in January of 2018 that would call for 80 percent of state energy coming from renewable sources and 3,000-megawatt energy storage capabilities by 2030. While those are just goals, it does put storage solutions on the front burner for the industry. “It’s an exciting time,” Brinkman said. “We’re going to continue to see additional investment and as a result of that research and development, we will see reduced costs and improved efficiency.” Another trend that Burns & McDonnell work on is the increasing need for charging stations for electrical vehicles. “These vehicle charging stations require a lot of power and a lot of power quickly,” said Brinkman. “They need high voltage, high amperage, which most of the residential systems aren’t designed for at this time.” Putting in these new charging stations in the newer parts of the Valley is less of an issue as the power distribution systems are newer and able to handle higher electrical loads. Where

the challenges come are installing these charging stations in older parts of the city, like downtown Phoenix. “An older area of our city was built when our electric usage was much lower,” Brinkman said. “The distribution cables and the distribution system feeding that area would be undersized for what we think about today. “The issues that you face are you have to either replace the existing infrastructure or add to it in order to meet the modern needs.”

ARIZONA SOLAR AT A GLANCE

• Solar Installed: 3,663.9 MW (413.7 MW in 2017) • National Ranking: 3rd (7th in 2017) • State Homes Powered by Solar: 544,000 • Percentage of Electricity from Solar: 6.66% • Solar Jobs and Ranking: 8,380 (6th in 2017) • Solar Companies in State: 460 companies total; 78 Manufacturers, 231 Installers, 151 Others • Total Solar Investment in State: $ 10,849M ($815M in 2017) • Price Declines: 43% over the last 5 years • Growth Projections and Ranking: 2,689 MW over the next 5 years (ranks 7th) (Source: Solar Energy Industries Association)

(Source: Solar Energy Industries Association)

54 | January-February 2019

RETAIL

Retail playing catch-up in Gilbert By STEVE BURKS

lowly, the commercial corners around the Town of Gilbert have filled up in the last three years, as the retail market in the fast-growing town has finally started to catch up to the needs of the population. From the bars and restaurants in the Heritage District to the once open spaces around the town’s signature retail center, SanTan Village Mall, Gilbert is seeing retail space move in at a rapid pace. “Gilbert continues to be one of the fastest growing and most desirable trade areas in the U.S.,” said Dave Cheatham, president of Velocity Retail Group. “During the recession, there was very little new construction. Now we are seeing the market catching up as there has been pent up demand.” Located on Williams Field Road and the Loop 202 Freeway, SanTan Village Marketplace and SanTan Village Mall opened in 2006, and 2007, respectively, right as the economy began its downward dive. Most of the vacant properties around those two shopping centers remained vacant for nearly

56 | January-February 2019

a decade. There was very little retail activity in the area until 2015, when Ryan Companies US started work on the 98,400 square foot Living Spaces, just west of SanTan Village Mall. That project set off a string of other projects at the intersection of San Tan Village Parkway and Williams Field Rd. “Gilbert has been really active in the last 3 years and those areas of development have generated some really positive momentum,” said Gabe Ortega, senior Vice President at NAI Horizon. “Their commercial corridor that is filling in along the Loop 202 is one example, and the restaurant and entertainment district has totally reinvigorated downtown Gilbert.” The uptick in retail development started in 2016 when Gilbert saw 342,615 square feet of new retail space. That was followed by 590,903 SF in 2017 and 283,520 SF in 2018. There is currently 469,000 SF under construction or in the planning phase for the town. “This growth can be attributed to many factors, particularly the strong

activity in single family permits, and excellent demographic segmentation in the community,” said Dan Henderson, director of the Gilbert, Arizona Office of Economic Development. “Over the last five years, Gilbert has averaged 1,600 single family permits per year. In the last year the annual median household income for Gilbert residents has also risen by 5.8% to $88,685, creating more disposable income attractive to retailers.” The activity in Gilbert is widespread. Epicenter at Agritopia in the Central Business District is a mixed-use project that is expected to add 55,000 SF of retail space, Audi is opening a new 41,000 SF showroom in the Rivulon development and City Gate Marketplace at Higley and the US 60 will add 171,000 SF of mixed-use space. Santan Pavilions is already up and thriving on the southeast corner of Williams Field and SanTan Village Parkway. The multi-phase project, planned for more than 280,000 square feet, is already in Phase V. The development is anchored by At Home

DEVELOPMENT: New shops at San Tan Pavilions, above, and a rendering of a planned center at Gilbert and Warner, right.

Furnishings, which opened in October of 2017, and the Chasse Building Team completed three of the buildings on the site totaling over 30,000 square feet shortly after that. “This area will continue to see future growth as the owners of the last two properties located at that intersection make plans to develop these parcels and bring them to the market,” Cheatham said. “Baring an unforeseeable major economic recession or collapse, Gilbert and Queen Creek are two of the strongest trade areas in all of Phoenix and will continue to see strong growth in the next 3 to 5 years.” Remington Nevada, the developer behind San Tan Pavilions, also has plans for a retail development further west near the Gilbert Town Center. The planned center at Gilbert and Warner is an 11-acre shopping and dining complex that will total 260,000 square feet of retail space. It is still in the planning phase.

“It’s hard to look much further than 12-18 months, but for that time segment, there are quite a few really exciting projects on the horizon around the San Tan mall area,” Ortega said. “Val Vista Square is one that comes to mind. It is just a half mile south of San Tan mall (on the north side of the Val Vista and Loop 202).”

Val Vista Square is a mixed-use development by the Park Corporation with sales and leasing done by NAI Horizon. The 32 acre site wraps around the Southeast Veterans Affairs Health Care Clinic on Val Vista Dr. And S. Market Street. Development plans call for four Class A office buildings, a hotel and nine retail sites. 57

BOMA

TOBY AWARDS

BOMA Phoenix paid tribute to The Outstanding Building of the Year (TOBY). The Outstanding Building of the Year is the most prestigious and comprehensive program in commercial real estate, recognizing quality in commercial buildings and rewarding excellence in building management. All local winners now have the opportunity to compete at the Regional level, BOMA Southwest Pacific region includes Arizona, California, Hawaii, and Nevada. The winners of the 2018 awards are:

58 | January-February 2019

• RENAISSANCE SQUARE

– 500,000 – 1 Million Square Feet – Managed by Steve Hamel, Hines

• 2777 E. CAMELBACK – 100,000 – 249,999 Square Feet – Managed by Travis Dana, Lincoln Property Company

• PAYPAL – Under 100,000 Square Feet – Managed by Gretchen Warren, CBRE

BOMA • LUHRS CITY CENTER – Historical –

Managed by Jessica Allen, Lincoln Property

60 | January-February 2019

2018 BOMA TOBY Award Winner!

BOMA • RIVERSIDE DISTRIBUTION CENTER – Industrial – Managed by Patti McBain, CBRE

• RAINTREE CORPORATE CENTER – Suburban Office Low Rise – Managed by Logan Mather, CBRE

62 | January-February 2019