Valley Partnership supplement in AZRE November/December 2014

2014

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VALLEY PARTNERSHIP

The four pillars

of Valley Partnership “THE VALLEY OF THE SUN’S PREMIER ADVOCACY GROUP FOR RESPONSIBLE DEVELOPMENT.”

T

hat is the mission statement of the organization for which I work – Valley Partnership.

We are a partnership that represents and protects the commercial development industry.

Our members are the most diverse representation of the industry. Our leadership is a combination of established high level executives. Our young partners comprise the best up-andcoming professionals in the development community. Those are pretty solid credentials for an organization that has been around for a little more than 27 years.

The mission statement is simple. How does it play out, day to day, in the professional life of the commercial real estate professional? Just take a look at the four pillars of Valley Partnership.

68 | November-December 2014

Valley Partnership Board of Directors, back row: left to right, Vanessa Hickman, Jeff Chaves, Chapin Bell, Eric Sloan, Doug Leventhal, Richard Hubbard, Steve Hoover, Tim Brislin, Brian Frakes, Scott Nelson.

Front row: left to right, Mike Atkinson, Brett Hopper, Ben Shunk, Chris Anaradian, Molly Ryan Carson, John Krueger, Carolyn Oberholtzer, Jay Kramer. Not pictured: Karrin Taylor, Roger Baele, Ryan Cochran, Molly Greene, John Creer, Heidi Kimball, Bryce Llyod, Rusty Mitchell and Derek Sorenson.

>> ADVOCACY: Valley Partnership is a lobbyist for the commercial development industry to protect our partners from over regulation of business and encourage pro development incentives, policies and law interpretation. This activity occurs at the federal, state, county and municipal levels throughout Arizona, with an emphasis on Maricopa County. Valley Partnership engages Richard R. Hubbard and creates professional relationships with Valley Partnership elected officials, regulators and development staff to ensure that the government entity watching over the commercial real estate industry is promoting efficient practices and pro growth policies. >> EDUCATION: Everyone knows that, on the fourth Friday of each month, you need to be at the Valley Partnership breakfast. With 200 to 300 of your closest professional friends in attendance, you will hear from the highest level of executives, elected leaders and international experts on the current issues affecting commercial real estate in the Valley. Valley Partnership works diligently to provide the most up-to-date information for

Volunteers work on the 2013 community project for Save the Family Foundation of Arizona's Escobedo facility in Mesa, Ariz. our partners about current issues and, more importantly, access to the experts and influential professionals on the subject. >> BUSINESS DEVELOPMENT: Valley Partnership is not afraid of promoting “business to business” between and among partners. However, it is not simply showing up to a Valley Partnership breakfast or happy hour (although those are good ideas, especially the happy hours), and handing out business cards. Through the committees, our partners are able to meet and engage one another on issues affecting the industry and the organization while engaging with real estate professionals of every level. Valley Partnership affords every partner the opportunity to interact with developers, municipal officials, and those in all areas of real estate to work together on issues affecting us all. Through this work, there is no better way to display your expertise, promote yourself and create lasting business development relationships. >> THE COMMUNITY PROJECT: No professional organization can succeed without giving back. I am proud to say that in our illustrious history, Valley Partnership and our partners have excelled at giving back to the community. There are many initiatives Valley Partnership undertakes for charities, but nothing compares to the annual community project. It is a yearlong labor of love by our committee that begins with the selection of a charity with a physical location that needs renovation. Over a year, the committee designs a plan for rehabilitation of the facility, raises money, solicits materials and services from our partners, and raises awareness of the importance of the charity, their mission and, most importantly, the community project.

Since inception, Valley Partnership has raised more than $3.5 million of cash and materials to contribute to community projects. In addition, there are thousands of hours of manual labor that have been put into these projects. A short list of the beneficiaries includes the Boys & Girls Clubs, Salvation Army, Arizona Foundation for the Blind, Maggie’s Place and this year’s recipient, Arizona Foundation for the Handicap.

We truly are the “Valley of the Sun’s premier advocacy group for responsible development” and plan to be around for another 27 years.

Richard R.Hubbard is the President & CEO of Valley Partnership 69

VALLEY PARTNERSHIP

70 | November-December 2014

Metropolis: Arizona economy demands a new sense of place in Phoenix Metro

By Amanda Ventura

B

lock by block, the Phoenix Metro is seeing reinvestment, redevelopment and repositioning of land, existing buildings and infrastructure. It may not be high tide across the submarkets and sectors, but a rising tide somewhere can still lift a decent number of ships.

The Great Recession has left its mark on the Metro, tasking developers and public entities to do whatever is necessary to meet the demands of Arizona’s present and foreseeable future.

Whether that means looking at the Millennial workforce, the K-12 and higher education system, urbanization or infill or attracting large businesses to the state, one thing remains constant — Arizona needs to have a sense of “place.”

Right now, that place is being largely defined by submarkets in the Phoenix Metro. From the largest office development in the Valley — the 2MSF Marina Heights in Tempe — to the comparatively small infill and adaptive reuse projects coming into downtown Phoenix, the commercial real estate industry is developing job corridors, cultural hubs and the multifamily living and transit to connect it all.

A sentiment for responsible development

runs through the projects in Arizona’s pipeline; More projects than Ryan Companies Vice President of Development Molly Ryan Carson can reference.

“Responsible development to me is a project that is self sustaining and provides positive attributes to the community in which it resides (employment opportunities, gathering space or amenities that fill a void in that area, green aspects in both the construction/redevelopment and management),” she says.

Industrial and office sectors are seeing large speculative developments come online and multifamily opportunities continue to wait in the wings while thousands of units make their way through the pipeline. One of the leading trends out of nowhereville is adaptive reuse and infill.

Scott Nelson, vice chair of Valley Partnership and vice president of development for Westcor, rattles off a list of projects revitalizing established neighborhoods — Vintage Partners’ redevelopment of Uptown Plaza, Sam Fox’s Yard Concept, Upward Project’s Central Corridor restaurant cluster and similar efforts in downtown Chandler and Gilbert.

He calls these catalysts for growth.

“I firmly believe infill development and redevelopment will be a big part of the Valley’s development activity in the coming decades,” says Nelson.

“The reinventing and repurposing of land and buildings throughout the region will be an important element to the evolution and maturation of Metropolitan Phoenix. Leveraging and reinvesting in our existing infrastructure – whether it be freeways, light rail, water, waste water, fiber, etc. – along with strategic investment in new and in-place infrastructure will help to ensure smart growth, sustainable economic development, and quality of life.”

Areas where this is taking place, Nelson notes, is downtown Phoenix — through CityScape, the BioSciences Campus — and Tempe — with Discovery Business Campus and Marina Heights.

Phoenix Market President for FirstBank Bryce Lloyd notes that, while this is nothing new, the money will always favor well-located projects, regardless of sector.

“There has been a move toward infill projects, which is a healthy development for the Metro area,” he says. “Everyone

CityScape — Phoenix, Ariz.

Developer: RED Development General Contractor: Hunt Construction Architect: SmithGroupJJR “The reinventing and repurposing of land and buildings throughout the region will be an important element to the evolution and maturation of Metropolitan Phoenix.” — Scott Nelson, Vice President of Development, Westcor

Molly Ryan Carson

DOUG LEVENTHAL

BRYCE LLOYD

SCOTT NELSON

KARRIN TAYLOR 71

VALLEY PARTNERSHIP Verrado — Buckeye, Ariz.

Developer: DMB Associates “It’s the epitome of small town America with commercial businesses including retail, office and restaurants all in walking distance to apartments and single-family homes.” — Karrin Taylor, Executive Vice President and Chief Entitlements Officer, DMB Associates Tempe Marketplace — Tempe, Ariz.

Developer: Vestar General Contractor: Frontera Building Company Architect: Butler Design Group “Taking a former landfill site, Vestar completed extensive environmental re-mediation and built a successful retail power center to serve the East Valley. With unprecedented freeway access and a mission to interact with the surrounding community, Vestar has one of the most popular and occupied developments. The project has entertainment more than 300 days a year and has embraced the new Chicago Cubs Spring Training Stadium by allowing parking and providing shuttle service to games. Compared to other power centers in the area, Tempe Marketplace is a distinguishable success story.”

— Richard Hubbard, CEO and President, Valley Partnership PHOTO BY ROBIN SENDELE, AZ BIG MEDIA

can look around and see the success of several of the infill retail/restaurant developments. These projects are having a positive impact on investment and redevelopment activities in the surrounding neighborhoods.”

There is an empty side of infill, though.

While municipalities look at ways to reel back unnecessary spending, roads, sewer and water lines have not had the kind of financing and building at prerecession levels.

“One of the most challenging aspects of development today is the creation and maintenance of infrastructure,” says Nelson, adding, “This can be complicated further as we start to see more ‘infill’ developments.”

For infill, developers are reinvesting in existing infrastructure to build a new project. That can be especially expensive, he notes, adding, “I would encourage the state and municipalities to consider alternative financing mechanisms, such as tax increment financing, to be able to successfully maintain existing infrastructure and build new public assets.”

THE GOOD NEIGHBORS The future of Arizona’s economic recovery is less ephemeral than first believed. In 2013, economists touted 2015 as a year for recovery. Now, they’re saying 2017.

There are a few strains on recovery for Arizona, including a less than favorable 72 | November-December 2014

reputation, slumping housing market and a strong need for Millennial attraction.

Economic development departments are tasked with attracting new businesses to the state and helping existing ones to expand into new spaces. However, even this has been affected by a changing attitude among new and expanding companies, notes Valley Partnership’s Immediate Past Chair and DMB Associates’ Executive Vice President and Chief Entitlements Officer, Karrin Taylor.

“Companies don’t build new offices or lease larger space when they are planning for growth anymore,” she says. “The economic climate has forced businesses to wait until they need the space to make a move. Then, landowners, brokers and

cities have to move quickly to respond and take advantage of opportunities.”

When a handful of developers were asked which sectors would see the largest growth over the next 12 months, their answers spanned from medical office buildings to class-A and -B office buildings, low price-point retail, fastcasual restaurants, multifamily, assisted living and industrial.

“As long as there is uncertainty and a sluggish national economy, Arizona’s growth will be restrained,” says Lloyd.

“We will probably need to remain patient.”

Lloyd mentions, then, that FirstBank recently closed one of its largest loans to date with fellow Valley Partnership member P.B. Bell on a multifamily property.

“It has taken a little longer than some expected to absorb the commercial space that was overbuilt during the years leading up to the pre-recession, but things are steadily improving,” says Nelson. “The recovery cannot come fast enough for all of us.”

“The slower than anticipated rebound in new home construction permits, a perceived stalling out of the housing recovery and net-new job creation” are strains on Arizona’s economy, says Valley Partnership Board Chair and Evergreen Devco Principal and Chief Operating Officer Doug Leventhal. “Commercial development, particularly retail, lags behind residential growth, so once housing gets back on solid footing, look for an overall improvement in the volume of new commercial development projects.”

So, how do you make Arizona look attractive in a residential slouch?

Make a place appeal to a younger workforce that’s buying into multifamily.

That can mean attracting companies where Millennials would like to work, as well as having urban cores that cater to popular and versatile lifestyles.

“The psychological shift of younger workers toward apartment living and renting will continue to impact Phoenix’s market for a while,” adds Taylor. “There’s a generation who saw their friends and parents lose their homes in the downturn and it’s affected their buying decisions. Those multifamily communities are bringing renewed life to downtowns and urban areas around the Valley, especially those areas with a higher concentration of retail and restaurants.”

THE RESPONSIBLE ONES The bones of Arizona’s recovery are jobs.

“Community wide, our No. 1 focus should be employment,” says Nelson.

Employment bases are what drive the need for housing, office and industrial facilities and bring more income to support retail.

“If we are unable to support additional employment and are not competitive to bring additional companies to the state, we are missing a significant pillar to support additional commercial development,” Nelson says.

Broader than employment, Carson adds, Arizona’s economy and the commercial real estate industry is being held back by bad branding.

“Negative press has seemed to rear its head all too frequently in Arizona,” she says. “Any aspect of the economy that is not functioning with all cylinders is at risk for slowing growth; this is the

time to band further together and unite around our state's strengths, and focus on improving in the areas of greatest need.”

DMB Associates’ Taylor agrees.

“Arizona must improve its image nationally to attract and retain businesses. Younger tech workers, engineers, and entrepreneurs want to live in a state where all people are respected and the state projects a positive image,” she says. “As a parent, I want my kids to stay in Arizona and that means that we have great jobs for them when they graduate college and that this is a thriving place of culture and opportunity. Changing our education system requires everyone pulling in the same direction. No more politicizing the process or the conversation; we need to demand results and hold our legislators, teachers, administrators and parents accountable for Arizona’s future.”

Town & Country Shopping Center — Phoenix Developer: RED Development General Contractor: Chasse Building Team Architect: Butler Design Group “The partnership of Macerich and RED Development looked at one of the oldest shopping centers in the Valley and asked whether to scrap and rebuild or rehabilitate. They chose the latter and while preserving the pedestrian friendly/ shaded interior of the complex, through intense tenant recruitment, they refilled vacant 'big boxes' and found local merchants to fill spaces where other tenants failed.” — Richard Hubbard, CEO and President, Valley Partnership

Marina Heights — Tempe, Ariz.

Developer: Ryan Companies US, Inc./Sunbelt Holdings General Contractor: Ryan Companies US, Inc. Architect: The Davis Experience “It represents a high level of new jobs to the Valley. It is infill, and it has great access to transportation, including light rail.” — Bryce Lloyd, FirstBank “A massive project and economic development engine that was imagined, designed and is being built by a combination of diverse interest: Private Developers (Sunbelt/Ryan); Tenant (State Farm); Government Land Owner (ASU) and Municipal regulator (City of Tempe).

The project is designed to complement the waterfront amenity, handle traffic and congestion issues, promote pedestrian and bike transportation and to blend seamlessly into the campus environment.” — Karrin Taylor, DMB Associates PHOTO BY MIKE MERTES, AZ BIG MEDIA 73

VALLEY PARTNERSHIP

The Flex Space Public, private sectors bend challenges with communication

By Amanda Ventura

I

t’s a story everyone has experienced to some degree since 2007: When the economy was healthy, cities were doing everything possible to keep up with the growth. When the recession hit, everything slowed — some projects were stopped in their tracks. Cities were no longer able to build the infrastructure necessary for rapid growth due to the slowdown as well as restrictions on impact fee-related funding. Belts tightened on public and private sectors alike.

As the recovery shakes its way fully to the surface over the next few years, cities are beginning to see dirt pushed around, projects come off drawing boards and economic development efforts in full force. Communities are waking up, stretching for their full potential.

74 | November-December 2014

“Every city wants to see healthy development, wants to create a welcoming community and wants to meet the demands of its residents. The private partners are essential in building those beautiful communities,” says Ken Strobeck, executive director of the League of Arizona Cities and Towns.

That said, there is no one size fits all approach to development. The only common denominator is the importance of communication.

“Arizona is full of cities that have decades of growth ahead of them,” says Strobeck. “In order for us to continue growing and build sustainable communities, it is essential that developers and cities work very closely together to be creative, form partnerships and

find ways to meet the needs of growth, while not creating an extreme burden on existing residents.” These partnerships are something Curt Johnson, senior vice president at CVL Consultants, helps facilitate on a daily basis between his clients and the public sector.

“A lot of cities have the same passion as we do when it comes to design,” he says, noting that while it sometimes takes “trial and error” to figure out what makes a city tick, it’s ultimately about a balance of needs.

FIRST IMPRESSIONS “Private developers don’t like surprises, so having things approved or mocked up with city’s conditions is starting on the right footing,” says

Johnson. Developers “owe the public sector the details they need to make a decision,” he says, adding that the city should return that courtesy. He notes one example of when communication between parties broke down. In Buckeye, he says, fire trucks require larger culde-sac loops with a 60-foot radius to

VANESSA HICKMAN

Bill Jabjiniak

accommodate their size. However, this fact wasn’t brought up by the city to one of his clients until late in the design process. Other things, like city street and sidewalk width restrictions can sometimes be changed to lower overall construction price as well as reduce heat island effects. It’s a city’s openness to these types of changes that can bring balance to developers and the public sector alike.

That said, all it takes is enough residents to file a legal protest at the city council level for a project to be stalled for about a year unless a super majority vote is reached. A recent example happened last May, when Mesa property owners near the location of a proposed medical marijuana dispensary development triggered a failed majority vote to rezone the property, despite the General Plan approval.

“Some owners may never be satisfied, as I have encountered adjacent owners that do not want any development on the privately owned land next to them,” he says. “This puts a tremendous burden on the land owner, who may not be able to entitle their land appropriately and for the developer, who may not have the time or financial resources to fund a long drawn out entitlement process. In that case, the developer would move on to another project someplace else.”

Often, developers have thrown so much money at a project they won’t just pack up and leave if it’s protested. One such developer and client who wishes to remain anonymous, he notes, was working on a five-acre infill piece in Scottsdale. Infill is particularly difficult as it usually has neighbors on multiple sides that must be appeased. It took the developer more than two years to get the design approved by council and even then the developer had to compromise a

Curt Johnson

Carolyn Oberholtzer

design of 22 housing units per acre to 10 units per acre.

“Most of my clients are gritty and willing to stick it out and do what they need to develop that piece,” Johnson says.

Since the downturn, he adds, the mood toward development has changed.

“We need each other,” he says.

According to Strobeck, for city growth to come into fruition, zoning and general plans may need to see minor changes or amendments. City leaders. Strobeck adds, always need to consider economic conditions and market needs as they grow.

“Whether it is a recession or economic boom, sometimes the initial zoning is a hindrance to growth and needs to be adjusted. This is common and healthy exercise,” says Strobeck, adding it’s important for residents and developers alike to pay attention to public rezoning hearings so all parties can voice concerns and stay in touch with what the other wants.

When Bell Lexus wanted to move into a space among the core of auto dealerships along north Scottsdale Road, the City of Scottsdale and Arizona State Land Department (ASLD) had to reevaluate the existing zoning to the Crossroads East Planned Community District. The partnership turned into a win for the respective parties. The dealership was able to relocate to one of the highest traffic intersections in the city, the land reaped the highest value achieved for State Trust Land at auction and the sale also resolved long-standing drainage and infrastructure repayment issues while ensuring Scottsdale received high-value sales tax revenue.

“The successful development of Bell Lexus not only was an example of a productive private-public partnership, but will pave the way for additional

Ken Strobeck

ChristinE ZiELONKA 75

VALLEY PARTNERSHIP

Mesa and DMB Associates worked closely on the Eastmark master planned community. It now has its own zoning code. success stories on the hundreds of remaining undeveloped Trust acres adjacent and proximate to the dealership,” says Arizona State Land Commissioner Vanessa Hickman.

Cities are responsible for regulating the general plan, even if it is beyond their direct control. Many development regulations are imposed on cities by state and federal laws. Cities are also obligated to its residents.

“Each city has its own unique character and wants to form a community that is responsive to its local residents,” says Strobeck. “When approving plans, cities want to make sure that development plans fall in line with that vision.”

If residents feel a development plan doesn’t align with the city’s character or their lifestyle, they can stall or block plans from being approved at council.

The most important thing a land owner and developer can do is work with the city staff, educate residents and make sure all respective voices are heard, recommends Strobeck.

“Early and constant communications with the planning department and the 76 | November-December 2014

office of economic development helps lead to success for both the developer and the city,” says Strobeck. “Many items can be resolved when more time is spent with residents and there is lots of communication. Residents have great investments in their communities and they take their pride of ownership seriously.”

BLURRED LINES The approach in some cities is to do less regulating and more facilitating in order to help developers’ plans meet the vision of the city.

One such city is Mesa.

Whether holding special zoning meetings to accommodate developer’s timelines or developing a new zoning code, as the city did for DMB Associates’ 3200-acre, master planned development of Eastmark, Mesa has made a conscious push to go the extra mile with developers who return the favor. For the First Solar building acquisition by Apple and GTAT in the city, staff sat down with Apple and discussed the timeline and expectations.

What would normally require 18-day turnarounds were whittled down to five,

says Mesa’s Director of Development and Sustainability Department, Christine Zielonka.

“We flexed the system to allow for a rapid development,” she says.

This is a trend Carolyn Oberholtzer, attorney at Bergin, Frakes, Smalley & Oberholtzer, PLLC, has also observed.

“Some municipalities are trending toward flexibility in an effort to be nimble enough to capture development/ end user opportunities and avoid their communities getting skipped over in favor of a neighboring city that can accelerate the speed to market,” says Oberholtzer. “‘Time is money’ is especially applicable in the development business. Recognizing that, we have seen some municipalities even initiate zoning cases on their own accord to help the process along.”

But this all started with DMB Associates, which City of Mesa Economic Development Director Bill Jabjiniak says went “out of its way to make sure it met with all the right people to make Eastmark a good fit for southeast Mesa and the Gateway area.”

Benedictine University developers and Mesa collaborated closely to turn a historical hospital into a higher education facility.

“They worked closely with our planning department to put together a plan that would give them the flexibility they needed, yet adhered closely to the vision and guidelines the city has for the Gateway area,” says Jabjiniak. “The perfect success story is the new Apple/ GTAT manufacturing facility. Because of the flexible approval process developed with DMB, we were able to bring the facility to the Tech Corridor within Eastmark in record time.”

In order to facilitate a strong partnership between Mesa and the private sector, Jabjiniak says, the city has invested heavily in infrastructure and cut development risk by facilitating entitlements. Recently, Mesa’s Planning Board approved an overlay zone for the Elliot Road Technology Corridor.

“This zoning overlay will allow private landowners in the Tech Corridor the opportunity to opt-in to the overlay zone when they have a high-tech company that is interested in building a facility on their property,” he says. “When developers are ready to build, all they need to do is submit the necessary paperwork to the planning department for administrative approval. The overlay zone will cut the entitlement process from several months down to a matter of a few weeks.”

However, when developers don’t pull their weight in communication projects tend to see delays. If developers don’t

also consider off-site costs, such as city infrastructure installs or improvements they have a high hurdle to clear through an appeal to the city manager.

“Community Facilities Districts are a critical tool in the public-private partnership tool box that enable a developer to finance large public infrastructure projects,” says Oberholtzer.

“Communities that lack facilities in their growth areas will have a difficult time capturing development if they do not allow Community Facilities Districts.”

Any time legislation has cropped up that could potentially put the two entities at odds organizations such as Valley Partnership have worked to broker compromise.

“You saw that in the last session with the Transaction Privilege Tax changes and proposed legislation that could have jeopardized Community Facilities Districts,” says Oberholtzer.

Zielonka says the first time she looked at Mesa’s General Plan map, it looked like a zoning map with small areas. Since 2002, the city has started to loosen its zoning to accommodate more creative causes for density and growth.

“It’s the private sector that has to come in and say this is no longer the best use [for a building],” Zielonka says, noting that this long-term thinking of building uses over time began with Eastmark, two days before the recession hit.

“The recession didn’t inform that alternative approach,” she says. “It’s saying [the general plan] is more of a high level, inspirational document, not a detailed document. [Mesa] spent years working through that philosophy internally.”

The same goes for development in Mesa.

“We’re trying to push Mesa forward,” says Zielonka. “We don’t want to allow mediocre development. One of the outcomes of the recession is money is tougher to get. Purse strings have tightened. One thing we’re constantly pushing on is high-quality development… one of our current challenges is we’re not allowing development that won’t hold up in the short-term or long-term.”

From a napkin sketch to something more advanced, Zielonka says starting conversations as early as possible is key to success. For instance - a project doesn’t have to be the size of Eastmark or involve a company like Apple to get special attention. Benedictine University, which now occupies the building of a former hospital in downtown Mesa, was what Zielonka calls a very close collaboration.

“The state and federal government can pass laws and discuss policy but at the end of the day, the partnerships between local communities and their development partners are what will generate job growth, healthy communities and continued economic growth,” says Strobeck.

77

VALLEY PARTNERSHIP

Breakfast

Club

By Amanda Ventura

Friday Morning Breakfasts, or FMBs, are monthly meetings held by Valley Partnership in downtown Phoenix. Each breakfast features a “Mayor’s Minute,” which is a brief update by a municipality, followed by a moderated panel discussing pertinent issues in the commercial real estate industry. Looking back on a year of sold-out breakfasts, former panelists and moderators provided AZRE with updates on their topics.

January: “Breaking Ground: Commercial Real Estate Market Preview From the Experts” Panel: Mindy Korth, Colliers International; Larry Downey, Cushman & Wakefield; and Matt Milinovich, Strategic Retail Group; Moderator: Richard Hubbard, Valley Partnership “There is no longer doubt that the metro Phoenix office market is experiencing a slow but steady recovery, but it has been, and will continue to be, an arduous climb. Annual net absorption has once again reached pre-recession levels of 2MSF. We had some sizable tenant announcements in 2014, but the fact remains, our market vacancy still hovers around 22 percent. However, when you drill deeper into the vacancy, you will find large blocks of quality office space is limited – leading to 'build-to-suit' activity.

Medical, insurance, financial and tech tenants lead the pack, but geographybased absorption has not been “fair and balanced.” Some submarkets are considerably tighter than others. The East Valley and Scottsdale submarkets continue to do well, while Northwest Phoenix and the CBD have yet to attract significant leasing momentum.

78 | November-December 2014

Rental rates in the best performing submarkets are on the rise, especially in class-A product.

As we move into 2015, we expect more good news as our job market improves and corporate occupiers (although cautious) become more confident in their expansions.” — Larry Downey, Vice Chairman, Cushman & Wakefield of Arizona, Inc. “Through August 2014, investment sales for office, industrial and retail sales are performing well. Office sales PSF are 3 percent higher, industrial PSF sales are 4 percent higher and retail PSF sales are 42 percent higher than through August 2013. Office and retail volumes were higher than mid-year 2013, with industrial lagging. There was no usual summer lull this year. With the current deals and those coming to market, prices and volumes will pick up even further during the remainder of the year. Our forecasts that we described at January’s Friday Morning Breakfast are coming to fruition.” — Mindy Korth, Colliers International

Source: Colliers International

SECTOR

SALES

AMOUNT (IN MILLIONS) AMOUNT PER SF

OFFICE

66

$896

$135

RETAIL

62

$528

$123

INDUSTRIAL

108

$690

$80

April: "Residential Development in the Valley" Panel: Jeff Gunderson, Lennar Homes; Michael Jesberger, Terrawest Communities; Moderator: Jim Belfiore, Belfiore Real Estate Consulting “The homebuilding industry continues to rapidly change gears, going from rapid recovery 30 months ago to a slow

but steady growth 18 months ago to deteriorating conditions throughout most of the last 12 months. The fall and winter outlook is not a good one, but positives — big positives — lurk behind the scenes, including relatively strong sales, office traffic levels, healthy employment growth, the prospect of growing population, and an imbalance between rental prices and the cost of owning — a hard-to-ignore reality.

The forecast is for brighter days for homebuilders, as 2014 nears a close and spring 2015 approaches.”

— Jim Belfiore, Belfiore Real Estate Consulting May: "Lifestyle Trends of the 50+ Consumer and Their Impact on Real Estate Development" Panel: Nick Taratsas, DMB Associates; Margaret Wylde, ProMatura Group; Brendan Morrow, The Weitz Company; Moderator: Jeff Chaves, then at The Weitz Company “While people 55+ make up about 25 percent of the total population, they have a homeownership rate of more than 75 percent, according to John Burns Real Estate Consulting. To create a highquality community experience for this important market, development for the Victory District of Verrado, DMB’s first 55+ community, is on the fast track.

Four homebuilders will offer 406 new homes in phase one. Construction has begun of the Big Patio, Victory’s exclusive event and community space and gateway to the models. With interest strong in Victory, DMB is planning a special preview event in January 2015.” — Nick Taratsas, Senior Vice President and General Manager of Verrado ARC, DMB Associates, Inc.

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