AZRE September/October 2017 by AZ Big Media

SEPTEMBER-OCTOBER 2017

AMAZON The Great Disrupter Amazon sets its sights on transforming grocery

INSIDE: COOL OFFICES p. 26 | STADIUM IMPROVEMENTS p. 38 | NAIOP p. 49

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Attract and retain

hat’s the name of the game right now; attract and retain. Whether it's companies trying to attract and retain the best and brightest employees through the built environment of the workplace, economic development groups trying to attract new companies to the Valley or efforts to retain Arizona's home teams at their current stadiums or arenas, new strategies are constantly being explored to improve Arizona and the Valley’s marketability. This issue dives deeper into all of those efforts and strategies, plus more. Read about the strategies and design features at offices across the Valley representing the latest amenities and office trends. In the East and West Valleys, two stadium projects have primed both areas for increased commercial and economic development opportunities. Members of the Arizona Multihousing Association breakdown Arizona’s projected need for 150,000-plus apartments by 2030. In the NAIOP supplement, you’ll find analysis and outlooks from NAIOP-AZ board members about the state of the markets and what’s coming down the pike as well as a collection of NAIOP member projects that have broken ground this year or are expected to soon.

President and CEO: Michael Atkinson Publisher: Cheryl Green Vice president of operations: Audrey Webb EDITORIAL Editor in chief: Michael Gossie Associate editors: David McGlothlin | Jesse A. Millard Interns: Melissa King | Cianna Leparulo Contributing writers: Jake Hinman | Mignonne Hollis | Courtney Gilstrap LeVinus | Deb Sydenham | Curt Woody ART Art director: Mike Mertes Graphic designer: Bruce Andersen MARKETING/EVENTS Marketing & events manager: Cristal Rodriguez Marketing coordinator: Kristina Venegas 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 | Cindy Kurtze AZ BUSINESS LEADERS Director of sales: Sheri Brown

David McGlothlin Associate editor, AZRE david.mcglothlin@azbigmedia.com

RANKING ARIZONA Director of sales: Sheri King EXPERIENCE ARIZONA | PLAY BALL Director of sales: Jayne Hayden CREATIVE DESIGNER Director of sales: Joe Freedman AZ BUSINESS ANGELS Director of sales: Brit Kezar

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. ©2017 by AZ BIG Media. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without permission in writing from AZ BIG Media.

2 | September-October 2017

â&#x20AC;&#x153; L IVELY. GR OUNDB RE AK I N G. E STA BLISH E D. â&#x20AC;&#x201C; Dan Henderson, Director of the Gilbert Office of Economic Development

LGE Design Build has been perfecting the conception and construction of the Valley's most iconic projects for more than 23 years. But, don't take our word for it. Listen to how clients, influencers, and officials define our work. And there's more to come as we plan out LGE's thrilling future. Look to our next defining moment this fall.

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

26 Cool Offices

32 Arizona Multihousing Association 38 Stadium Improvements

44 Building Owners & Managers Association

49 NAIOP

38 On the cover:

The Local is a 575,000 SF mixed-use, residential apartment development located blocks away from Arizona State Universityâ&#x20AC;&#x2122;s Tempe campus. Its five levels and 286 apartment units sit atop a three-level parking garage and a street level Whole Foods Market grocery store. 4 | September-October 2017

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

TRENDSETTERS Retail absorption slows, but investment activity surges Following a strong first three months of 2017, the momentum in the Greater Phoenix retail market cooled in the second quarter, with vacancy flat and net absorption cooling, according

to Collier International’s Q2 2017 Retail Research & Forecast Report. Asking rents in Greater Phoenix are on the rise though, increasing 4.3 percent in the past year to $14.56 per square foot. This marks the strongest annual rent growth in nearly a decade, even as current rents are still down approximately 25 percent from the prerecession peak. The investment market strengthened in the second quarter, with sales of shopping centers accelerating, prices rising and cap rates compressing. Yearto-date, the median price is $118 per square foot, and cap rates have averaged approximately 7.5 percent.

Phoenix office market records

quarters of positive net absorption

Since 2014, Phoenix has recorded more than 9.6 million square feet of positive net absorption. Averaging nearly 690,000 square feet per quarter, absorption doesn’t show any signs of slowing in the near future. According to JLL’s Q2 Office Insight Report, second quarter absorption was 595,346 square feet, which marks the 16th quarter of positive net absorption. Meanwhile, average asking rents are up 5.3 percent from one year ago, but are still 6.0 percent below the peak of $26.82 reached in 2007. New construction is also up with five new office projects breaking ground and totaling 638,090 square feet. That includes construction of Camelback Collective, a 118,090-square-foot Class A office building and 160-room hotel being developed by Holualoa Companies and LaPour Partners, Inc. It marks the first significant construction project in the Camelback Corridor submarket since 2010.

Fundamentals YTD net absorption

Forecast 1,522,142 SF

Under construction

1,493,291 SF

Total vacancy Average asking rent (gross) Concessions Source: JLL 6 | September-October 2017

19.6%

Thinking inside the box

E-commerce gives rise to taller warehouses Phoenix ranks among the 10 largest markets for warehouse growth, adding over 313-million cubic feet of warehouse space with an average warehouse height of 31.67 feet from 2010 to 2016. The rapid growth of e-commerce fulfillment networks in recent years has resulted in a steady increase in the height and volume of warehouses and distribution centers, likely necessitating a shift to three-dimensional measurement of industrial space, according to a new research report from CBRE Group, Inc. “E-commerce is driving three major trends in building design: separate car parking that is segregated from truck areas, taller clear heights and queuing lanes for controlled access into secured truck/trailer storage areas,” says Pat Feeney, industrial specialist with CBRE’s Phoenix office. “Given the continued strength of Phoenix’s industrial sector, the market is well-positioned to accommodate these types of changes as investors continue to seek out Phoenix for warehouse space.” Weighted Average Clearance Height for U.S. Warehouse Space

Feet 35 30

$25.21 PSF

Falling

Pre 1960s 1960s

1970s

1980s

1990s

2000s 2010s Source: CBRE

AZ BREWERIES ON THE RISE In an exclusive report, Cushman & Wakefield has identified the top markets across the nation with craft breweries in development, as well as cities booming with existing breweries. In a challenging retail environment in which most of the headlines have been about closures, consolidation and bankruptcies, this has emerged as one of the most positive growth stories in the marketplace — craft brewing concepts accounted for roughly 10 million square feet of occupancy growth in the U.S. last year alone. The report states, “Though both retail and industrial markets have benefited from craft brewery growth, industrial real estate has been the big winner accounting for over 81-percent of craft brewingrelated growth over the past decade.” In Arizona, Maricopa County ranks seventh in the U.S. for the most total number of breweries per county with 43, and also ranks seventh in the nation for most planned breweries with a total of 15.

Source: Source: Brewers Association, Cushman & Wakefield Research

What are the 10 most expensive Arizona zip codes for rent?

Portland on the Park: 200 W. Portland St., Phoenix 85003

Although the average rent in Arizona as of May this year is below the national average of $1,316, certain submarkets in the Valley can produce generous yields for landlords. In fact, the statewide average of about $950 is the result of a 5.8-percent year-over-year growth, one of the highest state-level growth rates in the country, according to Yardi Matrix. If the trend continues uninterrupted, the average rent in Arizona will reach the $1,000 mark in a year or so. Standing out as Arizona’s most expensive ZIP codes are 85003 and 85004, which added more than 1,200 new units year-over-year through March, boosting inventories by 53-percent and 85-percent, respectively.

ZIP CODE | AVG. RENT 85003: $1,576 85004: $1,525 7

TRENDSETTERS

The world’s first real estate-backed crypto-asset As Bitcoin and other cryptocurrencies continue to grow in popularity as an alternative investment class, one technology entrepreneur has taken the real estate investment trust (REIT) sector and married it with the crypto-economy to release the world’s first real estate-backed digital token called BrickCoin. It uses blockchain technology to create the asset-based cryptocurrency that replaces the vulnerabilities of the current FIAT currency system, and combines the safety of a real estate investment with the liquidity and performance of a cryptocurrency.

“Inflation levels are rising around the globe, chewing into real incomes and savings rates,” says BrickCoin’s Founder Lucas Cervigni. “The world needs a better, safer and easier way for ordinary people to save and protect their money from inflation.” BrickCoin will enable anyone to convert their FIAT currency into a stable and protected digital currency that grows in value, and represents an investment in a piece of commercial debt-free real estate. Returns vary based on the region, however its guaranteed to be above the inflation rate in the country of origin.

Time to earn an TOP ISSUES architecture license affecting real estate continues to drop

Years to Licensure

The latest architect licensing data indicates the time to become an architect has decreased to an average of 12.5 years — from the time a student enrolls in school to the moment they receive a license. The National Council of Architectural Registration Boards (NCARB) report, this is the eighth year in a row that the timeline has shortened. This trend is driven by candidates completing the experience and examination programs concurrently and more quickly. As a result, architects are earning a license about 9.6-months sooner than in 2015. NCARB’s data also reports, the average age of a newly licensed architect was 32 years old in 2016, an eight-month drop from the previous year. It marks the eighth year in a row that the benchmark has decreased, with architects earning a license 2.8-years sooner than a decade ago.

16 14 12 10 8 6 4 2 0

Time to Licensure

12.5

YEARS %

-6

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

8 | September-October 2017

Source: NCARB

According to the Counselors of Real Estate 2017-18 Top Ten Issues Affecting Real Estate, political polarization and global uncertainly lead the list because divisiveness increases the difficulty of decision-making and fuels uncertainty. “In assessing real estate trends here in Arizona and throughout the country, it helps to consider these issues and think of this list of trends as a resource,” says Sharon Harper, president and CEO of Plaza Companies and a member of The Counselors of Real Estate. “Anyone in the real estate business, or any business really, can use this to help make strategic decisions for the upcoming year.”

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

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 healthcare Immigration Climate change

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EXECUTIVE PROFILE

57 YEARS AND COUNTING John Amory Jr. reflects on his record-setting tenure with CBRE By JESSE A. MILLARD

here was a time when you could go dove hunting in McCormick Ranch. These were the same times when many popular spots were still patches of desert and steak dinners could be purchased for $4.50. Those times were the early 1960s, and CBRE Senior Vice President John Amory Jr. remembers them well, because it was the beginning of his 57.5-year career with CBRE. This was before email, CoStar and the copy machine, Amory says, which meant a lot of legwork. “I’d go down, work my way from the top of a building, and just go knock on doors. We didn’t have security guards down in the lobbies saying you can’t do that,” he says. “Some buildings had leasing agents, and so I avoided them walking in, because I was going to try and move a tenant out of the building.” Amory grew up on a farm near Boston, earned his undergraduate from

10 | September-October 2017

Harvard and was an artillery officer in the Army before he started his storied career with CBRE. When he arrived in Arizona after the Army, Amory was told to apply at Coldwell Banker because they had a good training program, he recalls. And many years and company name changes later, he’s still working there. His first assignment was leasing up the office tower at 3800 N. Central Ave., which Yankees Owner Del Webb developed. Amory still holds a particular fondness for the Del Webb projects he worked on because they were the first commercial real estate properties that he had been involved with. Over the years, Amory would represent many other buildings such as the First American Title Building, which is now the Monroe Building at 111 W. Monroe St. He has participated in 1,400 lease and sale transactions, totaling $640 million. In 1991, CBRE made Amory a senior vice president, a designation for the firm’s top two-percent nationwide producers. Amory only represents one building nowadays, but he doesn’t show any signs of stopping. His resolve can be seen in his advice to persevere and

never give up, and in his willingness to commute from Wickenburg to the Camelback Corridor for work. Much of the Valley has changed since Amory first started working. He notes that North Phoenix and Tempe have changed a great deal from when he was working those areas. And urban flight to the suburbs is a thing of the past, as Amory notices younger folks living Downtown instead. Amory vividly recalls a sign they had up near the Black Canyon corridor that said, “If you worked here, you’d be home by now.” Amory lives with his wife Marcie and their dog Buddy. His daughters, Wendy and Kimberly, live in Santa Barbara and La Jolla, Calif. His son Barkley lives in Kentucky. During the year, Marcie and John make sure to visit their children. And although Amory isn’t knocking on doors anymore, you can still see him making cold calls by telephone at CBRE’s office.

AFTER HOURS

The man with a gameplan Mark Detmer applies career experiences to childhood passion By DAVID MCGLOTHLIN

ark Detmer, managing director of JLL and a co-lead for JLL’s Industrial Capital Markets Group for the West region, has closed more than $10 billion in transaction volume over the last five years. Throughout the commercial real estate industry, he’s become well known for representing institutional owners, private equity, REITs, sovereign wealth and developers in the acquisition or disposition of office and industrial assets. But Detmer never thought his 22-plus-year career in CRE would lead him to become a co-founding owner and board member for Arizona’s only professional soccer team – Phoenix Rising Football Club. Detmer’s involvement with Phoenix Rising began in early 2016, after a conversation with Brett Johnson, who is now the team’s co-chairman and alternative governor. The two discussed how Phoenix was the largest market

12 | September-October 2017

in the U.S. without a Major League Soccer (MLS) team, and that there was a pathway to the MLS through a United Soccer League team that was undercapitalized and without a stadium solution. “If we could find the right location for a stadium, we knew we could re-capitalize that team and take Phoenix soccer to the next level,” Detmer explains. Using his leadership experience and network, Detmer and friends like Berke Bakay (now Phoenix Rising FC governor) and Didier Drogba (now a Phoenix Rising player and co-owner) formed an investor group to acquire the majority of the club’s stock and lay out a stadium plan. Detmer then used his CRE knowledge to identify and secure the best land site in the Valley for a new stadium complex at the southeast corner of McKellips Road and McClintock Drive in Tempe. From there, JLL’s Project Development Services team was tapped to transform 15.84-acres of dirt on the site into a full-service, 6,200-seat, “pop-up” stadium, which is the club’s home field while the MLS expansion is decided. Today, Detmer is responsible for coleading the MLS to Phoenix expansion

committee, which should know as soon as December if Phoenix Rising will be one of two teams accepted this year as an MLS expansion franchise. He says, “The focus of our committee is to prove that soccer is thriving in Phoenix and to successfully advance an MLS franchise and permanent, 20,000- to 25,000-seat soccer-specific stadium.” Detmer’s passion for soccer dates back to his childhood play on American Youth Soccer Organization teams. “Even then, soccer was like family,” he adds. “Our club’s culture is the same.” At Phoenix Rising games, Detmer is regularly accompanied not only by team colleagues but also by his wife and two children, who enjoy cheering on players and soaking in the energy of the stadium and the club’s fans. “At JLL and with Phoenix Rising, my goal is to create a better live, work, play environment for Arizona,” he says. “We are grateful for our fans and the support we’ve had in this effort – from Tempe and Mesa Mayors Mitchell and Giles to GPEC President Chris Camacho, and even our wonderful local media. Our Arizona family has been there for every step as we’ve launched Phoenix Rising FC for the Valley.”

NEW TO MARKET A

MULTIFAMILY A ARISTA AT OCOTILLO DEVELOPER: Gilbane Development Company; P.B. Bell GENERAL CONTRACTOR: MT Builders ARCHITECT: Whitneybell Perry Architects LOCATION: 3200 & 3250 S. Dobson Rd., Chandler SIZE: 205,543 SF; 211 units VALUE: $28M START/COMPLETION: August 2017 November 2018

14 | September-October 2017

HOSPITALITY B CLIFF CASTLE CASINO HOTEL DEVELOPER: Yavapai-Apache Nation GENERAL CONTRACTOR: A.R. Mays Construction ARCHITECT: Cuningham Group LOCATION: 555 W. Middle Verde Rd., Camp Verde SIZE: 111,175 SF; 122 rooms VALUE: $22M START/COMPLETION: February 2016 July 2017

OFFICE C MAJESTIC TEMPE COMMERCE CENTER DEVELOPER: Majestic Realty Co. GENERAL CONTRACTOR: Commerce Construction ARCHITECT: Commerce Construction LOCATION: 6270, 6116, 6026 S. Ash Ave., Tempe SIZE: 47,856 SF (Building 1); 85,752 SF (Building 2); 39,704 SF (Building 3) VALUE: $14.2M START/COMPLETION: February 2017 September 2017

EDUCATION D THE FULTON SCHOOLS RESIDENTIAL COMMUNITY AT TOOKER HOUSE DEVELOPER: American Campus Communities GENERAL CONTRACTOR: Oakland Construction ARCHITECT: Solomon Cordwell Buenz BROKERAGE: DMD Real Estate Group LOCATION: 500 E. University Dr., Tempe SIZE: 458,000 SF VALUE: $120M START/COMPLETION: November 2015 August 2017

MULTIFAMILY E GRAYTHORN DEVELOPER: Graythorn Development GENERAL CONTRACTOR: Graythorn Development ARCHITECT: Cypress Development BROKERAGE: Arizona Builder Sales LOCATION: 9850 E. McDowell Mountain Rd., Scottsdale SIZE: 45,900 SF; 27 units VALUE: $14.5M START/COMPLETION: July 2017 December 2018

MIXED-USE F CHAUNCEY LANE DEVELOPER: DBM Ventures, LLC GENERAL CONTRACTOR: LGE Design Build ARCHITECT: Cawley Architects; AV3 Design LOCATION: Scottsdale Road & Chauncey Lane, Scottsdale SIZE: 53,000 SF VALUE: $20M START/COMPLETION: June 2017 March 2018

The disruptor disrupts

Amazon deal shows need for online and brick-and-mortar retail options By MELISSA KING

mazon’s deal to buy Whole Foods has prompted a new outlook on the classic brick-and-mortar structure. Online retailers are now more actively seeking to gain presence in brick-and-mortar stores just as brick-and-mortar stores are seeking to have a bigger presence online. Amazon’s $13.7 billion purchase of Whole Foods shows an e-commerce giant that is willing to dive into the brickand-mortar world of retail, an area the e-commerce giant famously disrupted. “We finally have a giant Internet group deciding that they need retail locations,” says John Jackson, associate vice president of Colliers International in Phoenix. “Hopefully, everyone starts to realize that it really isn’t online that’s in: You need to be brick-andmortar and online.” Jackson says, the community is excited to see someone pushing away from the online only and embracing

16 | September-October 2017

traditional retail stores. Branding expert Deb Gabor, CEO of Sol Marketing, says the Amazon deal could mean a disruption to both the consumer packaged goods and grocery categories. “This new combined entity will have the power to put pressure on other retailers directly and indirectly and we could see a big shift in consumer shopping habits,” she says. Gabor adds she is interested to see what Amazon can do with customization and individualization and how they might bring that to brickand-mortar retail. Arizona is home to one of the most competitive grocery markets out there, but because there is not a lot of available land for large grocery stores, it’s a tough market to get in to, Jackson says. Whole Foods is very particular about where they place their sophisticated-grade grocery stores, which are typically in areas with higher demographics. There are fewer

The Local Apartments Developer: Forum Real Estate Group General Contractor: JE Dunn Construction Architect: Humphrey’s & Partners Urban Architecture Location: Ash Avenue & University Drive, Tempe Size: 575,000 SF Value: $67M Start/Completion: July 2017 – Feb. 2019 Subcontractors: Blount Contracting; Diversified Interiors; E&K Companies; HACI Mechanical; Kovach Building Enclosures; Otis Elevator; Schnabel Foundation Systems; SECON; Stone Cold Masonry; Suntec Concrete The Local is a 575,000 SF mixed-use, residential apartment development located blocks away from Arizona State University’s Tempe campus. Its five levels and 286 apartment units sit atop a three-level parking garage and a street level Whole Foods Market grocery store.

opportunities for that in Arizona, Jackson says. Prior to its Whole Foods purchase, Amazon has been unsuccessful in finding a location for one of its experimental retail locations in Arizona, Jackson says. More Whole Foods locations are being added, since the acquisition. Whole Foods recently announced it will be adding a Whole Foods 365 branded location to Tempe as part of the upcoming The Local mixed-use development. The new location will be Whole Foods’ 11th location in Arizona, and will be built near Downtown Tempe at University Drive and Ash Avenue. Amazon’s extensive delivery capabilities give Whole Foods a new opportunity to differentiate and bond with customers they previously didn’t have access to. “I’d be watching both the Amazon Basics brand and the Whole Foods 365 Brands very, very closely to see whether those are the brands that the company will use in a foray to disrupt (consumer packaged goods),” Gabor says.

It’s the big deals and the brokers who close them that make the market an interesting one to watch. Here are the Top 5 notable sales for the months of June and July. Sources: Cushman & Wakefield and Costar.

INDUSTRIAL/SALES

OFFICE/SALES

FREEPORT CENTER 420 S. 53rd Ave., Phoenix 127,680 SF; $10.3M BUYER: Colony Northstar, Inc. SELLER: PCCP, LLC BROKERAGE: JLL

THE OFFICES ON HIGH STREET 5310, 5350, 5410, 5415, 5450 & 5455 E. High St., Phoenix 491,139 SF; $101,415,292 BUYER: Harbert Management Corporation SELLER: ScanlanKemperBard Companies BROKERAGE: HFF

6615 W. BOSTON ST., CHANDLER 96,000 SF; $8.16M BUYER: Ivanhoe Cambridge, Inc. SELLER: Evergreen Industrial Properties, LLC BROKERAGE: CBRE

3131 & 3133 E. CAMELBACK RD., PHOENIX 295,401 SF; $81.75M BUYER: Goldman Sachs & Co. - Real Estate Management SELLER: Illinois Teachers’ Retirement System BROKERAGE: JLL

FREEPORT CENTER 1002 S. 56th Ave., Phoenix 118,854 SF; $8.1M BUYER: Colony Northstar, Inc. SELLER: Overton Moore Properties

CORPORATE CENTER 10400 N. 25th Ave., Phoenix 109,332 SF; $16.925M BUYER: Macfarlan Capital Partners, L.P. SELLER: Cohen Equities NY, LLC BROKERAGE: Kidder Mathews

200 S. 49TH AVE., PHOENIX 114,871 SF; $7.24M BUYER: Ivanhoe Cambridge, Inc. SELLER: Evergreen Industrial Properties, LLC BROKERAGE: JLL 475 E. LINCOLN ST., PHOENIX 64,000 SF; $7M BUYER: Montana Avenue Capital Partners, LLC SELLER: Zeb Pearce Companies BROKERAGE: Cushman & Wakefield

BLACK CANYON CENTER 10835 N. 25th Ave., Phoenix 97,549 SF; $12,387,500 BUYER: Tower Investments, Inc. SELLER: Younan Properties, Inc. BROKERAGE: Cushman & Wakefield 1733 S. STAPLEY DR., MESA 32,000 SF; $8,747,840 BUYER: DSW Mesa Grand/Spectrum, LLC SELLER: Vestar

LAND/SALES

MULTIFAMILY/SALES

2990 N. LAINEY LN., BUCKEYE 13,617,009 SF; $60,258,790 BUYER: D.R. Horton, Inc. SELLER: Quantum Capital N. PIMA ROAD., SCOTTSDALE, 85262 4,066,593 SF; $24M BUYER: M3 Companies SELLER: Desert Mountain Club, Inc. SW 40TH STREET & MCDOWELL ROAD, PHOENIX 3,669,059 SF; $23.9M BUYER: Phoenix Retail Co., LLC SELLER: Arizona State Land Department BROKERAGE: Arizona State Land Department WATERMARK MULTIFAMILY NWC Tempe Town Lake & Scottsdale Road, Tempe 173,369 SF; $14.7M BUYER: Trinsic Residential Group SELLER: Fenix Development Inc. BROKERAGE: Cushman & Wakefield S. VAL VISTA DRIVE & E. PARKVIEW DRIVE, GILBERT 1,249,301 SF; $12.42M BUYER: Maracay Homes SELLER: Tousa Recovery Acquisitions, LLC

Avana at the Pointe:

Originally built in 1985, the 418-unit apartment complex offers direct access to a variety of hiking and biking trails near the North Mountain Preserve.

18 | September-October 2017

RETAIL/SALES

ONNIX 1500 E. Broadway Rd., Tempe 550,880 SF; $77.05M BUYER: Jonathan P. Slager SELLER: Angelo, Gordon & Co. BROKERAGE: Marcus & Millichap

1610-1660 E. CAMELBACK RD., PHOENIX 32,963 SF; $23.5M BUYER: William K. Perry Farms SELLER: Crow Holdings Capital BROKERAGE: Cushman & Wakefield

ALTA PARADISE RIDGE 18220 N. 68th St., Phoenix 275,000 SF; $72M BUYER: DiNapoli Capital Partners SELLER: Wood Partners BROKERAGE: CBRE

1240 E. BASELINE RD. & 1655, 1855 & 1859, S. STAPLEY DR., MESA 77,851 SF; $21,282,128 BUYER: DSW Mesa Grand/Spectrum LLC SELLER: Vestar

ARCADIA COVE APARTMENTS 2252 N. 44th St., Phoenix 376,500 SF; $71.5M BUYER: Investcorp Group SELLER: Bascom Arizona Ventures, LLC BROKERAGE: Colliers International GREEN LEAF TEMPE STATION 2323 E. Apache Blvd., Tempe 422,764 SF; $59.5M BUYER: Green Leaf Partners SELLER: SCI Real Estate Investments, LLC BROKERAGE: CBRE AVANA AT THE POINTE 888 E. Clinton St., Phoenix 422,376 SF; $54.4M BUYER: Greystar Real Estate Partners SELLER: Green Leaf Partners BROKERAGE: Marcus & Millichap

1605-1705 S. STAPLEY DR., MESA 65,123 SF; $12.87M BUYER: DSW Mesa Grand/Spectrum, LLC; Indus MGS-WB, LLC SELLER: Vestar BROKERAGE: Cushman & Wakefield 3320 N. SEVENTH AVE., PHOENIX 117,821 SF; $11.55M BUYER: Trammel Crow Company SELLER: Bashas’ Supermarkets 4031 N. SCOTTSDALE RD., SCOTTSDALE 11,384 SF; $9.25M BUYER: JP Morgan Chase & Co. SELLER: Global Corporation

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LEGISLATIVE UPDATE

Training tomorrowâ&#x20AC;&#x2122;s workforce Should more high school underclassman be allowed to join dual enrollment programs?

n educated and skilled workforce is one of the top factors in determining business attraction and expansion decisions. We hear this all the time from national site selection consultants to existing businesses within our communities. Creating jobs is no longer the primary focus for our regions and communities. Instead, we must switch gears and focus on a much more complicated task of educating and creating a workforce if we hope to compete in the near-future economies. As the demographics of the workforce shift, with Baby Boomers leaving and Millennials entering, the concern is no longer having enough individuals to fill the positions, but having those individuals educated to the level required by the businesses seeking them. Expanding economies require a continuous supply of skilled workers. This supply can be accomplished either through recruitment at the expense of other communities or through local programs. A simple step that we can take in Arizona is to support the dual enrollment strategies for high schools and the removal of the 25-percent cap on freshmen and sophomores to participate in these programs. Dual enrollment initiatives promote college and career readiness for students, and helps Joint Technical Education

20 | September-October 2017

Curt Woody AAED Pro

Districts (JTEDs) achieve the requirement that its programs lead to industry certification or licensure. Current legislation allows for juniors and seniors to participate with only 25-percent of the freshman and sophomores allowed to enter into the programs. Elimination of this cap would allow tremendous fiscal gains given that early college models in Career and Technical Education (CTE), eliminate duplicative programs, and increase high school retention, completion and matriculation to college or technical training. Starting these programs at the junior level simply does not go far enough to

achieving the desired outcomes for career ready students. We have pockets of successes in various segments of our state as it pertains to marrying business requirements to education curriculums. Many community colleges will partner with a specific industry to provide a curriculum to educate and train an identified need of workers in that sector. These individual successes are not enough. We need a comprehensive strategy that begins the process of properly educating our future workforce much sooner than high school. Removing the freshman/ sophomore cap is a start but does not go far enough. The earlier we can teach our students skills that directly connect with real-world industries, the better. Ideally, the process should begin when the student enters the educational system: in kindergarten. Curt Woody, AAED Pro, is the president of Arizona Association for Economic Development and director of economic development and tourism for the Town of Marana.

Regulating drone use Arizona legislation stops cities and towns from making its own regulations for UAVs

erospace and unmanned sectors are rapidly growing industries and economic drivers for the state of Arizona. Our state is ranked second in the nation for aerospace and defense systems manufacturing jobs, employing more than 11,700 people. In 2016, our state was ranked first in the nation by Price Waterhouse Cooper for aerospace manufacturing attractiveness. In recent years, unmanned aircraft systems (UAS) or as they’re more commonly referred to, drones are being used in industries beyond the defense sector. One example is the real estate industry. Drones provide added value in marketing residential and commercial properties including aerial views and videos showing large properties and confirming the condition of a structure. Processes for surveying and assessing properties are safer and quicker when drones are used to gather information. According to Phoenix Drone Pros, drone photography has also been shown to reduce the days on the market and

Mignonne Hollis

Arizona Regional Economic Development Foundation increase the sale price. This increased usage of drones in commercial industries is largely due to the most recent FAA regulations. Starting in the spring of 2016, a muchawaited ruling by the FAA provided regulations to small unmanned vehicles. This ruling is commonly known as the Part 107 waiver (14 C.F.R Part 107) and gives certified drone pilots access to fly over people and inhabited areas without

needing to first obtain a Section 333 exemption; meaning drone pilots are no longer required to have pilot’s licenses. These waivers have opened the doors for many types of commercial drone pilots. In Arizona, small businesses make up 90 percent of the companies that have obtained these waivers. According to the Association for Unmanned Vehicle Systems International (AUVSI), most waivers issued by the FAA are issued to the real estate industry. In addition to the FAA regulating drone pilots, states and cities are also able to legislate the use of UAVs. In many states, this has created a patchwork of laws and a fair amount of confusion for the person operating a business; however, this is not the case for Arizona. In an effort to help grow businesses, Gov. Doug Ducey signed legislation in May of 2016, barring cities and towns from making their own rules legislating drones. Aerospace Arizona, founded and operated in 2015 by Arizona Regional Economic Development Foundation, supports the aerospace industry throughout Arizona. The association actively promotes the economic strength of the aerospace industry and tracks state legislation to ensure that new laws do not impede growth. This November, Arizona Regional Economic Development Foundation along with its partners is hosting the second annual UAS Summit and Expo in the metro area. The three-day conference will be held in Mesa at the Sheraton Mesa Hotel at Wrigleyville West. The UAS Summit seeks to create awareness and visibility around the UAS and aerospace industry and to provide new opportunities for industry networking and education. A diverse lineup of speakers and panel discussions planned for this year’s summit will showcase the talent and the depth of Arizona’s UAS industry from academia, to military, to commercial and real estate UAV applications. Brian Wynne, president of AUVSI will deliver a keynote address. For more information, visit arizonauassummit.com. Mignonne Hollis is the executive director of Arizona Regional Economic Development Foundation. 21

LEGISLATIVE UPDATE

Congress prepares to debate tax reform

tool for building equity, and reducing the need for third-party financing. For the apartment industry, such transactions allow owners to continue investing in the real estate market while deferring taxes attributable to the sale of their investment. This deferment allows for future investment of capital in order to meet the surging demand for workforce housing. Like-kind exchanges also help get properties into the hands of new owners with the time, resources and desire to restore and improve them. Without Section 1031, many of these properties would languish — underutilized and underinvested — because of the tax burden that would apply to an outright sale.

Apartment industry looks to preserve key tax policies

LOW-INCOME HOUSING TAX CREDIT PROGRAM

here has been much speculation surrounding Congress’s growing appetite to enact significant tax reform. In fact, some have even suggested that given the GOP’s firm grip in Washington, this may be a “once in a generation” opportunity to pass meaningful reform. The last time Congress passed tax reform was over three decades ago. In 1986, during the Reagan administration, Congress passed the Tax Reform Act of 1986 (TRA ’86), becoming the second of the two Reagan tax cuts. The reform did many things to the tax code including simplifying the code, broadening the tax base and eliminating tax shelters. While the 1986 Act is widely viewed as a fundamentally sound tax policy, it is also a seemingly fleeting example of bipartisan workmanship at its best. Now 30 years removed from TRA ’86, lawmakers seem poised to once again make significant changes to the code. Tax reform has the potential to fundamentally reshape the apartment industry. The key to smart tax policy is to promote economic growth, job creation and investment in the community without unfairly burdening

22 | September-October 2017

Courtney Gilstrap LeVinus

Jake Hinman

Capitol Consulting

a specific sector or taxpayer. If Congress moves forward with tax reform, the apartment industry urges restraint in two key areas of tax policy.

1031 LIKE-KIND EXCHANGES A Section 1031 Exchange, also known as a Like-Kind Exchange, refers to Section 1031 of the U.S. Internal Revenue Code, which allows capital gains taxes to be deferred if the proceeds are reinvested in a similar property. Largely unchanged since 1928, likekind exchange rules encourage future investment in real estate and are a critical

While the Tax Reform Act of 1986 eliminated many sections of the tax code, it also created the most effective tool for creating affordable housing options for the working poor. The LowIncome Housing Tax Credit (LHTC) was added to the Act to encourage investment in affordable housing, and it is responsible for financing nearly three million affordable homes since its inception. As a public-private partnership, the Housing Credit generates money from investors for the construction of affordable homes and transfers the financial risk of development from taxpayers to the private sector. In Arizona, the Housing Credit is responsible for creating nearly 50,000 affordable homes, and has had a ripple effect on the health of our state’s economy, supporting over 55,000 jobs and generating $5.28 billion in local income over the past 30 years. As demand for housing affordability far out-paces supply, it is critical to ensure that the value of the current credit is not diminished during the tax debate. Courtney Gilstrap LeVinus is the interim president and CEO of the Arizona Multihousing Association and Jake Hinman is the director of government relations for Capitol Consulting on behalf of AMA.

LEGISLATIVE UPDATE

Technologies’ renaissance is shaping the future

his is happening – are we ready? Entirely new cities and “fiberhoods” are emerging, grounded in cutting-edge technology. Sensor-laden, data-driven and internet-connected, these urban prototypes are the testing grounds for the future. One of the best examples of this New World Order is Peña Station Next, just outside of Denver – a prototype for the technologically transformed urban neighborhood of the future. Panasonic and Colorado developer L.C. Fulenwider are partnering on the project that will double as a proving ground for exotic technology. When completed in 10 to 12 years, it will be a landscape where virtually every object – from lighting to parking meters – will be connected to the internet and will supply a continuous stream of data to the development’s managers, who also will be able to control them via cloud-based apps. A cutting-edge sensor array already developed by federal government

24 | September-October 2017

Deb Sydenham

ULI Arizona District Council

researchers will continuously monitor environmental conditions – everything from the cloud cover to the level of particulates in the air, as well as traffic density and pedestrian count. “It’s a Fitbit for cities,” explains George Karayannis, vice president of Panasonic's CityNOW smart-city division, and also states they aim to make Peña Station Next, “the smartest and most sustainable 382 acres in the country. Some cities are piloting some

of these technologies, but no one city is doing all of what we’re doing.” Panasonic, which chose Denver out of a list of 22 finalists for the site of its technology center, hopes to turn Peña Station Next into both a proving ground for smart-city technology and a template for other real estate projects. Karayannis says the company is already having discussions with “a few dozen” developers across the nation. “We’re looking for opportunities to develop transformative human-centric communities,” he says. In places such as Peña Station Next, a promising new partnership model is emerging in which a real estate firm partners from the start with a technology company that not only supplies the electronics, software, and expertise, but which becomes an investor as well. “I think this is where the real estate industry is going,” says L.C. Fulenwider President Ferd Belz, who led the effort to bring Panasonic into the project. “They’re with you from the

beginning, as the technology evolves. This is going to be a learning lab, where we’ll be experimenting with systems and figuring out how to make the work. That’s hard to do if you just work with a technology contractor.” In January 2016, AT&T launched their Smart Cities framework using internet of things (IoT) innovations to create impactful solutions for cities and forming alliances with technology leaders and industry organizations. They are currently working with eight U.S. cities through public-private partnerships to develop smart solutions for their various challenges. Embracing this technological revolution means local officials face the complicated task of figuring out how to retrofit existing infrastructure or to layer new capabilities onto it. While governments’ efforts to make cities smarter are often constrained by funding, political inertia, and the pressure to focus on immediate problems rather than long-term transformation, private developers have more freedom

Colorado-based Navigant Research predicts that the market for smart cities technology will grow to $27.5 billion worldwide by 2023. and agility to create projects with the latest technology, perhaps advancing the smart cities concept more rapidly. The Smart Cities movement is the wave of innovation already starting to transform urban areas across the globe – and in the process is creating new challenges and opportunities for the commercial real estate sector. Advances such as the IoT, in which devices communicate with each other via internet connections; sophisticated sensing technology; wireless broadband;

“big data” analysis; and automation are converging to improve how cities use energy, water, and other resources; how they manage traffic and monitor environmental quality; and how they provide basic services such as policing. Experts say that the moves toward smart cities are playing out in a variety of ways, but the most rapid progress toward smart cities may come in the commercial real estate sector, where private entities developing greenfield projects or renovating sizable urban parcels have more freedom and agility to embrace innovation. The Valley of the Sun now has a frontrow seat in the smart cities movement as development of ASU’s Novus Innovation Corridor in Tempe unfolds. This is happening – we’re most definitely ready. Deb Sydenham, FAICP, executive director of ULI Arizona District Council, and excerpted from Smart Cities Promise a New Way of Living, Patrick J. Kiger, Urban Land, the Magazine of the Urban Land Institute. 25

COOL OFFICES

ATTRACTION Local examples of different workplace designs that help attract and retain desired talent

By DAVID MCGLOTHLIN

s unemployment rates continue to drop, competition for jobs in the workforce stiffens. In the first quarter, Arizona’s unemployment rate was 4.4 percent, which is a 2.4 percent increase in total employment year-over-year. During that time, 17,175 of the 47,600 workers added to payrolls were in traditional officeusing sectors, according to a Marcus & Millichap 2017 Office Report. One way a company can position itself to attract and retain the best employees is through the built environment of its workspace. In a 2016 Workplace Survey, Gensler, the largest architecture firm in the world, identified a direct link between key aspects of workplace design to higher levels of creativity and innovation. According to its research, “There are 48 million U.S. workers that are working in a workplace that is not set up to help them innovate, representing billions of dollars in lost revenue and profit for countless organizations across the country.” These offices represent workplace strategies, designs and features that drive innovation, releasing the creative potential of every employee through the power of design.

26 September-October 2017

IMAGE COURTESY, GENSLER | RYAN GOBUTY

Booking.com

Owner: Booking.com General Contractor: Venn Construction (formerly RJM Construction) Architect: Gensler Location: 112 N. Central Ave., Suite #600, Phoenix Size: 2,800 SF Start/Completion: January 2016 – April 2016 Why it’s awesome: Looking to capture the essence of Arizona and the Sonoran

Desert, the design team collaborated with Booking.com to create a fun and uniquely Phoenician office. Elements and materials representative of Arizona were integrated into the space, including door frames made from locally-sourced reclaimed mushroom wood and custom saloon doors, a sly play on the wild west history of the state. The break room includes a lucky penny wall punctuated with commemorative Arizona State quarters.

Keyser

Owner: Jonathan Keyser General Contractor: Layton Construction (Phase 1); SAB Southwest Architectural Builders (Phase 2) Architect: Bar Napkin Productions (Phase 1); Evolution Design (Phase 2) Brokerage firm: Keyser Location: 4141 N. Scottsdale Rd., Scottsdale Size: 11,000 SF Value: $1.1M (Phases 1 & 2) Start/Completion: April 2014 – August 2014 (Phase 1); May 2016 – September 2016 (Phase 2)

Why it’s awesome: Designed after high-end, European style, cutting edge law firms, the open office features a hidden doorway separating the front lobby from the rest of the space, which includes writable walls throughout, high end finishes, massive granite tables in conference rooms, numerous huddle rooms with lounge seating and a huge kitchen lounge area. In addition to video games, mini-basketball hoops, a ping pong table and dart board, the office also boasts a punching bag and a red English-style telephone booth with Superman’s costume in it.

D Lewis Roca Rothgerber Christie Headquarters

Cushman & Wakefield

Owner: LBA Realty General Contractor: Layton Construction Company Architect: RSP Architects Location: 2555 E. Camelback Rd., Suite #400, Phoenix Size: 34,119 SF Value: $2.4M Start/Completion: October 2016 – March 2017 Why it’s awesome: The new Cushman & Wakefield workplace spans two floors within Esplanade V and features sit-to-stand desks, a branded lobby with a 96-inch column of transparent video monitors and an assortment of both collaborative and private spaces complete with wireless audiovisual capabilities. A restaurant-style café/ lounge, dubbed “Cushman Central,” was also implemented featuring cold brew, beer and wine on tap for entertaining clients and hosting industry and company events.

Owner: Lewis Roca Rothgerber Christie General Contractor: Stevens Leinweber Construction Architect: Gensler Location: 201 E. Washington St., Suite #1200, Phoenix Size: 65,000 SF Start/Completion: August 2011 – March 2015 Why it’s awesome: The design represents a refreshing take on traditional law office design. Knitting together a polished

reception, universally-sized attorney offices, multi-functional library, relaxing lounge and expansive conference center, the design team created a look and feel that is timeless. Designed as one-part gallery and one-part functional law office, visitors and staff navigate the modern interior, walking on hand-laid end-grain wood floors, among works by Calder and Miró. The law library was combined with the attorney lounge, featuring double-sided rotating bookshelves, and allowing for a highly-efficient, collaborative space.

IMAGE COURTESY, GENSLER | RYAN GOBUTY

COOL OFFICES E

Matson Money

Owner: Matson Money General Contractor: Wespac Construction Architect: Evolution Design Brokerage: Cresa Location: 18940 N. Pima Rd., Scottsdale Size: 47,482 SF Value: $7.43M Start/Completion: January 2016 – October 2016 Why it’s awesome: Deemed “Matson Money West,” this innovative new regional headquarters for the Cincinnati-based wealth management company, is truly a one-of-a-kind project. Cresa’s project management provided an exclusive office environment with client experience enhancements such as a TV studio, screening room, high-tech training environments, a merchandising area, catering kitchen and exceptional office décor like imported Italian title and two, three-ton sections of the actual Berlin Wall.

Seed Spot

Owner: R&R Arizona General Contractor: Robert E. Porter Construction Architect: CCBG Architects Brokerage firm: Colliers International Location: 502 S. Second St., Suite #1, Phoenix Size: 4,500 SF 28 September-October 2017

Value: $227,000 Start/Completion: April 17, 2017 – May 31, 2017 Why it’s awesome: After nearly four years at its Midtown location, Seed Spot, an incubator for entrepreneurs with ideas for social change, relocated to the Phoenix Warehouse District in June to a newly renovated commercial suite in the

historic R&R Partners warehouse. Built in 1926, the renovations highlight the former produce warehouse’s 20-plus foot ceilings, brick walls, concrete floors and wide open layout. Seed Spot’s new office also features conference rooms and a large classroom that will help the nonprofit better serve the start-ups they incubate through enhanced collaboration.

G Wentworth Property Company Corporate Office

Developer: Wentworth Property Company General Contractor: Jokake Construction Architect: RSP Architects Location: 802 N. Third Ave., Phoenix Size: 14,740 SF Start/Completion: 1Q 2016 – Q1 2017 Why it’s awesome: Wentworth transformed the first floor of the three-story office building to include a virtual reception area, café and game room. Christened “J-Dub’s,” the space includes a 30-foot bar with on-tap beverages, communal tables, a 22-foot shuffleboard table, electronic games and patio for corn hole. Accessible via stairs or elevator, floors two and three include private and shared workstations, conference rooms and breakout areas with bar-height and upholstered seating.

Western Window Systems

Developer: Wentworth Property Company General Contractor: Layton Construction Architect: Ware Malcomb Location: 2200 E. Riverview Dr., Suite #100, Phoenix Size: 35,000 SF (office); 135,000 SF (warehouse) Brokerage: Cresa Value: $5M Start/Completion: October 2016 - April 2016 Why it’s awesome: The 170,000 SF tenant improvement project is the new corporate headquarters for Western Window Systems. The office design embraces the culture of the company: “A Better Way to Live and Work.” Inside, hundreds of lineal feet of multi-slide glass line office and meeting room areas. You’ll also find video games, pool tables, putting green, LEGO walls and a slide from the second floor to the first.

COOL OFFICES I

Workuity

Owner: CoWork, LLC General Contractor: RJM Construction Architect: Bar Napkin Production Brokerage: Cushman & Wakefield Location: 2390 E. Camelback Rd., Suite #130, Phoenix Size: 18,358 SF Value: $1.8M Start/Completion: December 2017 – March 2017 Why it’s awesome: Workuity, the largest co-working space in the state, has opened its flagship location within the Biltmore Center. Members enjoy extraordinary workspaces that combine the flexibility and community of a co-working facility, with the productivity, sophistication and personalized service that high performance professionals, entrepreneurs and start-ups demand. Members receive 24/7 access to private office suites, open workspaces, conference rooms, a theater, telephone booths, a 30-foot kitchen, secure printing, business class high speed fiber internet with the best available high-security architecture, coffee, beer and wine always available, fitness center with locker room and showers, all for one affordable price with month-to-month terms.

YAM Worldwide Center

Owner: YAM – Bob Parsons General Contractor: Hardison Downey Architect: McCarthy Nordburg, Ltd. Location: 15750 N. Northsight Blvd., Scottsdale Size: 66,000 SF Value: $7.9M Start/ Completion: October 2014 – June 2016 Why it’s awesome: Its design is rich in a raw industrial setting that exudes the customer experience, starting in the lobby, with a grand rolling video behind the custom reception desk, vibrant colors, a blackened steel feature staircase and exposed ceiling with wood slats. The space captures the story of YAM and speaks to their unique branding and culture, with numerous community spaces for collaboration in a variety of bench seating options. Building information modeling was used to balance technical needs with a one-of-a-kind design desired by the client. Tell us what offices in the Valley are your favorites and why. Send us your photos and tag us on social media. @AZBigMedia @azbigmedia AZ BIG Media

30 September-October 2017

ARIZONA MULTIHOUSING ASSOCIATION

COMING DOWN THE PIKE Arizona needs more than 150,000 apartments by 2030 By JESSE A. MILLARD

32 | September-October 2017

Domus: Located at 4445 N. 36th St.,

Domus is a luxury multifamily community developed by Smithfield Properties and managed by Mark-Taylor Residential.

he future of Phoenix is looking packed, as it is expected to need 150,302 new apartment units by 2030 to keep up with demand, according to a study released in late June. Phoenix will need to add 10,736 apartment units per year on average in the coming years to meet this projected demand, according to a study released by the Arizona Multihousing Association (AMA) and National Apartment Association (NAA). The Phoenix area’s accelerating population growth, a rising number of Baby Boomers opting for the lock-andleave lifestyle that apartments offer and Millennials staying in apartments longer are fueling this expected demand, says Courtney Gilstrap LeVinus, interim president and CEO of AMA. “I think people are generally surprised there is such a need (for apartments),” Gilstrap LeVinus says. “When you go in and look at the numbers, and really recognize the demographic shift that we’re seeing, it starts to make sense.” Arizona is also growing, especially Maricopa County. In March, the U.S. Census Bureau announced that Maricopa County was the fastest growing county in the country last year, adding 222 people per day. To meet this projected demand, it looks like Phoenix-area developers will have their work cut out for them. Currently, Colliers International is forecasting that about 10,500 apartments will come online this year in Metro Phoenix. That number is up from the average of about 6,300 apartment units per year from 2014 to 2006, says Pete O’Neil, research director at Colliers International’s Phoenix office. But 2017’s projections will likely hit a 30-year high for the market, he adds. For this year, it looks like Phoenix is 33

AMA FAST FACTS In late June, the Arizona Multihousing Association and the National Apartment Association released a report that predicts Arizona will need 150,302 new apartments by 2030 to keep up with demand. The report also highlights:

- Phoenix will need to increase the number of apartments by 38 percent over the next decade - Phoenix will need all types of apartments at all price points - Phoenix will need to average 10,736 units per year in the coming years to meet the expected demand - Across the nation, 4.6 million new apartments are needed by 2030 as living needs in the U.S. change - Apartment developers, owners, managers and residents contribute $9.9 billion to Phoenix’s economy annually

on track to meet the report’s projected demand, but that might not be the case going forward. “I would be very surprised if this level of new construction is able to be sustained in the next few years,” O’Neil says. Although it’s too early to come up with a 2018 forecast, Colliers has its eye on about 5,000 apartment units that are under construction right now that will be move-in ready next year, O’Neil says. The AMA report also notes that apartments of all types will need to be built to meet this projected demand. There could be a problem with meeting the full needs of the projected demand. The current trend when it comes to new apartment developments is luxury, amenity-rich assets in urban communities. “Many of the new developments are mid-rise, in popular submarkets with amenities in the complex with nearby dining and entertainment options,” O’Neil says. “The average rent in new construction is 40 to 50 percent higher than the current average market rent. Affordable and mid-range are not a 34 | September-October 2017

TOMSCOT: Located near Scottsdale’s upscale shopping and entertainment district, the 278-unit luxury multifamily community boasts unique amenities such as a golf simulator, dog park and rock climbing wall just to name a few.

large segment of new construction.” The demographic shifts that the AMA is seeing might not make this so much of a problem, though. Retiring Baby Boomers who may be selling their homes for an apartment will have cash to spare for these amenityrich communities. Meanwhile, Millennials are getting married much later in life, and aren’t moving into single-family homes as young as previous generations, Gilstrap LeVinus says. And everyone knows how much Millennials love easy, amenity-rich types of apartments that are within urban cores, which is where many of these luxury apartment developers are cropping up. Gilstrap LeVinus says the AMA is certainly seeing the national trend of urbanization where many generations are leaving the suburbs for downtown regions. “People don’t want to be in their car at the beginning of the day, or the end of the day for a couple of hours,” she says. “They want to be close to amenities, being in the same area as the John Carlson neighborhood.”

WHAT COULD STOP US? The Multihousing Association’s national report calls for more incentives to be created and for restrictions to be loosened in order to help developers meet this demand. Arizona has a healthy climate for apartment developers, Gilstrap LeVinus says. “We’re still able to build very affordable units, because our land costs are not what we see in other urban cities,” she notes. There is still a desire to move projects along faster, she mentions, “Anything that we can do to work with municipalities to get projects to the finish line, without shortcuts is critical.” Developers looking to fill this expected demand will need to find a balance of creating projects quickly while bringing lasting assets to the Phoenix area.

Courtney Gilstrap LeVinus

Pete O’Neil

“We do what’s right, not what’s easy.” — Chapin Bell, CEO, P.B. Bell

Providing our clients award-winning multifamily property management services in Arizona since 1976.

PBBell.com For more information contact Arian Ploszaj at 480-951-2222 or aploszaj@pbbell.com

AMA

TOP 5 HIGHEST RENTS 1. South Scottsdale - $1,315 2. Central City/Sky Harbor - $1,290 3. N. Scottsdale/Fountain Hills - $1,222 4. North Tempe - $1,176 5. S. Gilbert/Queen Creek - $1,099

TOP 5 LOWEST RENTS 1. Central Black Canyon - $655 2. Glendale - $743 3. Maryvale/Estrella - $750 4. Metrocenter - $778 5. West Central Phoenix - $809 There are tools that exist to strike that balance of fast pace projects with no shortcuts. The City of Phoenix has a program that allows developers to use city-approved third-party certification. “Architects and engineers can certify the plan, so (developers) don’t have to go through every single step with the City of Phoenix,” Gilstrap LeVinus says. She mentions several local Multihousing Association members have taken advantage of Phoenix’s program to get projects moving at a faster rate. 36 | September-October 2017

“Again, it’s striking that balance to make sure that all of the i’s are dotted, t’s are crossed, neighborhoods are happy with the development that’s going in, and the project goes through the process as it should,” she says.

IS MEETING THIS DEMAND POSSIBLE? Meeting this apartment demand is going to be a challenge, Gilstrap LeVinus says. A lot of the developments that will meet this demand are being built in the Valley’s urban cores, like Downtown Phoenix, Gilstrap LeVinus explains, but we could start seeing apartments spread out to other regions, like the West Valley and rural Arizona. Job growth in the state and in the Valley is very important to whether or not this demand will even exist. The AMA is tied with the Arizona Commerce Authority and other organizations when it comes to working to bring more jobs to the state, Gilstrap LeVinus says. More jobs, means more apartments, she adds. And it’s very important to businesses that may move operations here that there is adequate housing at all economic levels for employees, Gilstrap LeVinus says. Annual job growth is the most correlated metric to annual apartment demand, says John Carlson, president at Mark-Taylor Residential, which operates more tha $2.5 billion in

VELAIRE AT ASPERA: Developed

by P.B. Bell, the 286-unit complex marks the first new multifamily community to be built in the West Valley in roughly 14 years, which was the result of a pent-up demand for a new, high quality apartment community in the area.

multifamily real estate investments. According to Mark-Taylor Residential’s analysis, the Valley is approaching the middle point of the current multifamily expansion, he says. The apartment market has remained in balance this cycle, when job growth from 2011 to the present and historical absorption are taken into account, Carlson says. Looking ahead, it remains to be seen if adding 150,302 new apartment units by 2030 to meet expected demand will be a reality. “We all know that job growth and therefore apartment construction are not linear, they are cyclical and based largely on unpredictable factors like monetary policy and the availability of debt,” Carlson says. “With that said, looking ahead and in consideration of that cyclicality, our best estimate would be that approximately 55,000 to 70,000 new apartment units are built from 2018-2030.”

Kasten Long Commercial Group (KLCG) is proud to be in partnership with the Arizona Multihousing Assoc. (AMA) and will be a resource for the AMA members that own and manage apartments. KLCG has focused on apartment brokerage since 1998 with more than 1,000 apartment transactions. The company’s “client first” dedication, market knowledge and brokerage experience is a perfect fit with the AMA.

TOGETHER WE WILL:

• Host quarterly meetings/events at select locations across the Valley to highlight current and planned commercial projects that will affect property values. • Provide updated data and insight on the greater Phoenix apartment market. • Be a resource for all aspects of apartment ownership, management, maximizing cash flow and property value. The meetings / events are open to the public. Please contact Jim Kasten, CCIM (Jm@KLCommercialGroup.com, 602-677-0655)

if you would like to receive information on future events.

STADIUMS

STADIUM IMPROVEMENTS

38 September-October 2017

Best-in-class sports venues drive commercial and economic development opportunities By DAVID MCGLOTHLIN

ach season, thousands of roaring fans with drinks and snacks in hand, adorned from head to toe in their favorite sports memorabilia, pack into stadiums across the Valley to cheer their favorite athletes and teams on to victory while hoping to experience history in the making. Like November 4, 2001, when over 49,000 fans witnessed Arizona Diamondbacks legend Luis Gonzalez’s game-winning, bloop-single over the head of Derek Jeter in the bottom of the ninth inning during Game 7 of the World Series at then Bank One Ballpark for the team’s first and only World Series Championship. Before any of that can happen though, a stadium must be designed, planned and built, which is a process that gets started years before opening day. Then, it must be maintained and updated in order to stay competitive with newer stadiums in attracting other major events during the off seasons. Whether its football, baseball, soccer, hockey or motorsports, a state-of-the-art sports venue enhances the experiences for the fans, teams, players and sponsors alike. It can also enhance the surrounding communities by creating a synergy between the new residents, companies and visitors to the area while generating nearby commercial and economic development opportunities. A prime example is the $455.7 million, 1.7-million-square-foot, University of Phoenix Stadium completed in 2006. It’s the home of the Arizona Cardinals and annual Tostitos Fiesta Bowl, which each generate $150 million in economic impact annually, according to the stadium’s owner – the 39

STADIUMS

Arizona Sports & Tourism Authority. In the past few years, it has hosted some of the largest and most publicized sporting events like two Super Bowls, two College Football Championship Games and the 2017 NCAA Final Four Tournament. The Phoenix Local Organizing Committee reports, the events hosted at the stadium since it opened 11 years ago have generated well over $5 billion in total economic impact, which includes $1.3 billion in the last three-years alone. “Mega sporting events are a huge benefit to Arizona’s economy, generating millions in revenue and tax dollars and providing incredible national and international media exposure for our state,” explains Gov. Doug Ducey in a statement with PLOC’s findings. “And they foster 40 September-October 2017

community pride as residents come together to celebrate the spirit of elite athletic competition.” Tourism is one of Arizona’s base industries, which accounted for more than 43 million visitors in 2016 that collectively spent $21.2 billion, according to the Arizona Chamber of Commerce. “When you break that down, the sports tourism industry is a vitally important part,” says Glenn Hammer, president and CEO of the ACC. “We want a strong cultural scene and sports are a huge part of that. These major sporting events do a fantastic job of selling our state to the country and people all over the globe.” He enjoys all of the Valley’s stadiums for different reasons because each offers something unique. However, he explains, each stadium creates a whole

ecosystem of businesses around it once completed that become a magnet for more economic activity despite each stadiums’ differences. For instance, Downtown Phoenix before the completion of Talking Sticks Resort Arena in 1992 and Chase Field in 1998 was largely seen as an eight-hour economy where most of the activity focused on work and ceased to exist after 5 o’clock when employees headed back to their homes in the suburbs. While Downtown Phoenix’s revitalization was slow and gradual, between 2005 and 2016, the area has experienced more than $4.8 billion in investments to the areas of transportation, office, housing, education, arts, culture, sports and hospitality. That includes the $600 million

PHOENIX RACEWAY: The entirely new Fan Zone will allow motorsport fans to interact with their favorite teams and drivers while getting closer than ever before to the race cars in the garage.

expansion of the now 880,000-squarefoot Phoenix Convention Center, which hosted the 2015 NFL Experience for the Super Bowl, College Football Champ Playoff Campus in 2016 and the Final Four Fan Fest in 2017. Hammer says, “The Suns’ and Diamondbacks’ stadiums have been a pillar for the renaissance we’ve seen in Downtown Phoenix,” which now boasts a synergistic mix of live, work, play components that’s attracting the best and brightest employees, companies and mega events. Downtown Phoenix now has over 180 restaurants and bars, more than 3,000 hotel rooms, 800,000 square feet of retail, 8-million square feet of private office space and a public transit system connecting to the rest of the Valley. As the Valley’s populations and the

popularity of organized spectator sports grow in demand, so do money-making opportunities and the demand for large public multi-purpose facilities that can support the massive crowds and draw in major events. The East and West Valleys are both getting in on the action, each with its own major stadium project. In Tempe, the Phoenix Rising FC’s “pop-up” stadium was constructed as the temporary home of the United Soccer League club, but plans for a permanent, new-build stadium is pending on the club’s inclusion as a Major League Soccer expansion team. In Avondale, a $178 million modernization project of Phoenix Raceway is currently underway to enhance amenities for fans, teams, sponsors and stakeholders. Meanwhile, the owners and management of other stadiums in the Valley are considering whether to modernize existing stadiums or relocate and build a new one in order to stay on pace with other teams and venues nationally. Not only does a modern stadium need to be timeless, create a sense of place, be experiential, support massive crowds, but it also needs to be easy to interface with and navigate through as well as being flexible and adaptable for multiple uses and events.

PHOENIX RACEWAY MODERNIZATION REVS UP This past Spring, Phoenix Raceway, together with its parent company, International Speedway Corporation broke-ground on a $178 million modernization to place Phoenix Raceway as the newest, fan-friendliest and most technologically advanced entertainment venue in Arizona. The project is a culmination of what has been years of planning, analysis and research into what sporting fans find most desirable and how to most effectively allow them to interact as spectators within the stadium environment. The result is an entirely

new way for racing fans to interface with the drivers, their racing teams and the sport of NASCAR. “In the ever-changing landscape of the sports business, you need to be able to keep pace with expectations,” says President of Phoenix Raceway Bryan R. Sperber. “There are so many choices that it becomes even more important to meet the expectations of fans and sponsors at every race.” Originally built in 1964, Phoenix Raceway is considered the premier motorsports venue in the Southwest. In fact, it’s the only track in the West to feature two Monster Energy NASCAR Cup Series weekends a year, beginning with the Camping World 500 race in March and the upcoming Can-Am 500 race in November as well as a Verizon IndyCar Series race in April. The transformed Phoenix Raceway will put racing in an even more exciting, new light with the modernization project that Sperber describes as “groundbreaking” and “innovative.” With connectivity and technology becoming ever more important for fans to experience and interact with a venue through their devices, Sperber says, Phoenix Raceway will be the first and only motorsports venue in the United States with Wi-Fi connectivity throughout the entire stadium. Other highlights include a completely redesigned infield featuring a first-ofits-kind Monster Energy NASCAR Cup Series Garage Fan Zone, placing fans face-to-face with sport’s superstars. From musical acts to restaurants and beer gardens or interactive displays and spaces where fans will really be able to “enter the lock room,” Sperber explains, the next evolution of Phoenix Raceway will truly transform how attendees experience the venue. “It’s a way for fans to go behind the velvet rope, be a VIP, see the sport up close and have experiences that they had not been able to have before.” “Soon we’ll have the ability to host a wide range of events from other motorsports events to other athletic events, culinary events and music festivals,” says Sperber. “Really, there’s nothing out there in terms of big events or small meetings that we wouldn’t be able to host and provide a bestin-class experience.” The track is actively entertaining 41

STADIUMS

PHOENIX RISING FC: Now more than halfway through their season, which runs through October, the team has enjoyed sold-out crowds and its ownership is already looking forward to the next, permanent phases of the site.

conversations regarding a variety of events and expect to have a dramatically different schedule two years from now with more events and activities. As for development surrounding the racetrack in Avondale, Sperber says, the track has attracted some new brands that will be announced in the coming months because of the high profile nature of this project in the industry. “Some are in the tech space, which aligns with Gov. Ducey's vision of creating a more attractive environment to bring tech businesses to Arizona,” Sperber adds. “It goes to show that sports as an anchor can be a really powerful tool for mixed-use projects and other types of development.” 42 September-October 2017

PHOENIX RISING FC ON THE FAST-TRACK Phoenix is the largest market in the U.S. without a MLS team, but Phoenix Rising FC hopes that will change, and it will be accepted as a MLS expansion team. However, the club’s first priority was to complete a temporary stadium for this season’s games. It only took 52-days under the direction of JLL’s Project Development Services team for crews to transform a 15.84-acre dirt lot into a full-service pop-up complex featuring a 6,200-seat soccer-specific stadium with three VIP suites, an owner’s suite, locker rooms and an adjacent, soccer-specific training field that, like the main stadium, has natural grass. With the help of the Salt River PimaMaricopa Indian Community, Solana Group, SRP, DLR, Kitchell and JLL, the pop-up stadium received its certificate for occupancy on March 24 and the team played its inaugural match as Phoenix Rising FC the next day.

The goal of Phoenix Rising FC — Arizona’s only professional soccer team — is to replace its pop-up facility with a permanent, climate-controlled Major League Soccer stadium at the same location by 2020. However, the USL team would need to be accepted as a MLS expansion team before construction on the stadium starts. Phoenix Rising FC’s proposed stadium would be the centerpiece of a larger soccer complex and mixed-use development that will accommodate the Phoenix Rising FC youth soccer academy, professional and community soccer events. It’s also expected to happen alongside other key developments in the area, including a possible amusement park and a masterplan that includes high-tech office and retail space. The club’s plan is to privately fund the stadium on the 45-acre site already under contract and in use by the club in partnership with the Solanna Group.

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BUILDING OWNERS AND MANAGERS ASSOCIATION

Trends, tenants & technology

Local experts explore the market forces shifting how building owners and property managers operate By DAVID MCGLOTHLIN

rom the growing prevalence of collaborative open workspaces and shifting demands of a multigenerational workforce to disruptive new technologies and an increased emphasis on facilitating health and wellness within the workplace, building owners and property managers are doing their best to adjust as market demands shift.

44 | September-October 2017

The Building Owners and Managers Association (BOMA) of Greater Phoenix strives to be an industry leader for best practices, innovative programs and groundbreaking initiatives through education and advocacy. Thus, a group of local BOMA members from different backgrounds, companies and disciplines were asked to explain how the latest shifts in the market might impact your business or role as a tenant. AZRE: What’s one big trend that’s catching your attention? TH: Collaborative workspace is one trend continuing to drive change in office space. Nearly every tenant improvement shows firms moving away from private offices and high

MATSON MONEY: Designed by Evolution Design, Matson Money combines highend décor like imported Italian title, sections of the Berlin Wall and a replica Statue of David with with state-of-theart technology throughout its TV studio, screening room, commercial kitchen and learning space.

cubical walls as workspace is becoming increasingly open and free form. Additionally, as headcount increases in traditional office space, parking becomes a bigger issue for tenants, employees and visitors. TP: While most landlords quickly reinstated staple Class A services and tenant amenities once the market

Becky Bishop

Dave Dickens

Jovanna Freeman

Tom Hatch

Tawnya Peirce

Robert Vincent

Property manager and LEED Green Associate at Avison Young

Principal at Interstate Mechanical Corporation

Assistant general manager at JLL

Asset and property manager at Forum Capital

Associate director at CBRE

Asset manager at Cordia Capital Management

recovered, best-in-class amenities and tenant touch points that previously only catered to C-suite executives are now being considered for all types of office environments. Sophisticated parking access controls and common-area mood elements such as music, scents and highend toiletries are just a few features that are more common today than ever, and without them, spaces feel underserviced. JF: Technology because it is permeating the property management world. Tenants and their employees are rejecting anything old school. They want high tech from the design aesthetic of their space to the smart technologies in their lobbies to the way we communicate about the day-to-day operation of their buildings. They want electronic directories – not static boards. They want interior office spaces that connect versus divide. And they want any technology that allows them to work and play and communicate on the fly. BB: Resilience. First it was green buildings, then it was sustainable buildings and now it is also resilient buildings. This has come into focus because of the extreme weather changes the country is experiencing. Resilience is focusing on making sure that your building can survive severe weather such as flooding, tornados, hail or dust storms. RV: Definitely the industrial product and markets. It used to be that industrial buildings were old and outdated and in undesirable submarkets. It’s been great to see the facelift of this product has been

refreshed to new, sexy, efficient buildings that top Fortune companies are looking for to build their business and portfolios. DD: A big trend we’re seeing is an increased need to be more knowledgeable about energy management systems (or controls) for their mechanical systems. Putting in a new controls strategy gives a property immediate asset value, which can greatly improve the ability to rent or possibly sell the property for more. IMCOR offers full controls solution with an open protocol system, so our customers have the flexibility to use anyone, as opposed to only proprietary options. AZRE: Looking ahead, what’s another potential trend worth keeping an eye on? BB: The WELL Building Standard. It was developed to keep the occupants of a building healthy and productive. It focuses on seven core concepts: light, air, comfort, fitness, water, nourishment and mind. For example, the Air Concept focuses on air quality, which can be improved by indoor vegetation to produce an oxygen rich environment. Other practices would be using the right cleaning products, changing air filters frequently and using low VOC producing paint. RV: I think the storage product is the silent trend out there. With populations growing, low maintenance for operations, and being somewhat recession proof, I can see this becoming a new trend.

TH: Ridesharing and self-driving cars are projected to have a big impact on a number of business sectors including real estate. The emergence of autonomous cars and ridesharing has the potential to drastically reduce the need for employee and visitor parking in addition to the amount of space required for roads. As municipalities adopt zoning requirements that reflect these changes, property owners could be left with significant tracts of land historically dedicated to traffic and parking available for redevelopment and/or repurpose. DD: More and more at IMCOR, we’re seeing our customers, who are both owners and managers, being asked to know even more about their mechanical systems and controls strategies. They’re being asked what can they do to run their buildings more efficiently, and how they can decrease or increase spending to provide a higher ROI. More frequently, owners want us to help justify their spending with either an energy analysis calculation or defined analytics on the many benefits of making mechanical modifications. JF: Going green. I can’t think of a company that does not have some form of sustainability initiative happening in their building, and all of today’s tenants look for this. They want LEED buildings and Energy Star certifications that show that an owner and property manager are thinking about things like energy conservation, smart water use and recycling. I’ve seen a tenant choose – and not choose – a building based on this. 45

BOMA “Bottom line, we spend more waking hours from Monday through Friday at the office than we do at home. So the office design should help promote our well-being.” — Becky Bishop AZRE: How do building owners and property managers create greater tenant value through experiential elements, design features and communications practices? RV: We try to foresee an issue today, before it becomes a problem tomorrow. For example, if we have a struggling office asset with high vacancy, we will spec ready office space rather than leave it untouched waiting for the perfect tenant to drop in. JF: The latest and greatest amenities are wonderful but, when it comes down to it, nothing replaces old fashioned customer service. My tenants have my office and cell numbers, and when they reach out to me I pick up the phone, whether they lease 1,000 or 100,000 square feet. I want my tenants to know they are important. If you don’t have a property manager with this mindset, things can fall apart. AZRE: Where are the key touch points where tenants interact within an organization or building? TH: Tenants touch, or interact with, an organization or building by either interacting with personnel or a properties physical infrastructure. Personnel includes (among others) brokers, property managers, security staff and engineering. Physical infrastructure includes the design 46 | September-October 2017

or look and feel of a property, landscaping, lobby, common area halls, restrooms and site amenities. Each one of these touch points impacts how tenants feel about an organization or building which may be reflected in occupancy and rent rates. TP: In today’s fast-paced, high-tech work environment, property managers must prioritize convenience. Tenants are drawn to technology, mobile applications in particular, to service building functions like submitting work orders and reserving commonarea conference rooms, and to complete personal tasks like scheduling on-site auto-detailing and coordinating dry cleaning pickup. AZRE: How can improvements to the workplace design and policies positively impact occupant health, well-being and productivity? BB: One of the many improvements that can be made to the workplace design would be to balance the air distribution within the office space to create greater comfort for the occupants. Another would be to provide day lighting, which can improve the productivity of the occupants. Improving the Indoor Air Quality (IAQ) will ensure less sick days and decrease personnel costs. Bottom line, we spend more waking hours from Monday through Friday at the office than we do at home. So the

office design should help promote our well-being. TH: Good design definitely impacts employees. Currently, I see a divide among employees with one set holding onto personal space and privacy and another set embracing collaborative and open workspaces. While it is hard (impossible) to design workspace and policies that satisfy every employee, a certain amount of flexibility should be afforded to individuals as management and HR departments establish work environments and policies. Good lighting (natural is best), climate control, air filtration and adequate privacy are all imperative for employee well-being and productivity. DD: We’re seeing more open floor plans and minor design retrofits in both old and new buildings to create a more collaborative and productive environment. The days of hiding in a cubicle like the movie “Office Space” are slowly disappearing. The new designs and retrofits support constant communication, because there are minimal and shorter walls, if any, and much more interaction with colleagues and team players. The heavy influence on health and wellness in the workplace is also changing building designs. We will continue to see more original designs or modified builds that allow tenants to provide their employees with stress relief through an onsite gym.

Tim Lawless takes over as leader of local BOMA chapter Former NAIOP-AZ President Tim Lawless took over as the executive director of the Building Owners and Managers Association (BOMA) of Greater Phoenix on September 6. Lawless replaced Sarah Osteen, who resigned in July after taking the helm in spring 2016 following the unexpected passing of Mark Covington in December 2015. Prior to taking the position at BOMA, Lawless was the leader of NAIOP-AZ for nearly a dozen years. NAIOP-AZ credits his leadership for the real estate association’s increase in membership, educational offerings and for his effective legislative advocacy for NAIOP-AZ members on important policy matters.

MARINA HEIGHTS: Developed by Ryan Companies and Sunbelt Holdings, the two-million SF mixed-use campus in Tempe was a build-to-suit for State Farms, which features a variety of on-site amenities. The property is currently managed by Transwestern.

AZRE: How is technology creating new demands for the industry? TP: Automated and online property management platforms have enabled property managers to process payables, certificates of insurance, contracts and work orders in a more efficient and transparent way than ever before. Approving invoices via a mobile app instead of using a paper-based method to complete the same task, creates more time for property management to focus on the customer experience at the property level. DD: The rise and prevalence of Variable Refrigerant Flow systems (VRF) and Variable Refrigerant Volume systems (VRV). They use refrigerant as the cooling and heating mechanism, like a ductless mini split HVAC system, so the VRF/VRV system allows you to cool and heat neighboring offices at the

same time. We are installing these all over the Valley, and the flexibility and versatility they create for a workspace’s environment attribute to higher leasing or selling prices, as well add to increased retention. These systems are also phenomenal at providing asset value, as well as energy savings. JF: Tenants are actually moving out of buildings that don’t meet their standards for technology. Some of these standards like a demand for a tenant common lounge, or modern interiors can be expensive requests to fulfill but the cost can pay for itself in reward. I know of a tenant who recently relocated from a nice but older building because, even at a higher rent, it was more cost effective to move than to bring their existing space up to modern standards. RV: Technology and industrial were never in the same discussion, but now all that has changed. I think building industrial single-tenant spec product is riskier than ever. We are now seeing increased clear heights pushing 40foot clears, level straight foundations for million plus buildings and complex robotics systems within these spaces. Technology plays a vital role in how the

products are getting from the containers in the ports, to the distribution center and on to our doorsteps. AZRE: How are big data and analytics transforming real estate operations? TH: Big data and analytics allow asset managers and ownership groups to maintain effective oversight and control of their properties. Asset managers are able to compare different campuses or properties to one another allowing for the discovery and proliferation of best practices throughout an asset class. Big data and comparative analytics allow real world payback analysis and help weed out less effective means. TP: Tenant operational costs are key. While that includes real estate expenses, the cost of the labor pool and location to those real estate assets drive the tenant’s operational budget. The inclusion of labor analytics into a tenant’s decision to relocate or expand should be at the top of their strategic planning efforts. Partnering our landlords, leasing specialists and management experts with these labor analytic services can prove to be the critical element when engaging a tenant in lease negotiations. 47

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48 | September-October 2017

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2017

NAIOP

JOINING

the ranks NAIOP-AZ incoming chair aims to add to his predecessors' successes By DAVID MCGLOTHLIN

hen Matt Mooney, senior vice president and managing director for Cousins Properties, first moved to Phoenix in 2006, he quickly realized the career benefits of joining NAIOP-AZ, a premier trade association representing the CRE industry in Arizona. Mooney joined as a member later that year, mostly for the networking and educational offerings, but eventually started serving as chairman of different large-scale events and the education committee, while also serving on the public policy committee. Today, Mooney gears up for his new



52 | September-October 2017

role as incoming chairman of Arizona’s local NAIOP chapter, which currently consists of more than 800 members. “I’m certainly very honored by the opportunity to chair the NAIOPAZ Chapter,” says Mooney. “The list of past-NAIOP chairs is virtually a ‘who’s who’ in Phoenix real estate so I’m humbled to have my name next to those individuals.” Like the NAIOP chairs before him, Mooney aspires to be a leader in the community and help propel Arizona, its economy and commercial real estate industry forward. “I have a strong desire to give back to our community and that perspective is only kindled by Cousins Properties’ emphasis on community engagement,”



he explains. “Arizona has been good to me personally, and to our portfolio, and my perspective is that to whom much is given, much is required.” Mooney believes the impact of NAIOP-AZ is bigger than many people realize. For instance, many of the legacy-type projects from around the Valley that define the state were driven and led by NAIOP members, including many past chairs. Mooney says, “I’d like to be remembered for continuing to lead the organization forward in a positive way and doing that in a selfless manner,” which reflects the mindset of his predecessors.

AZRE: How do you describe the impact of NAIOP-AZ on the state? MM: First of all, just about all of the state’s leaders in our industry are or have been active in NAIOP, and so the relational synergy that is created through that involvement is noteworthy. If you look at a lot of the large, legacy-type projects that define our state, they were driven by NAIOP members. Secondly, you have to look at a lot of the wins that have happened at the State Capitol, and in particular, in the area of property taxes. Arizona has made significant strides in tax reform



over the last decade, and NAIOP has been a leader in those conversations.

AZRE: What are a few examples of projects led by NAIOP members that have had a significant impact on the community? Why do those projects standout to you? MM: It’s really hard to narrow it down but I’ll give you a few examples from just this cycle of leading projects in our marketplace.

 In Tempe, Liberty Center at Rio Salado is constantly in the headlines, as Liberty Property Trust has taken what most people would have considered a 10-20-year project and almost completed it in five years. Liberty is led locally by John DiVall and Megan Creecy-Herman, both past NAIOP chairs.  ViaWest has been extremely active in multiple submarkets across multiple product types including Nexus at ASU Research Park, Biltmore Center in the Camelback Corridor and now 111 Monroe in Downtown Phoenix. They are led by past NAIOP Chair Steven Schwarz and our current NAIOP Communications Chair and Board Member Danny Swancey.

 Likewise, Wentworth Property Trust has been active all over the Valley with multiple industrial projects along I-10, Discovery Business Campus and recently their large North Scottsdale portfolio. Wentworth is led by Jim Wentworth, Sr., a past NAIOP Lifetime Achievement Award winner, and Jim Wentworth, Jr. - a current NAIOP board member.  Finally, and probably, the biggest headline grabber this cycle has been Ryan Companies and its two-millionsquare-foot development at Marina Heights with Sunbelt Holdings. That project was led by John Strittmatter, a past NAIOP chair from Ryan Companies. Current Board Member and Public Policy Chair Molly Carson has also been leading Ryan at GoDaddy’s development in the ASU Research Park and the current McKesson project in Scottsdale. The list goes on and on and I will certainly leave some important projects out. Dave Krumweide is another past NAIOP chair from Lincoln Property Trust and they’ve been incredibly active all over the Valley this cycle too. Plus, if you delve into what brokers led these deals, you’ll find NAIOP members on just about all of them.



NAIOP

Looking back and moving forward NAIOP-AZ leaders discuss the past, present and future of Arizona’s commercial real estate industry By DAVID MCGLOTHLIN

ften times in order to progress, one must first reflect back on how they got there, which is what board members of NAIOP-AZ did for this year’s annual roundtable. Despite being hard hit by the Great Recession, Arizona’s commercial real estate industry continues to make a slow and steady recover that has most people optimistic the state is headed down the right track into the future. With a combined 112-plus years of CRE experience and knowledge between them, this collection of NAIOP board members represent a diverse cross-section of disciplines and specialties in the industry. DS: What is different in our local commercial real estate industry since last year? RK: A year ago, Phoenix was still recovering from the Great Recession. That remains true today, but our road to recovery has been very strategic. In that time, we’ve stabilized our growth, diversified our industries and worked toward a more sustainable future. Furthermore, our vacancy rate has fallen below eight percent for the first time since 2006 and we have experienced robust positive net absorption totaling nearly 4.79-million square feet YTD 2017. The effects of the recovery can also be seen in the number of new businesses and influx of people that now call the Valley home. MM: For the most part, I think we are

54 | September-October 2017

seeing more of the same trends that we have seen this cycle: diversification of our jobs base, particularly financial services and tech, as well as an urban appetite for office, multifamily and retail. The one thing that stands out to me compared to last year is the build-to-suit activity we’ve seen on the office side. Companies like McKesson,

Centene and Freedom Financial choosing to wait on a new build in the East Valley when our overall Phoenix market office vacancy remains as high as it is, is another validation on the importance of specific submarkets. DP: We are experiencing increased interest from national retailers who

Danny Swancey

Andrew Cheney

Keith Earnest

Executive vice president at ViaWest Group Moderator DS

Principal at Lee & Associates AC

Executive vice president at VanTrust Real Estate KE

Matt Mooney

Darren Pitts

Lawrence Pobuda

Senior vice president, managing director at Cousins Properties MM

Executive vice president at Velocity Retail Group DP

Senior vice president, general manager at The Opus Group LP

Rusty Kennedy First vice president at CBRE RK

Molly Ryan Carson Vice president of real estate development at Ryan Companies US, Inc. MC

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NAIOP had previously put their expansion plans on “pause” during the recession. Nearly every category of retailers, restaurants and grocers who currently have a presence in Arizona are actively pursuing new sites to grow their store presence in emerging trade areas as well as reposition in more established areas, which includes relocating to a better location or a more optimal size. In addition, Phoenix is once again seeing activity from retailers that are new to the market. Expect to see more announcements later this year and into 2018. Phoenix came out of the Great Recession very slowly but clearly has turned the corner in the last 12 to 24 months. KE: We are currently more active in other markets than in Phoenix. We still plan on approximately $60 million in construction starts at two local projects, Chandler Corporate Center for 115,000 SF and a 600,000 SF specindustrial building in Buckeye, but have constructed over three-million SF of space in North Las Vegas in the past 18 months. Many of the e-commerce transactions that we made in Las Vegas were looking at multiple markets, but selected Southern Nevada for its streamlined entitlement process and affordable labor. We have seen Phoenix win several of the most recent “multimarket search” deals, so we are very

grow 3.1 percent, more than any other Western U.S. metro. Combine that with competitive costs for electricity for users and housing for employees, and it’s easy to see why Phoenix remains attractive for both tenants and investors.

encouraged by that trend and believe it will continue. DS: How would you compare our Metro Phoenix commercial real estate market to other major markets throughout the nation and specifically the Western U.S.? DP: I would say that Phoenix is becoming the “bargain of the West.” All of the coastal markets — Seattle, Portland, San Francisco, Los Angeles, San Diego — remain phenomenally expensive, additionally, the inland markets of Las Vegas and Denver are becoming very expensive places to live too. The cost of living bundled with a high-quality of life and a pro-business political environment make Phoenix a very attractive alternative for business expansion today. Our state’s leadership has done a good job but needs to continue to support infrastructure expansion as well as improve the overall education system in Arizona to remain a competitive market for business.

LP: Overall, very healthy, yet very young. Metro Phoenix is evolving and in many ways represents a pleasant surprise for folks who might have other preconceived ideas. This seems to be especially true of Silicon Valley technology companies that might initially invest in Phoenix for backroom/support functions, but they find the talent pool is capable of much more than back office work. As compared to other west coast markets, we are not Seattle or San Francisco, yet we are carving our own unique path. I believe that one of the unique calling cards for Phoenix will be its strategic geographic location. Sharing borders with California and Mexico – the 8th and 13th largest economies in the world, respectively – makes for endless possibilities.

RK: It’s no secret why Phoenix continues to be on any tenant’s or investor’s shortlist. While we’re still very much a young metro area, we have an exceptional business-friendly environment as a right-to-work state, a growing educated workforce and an incredible, affordable quality of life. In 2017, employment is projected to

MC: Arizona’s recovery lagged behind the good majority of other markets. Phoenix’s office market remains steady; positive absorption, vacancy continues to decline and rents continue to rise, albeit modestly.

METRO PHOENIX BY THE NUMBERS:

top

4.4 5.5 35.4 3rd 5th 6th 20 million

million

population (2017) population (by 2027)

median age

largest labor pool in the West

largest metro

largest concentration of data centers

nationally for tech job growth

COMPARING METRO PHOENIX:

59k+ 17% 6.19% 40% 20% 77%

median household income ($58,216 nationally)

projected employment growth over the next decade (11% nationally)

projected manufacturing employment growth over the next decade (1.53% nationally)

cheaper operating costs than in California

more competitive cheaper cost of living labor costs on average on average than than leading California leading California markets, including Los markets Angles, San Francisco and San Jose

Source: Greater Phoenix Economic Council; Marcus & Millichap Q2 2017 Market Research Reports 56 | September-October 2017

NAIOP DS: Where does Arizona stand in its economic development plans? MM: Without question we are headed in the right direction. I think Governor Ducey is doing a great job, and I think businesses and investors nationally are continuing to learn how different Arizona is today than it was 10 years ago. The theme I’m continuing to hear that we’ve got to remain focused on is K-12 education. Prospective employers and headquarters evaluate that component of our state a lot more closely than many people realize. LP: The focus on education is spot on – it’s been Arizona’s Achilles heel for far too long and we need to solve it. This is one of the most important elements in any economic development strategy – an educated and well-trained workforce. We are planting education seeds today that will take a long time to germinate. In addition to education, the focus on infill development is exciting – people moving into the city to take advantage of neighborhood restaurants, cultural amenities and transit choices. Roosevelt Row and Downtown Tempe are two great examples. MC: We are on the right track. We have done a very good job attracting and expanding a variety of business segments from startups to corporate headquarters, from technology to medical components, financial institutions, etc. For example, Gov. Ducey with the help of GPEC, the ACA, our universities and economic development departments throughout the Valley, have come together to strengthen our brand, attract dozens of new firms to our state and help local companies grow.

DS: What do you think has the biggest chance of derailing the positive trajectory of Phoenix’s CRE market? MM: I think our biggest concern is the same as every other city and that’s just an economic downturn nationally. That said, it is important that we continue to make the right moves politically to grow our state as well. There are a lot of people that would argue we are still feeling the ramifications of a bill like SB1070 that passed 10 years ago. We’ve got to maintain a business-friendly

POSITIVE SIGNS FOR AZ:

1 1 1 2

nationally for entrepreneurial activity

nationally for projected annual job growth

Source: Arizona Commerce Authority 58 | September-October 2017

nationally for high education degree opportunities

nationally for workforce quality and availability

message nationally to continue to win corporate expansions and relocations. RK: Since the end of the Great Recession, we’ve made great strides in being better prepared to handle national and regional economic challenges. As always, we need to be mindful of staying competitive from a business-friendly perspective. If you look at our history, we’ve been hard to fall and fast to rise. But more than any other city in the Western U.S., I believe Phoenix will experience an incredible 25–30 years ahead. AC: Higher taxes and any legislation that doesn’t support Arizona’s probusiness environment. If we keep those two areas in check, we will continue to beat out California and Texas on a lot of company relocations. The state is in an enviable position in many ways. We are excited about the future.

NAIOP

DS: We now have a number of years of consistent expansion of the national economy. Are we overdue for a national recession? If so, how will Arizona fare in comparison to Great Recession? If not, how many good years do you see before the next cyclical downturn? AC: Metro Phoenix was late in recovering, so to many it feels like it’s been long enough since our last recession so it must be time for another. I agree to an extent and feel like we have a few good years before a recession hits. But, I believe it will be a relatively small one. We haven’t overbuilt product and a lot of the real estate related tenants that got us

into trouble last time have grown at a healthier pace this time. In other words, I think the next recession will be a soft landing for us.

of construction – particularly in office and single-family housing. In essence, we just have much less further to fall this time if we do get a pull back.

MM: There is certainly no shortage of people saying we are overdue for a recession, but generally their reasoning is just the length of this cycle versus glaring areas of the economy that are overheated. I think that makes it a lot more difficult to predict. Fortunately, Arizona is in a dramatically different spot than it was during the Great Recession. Yes, our jobs base is more diverse, but more importantly we just haven’t seen anywhere near the same levels

KE: I believe the landscape is different in this cycle in that the conservative underwriting and conservative lending principals practiced over the past several years will keep us out of a significant recession. Interest rates are rising as are equity requirements for new deals so all of those factors should keep development in line with demand. With vacancies continuing to fall, we should see a nice bump in rent growth over the next few years, which makes everyone happy.

OFFICE MARKET OVERVIEW Ex Re c

ess

ion

Peak Market

Overall vacancy

nsi

Co nt

r ac

15.0%

t ion

er y c ov

Market Bottom - 2010

▼

Current Market

RENTAL RATES Northwest Phoenix

20.72/SF ▲

Airport area

West Valley

22.14/SF ▼

23.30/SF ▲

Central Corridor

East Valley

23.13/SF ▲

23.17/SF ▲

East Phoenix

North Phoenix

21.69/SF ▼

25.33/SF ▲ Scottsdale

25.84/SF ▲ Source: CoStar, Cresa

60 | September-October 2017

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NAIOP

DS: Has Downtown Phoenix finally turned the corner? Do you believe a viable downtown is essential to our city’s success? MM: I think Downtown Phoenix is making tremendous progress. ASU and TGEN deserve a lot of credit as its downtown campuses put a lot more people down there and now that momentum has spurred a tremendous amount of multifamily and retail. A move like Quicken Loans going from North Scottsdale to Downtown Phoenix for 150,000 SF is a big validation, along with the growth of Uber, Galvanize and others. That said, I don’t think our overall Phoenix Metro’s success is disproportionately tied to Downtown Phoenix. In my opinion, Phoenix grows a lot more like Los Angeles, Houston or Atlanta where you have multiple urban nodes — Downtown Phoenix, Downtown Tempe, Old Town Scottsdale, etc. —

62 | September-October 2017

and there is nothing wrong with people having options. LP: I’m not sure I think of it in terms of “turning a corner” as much as I think of it as analogous to moving from adolescence to adulthood, and yes, I think we’re all happy to be moving into this next phase. The City of Phoenix has been smart to focus on economic development initiatives that center on making downtown more livable and inviting – for businesses and residents, alike. Is a viable downtown essential to our city’s success? Is a strong core essential to an overall fitness plan? Strong arms and legs don’t go with a weak core – a strong core is essential. KE: Downtown has certainly turned the corner and the addition of the grocery store with Block 23 will be a real game changer. I’m encouraged by all of the residential development in Downtown Phoenix and am pleased with the variety of residential options

that now exist. From two-story lofts, to converted office buildings, to highrise penthouses, residents now have several choices when renting or buying in downtown. It took time and vision from developers like Trammel Crow, Opus, Ryan and RED to set the table for the transformation, but when you see the Super Bowl NFL Experience, Football National Championship and the Final Four all have their main events in Downtown, it’s well worth the wait. I just hope the Suns, Diamondbacks and Coyotes are also part of the mix going forward. AC: 25 years and now Downtown is an overnight success? Yes, we are now reaping all the investments we made. Have you heard all the leasing that’s been done downtown? Quicken Loans, Credify, and Upgrade are just some of the 250,000 SF deals that have been done this year. I do think a downtown with impressive infrastructure and a healthy buzz is key for a city’s success.

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NAIOP DS: Is the Phoenix market still ripe for speculative building? If so, where and what type of buildings? AC: Yes, in most submarkets. If you build spec in Tempe or Scottsdale, where companies love to recruit the most, it will be leased. There has been tremendous success with multi-story class A office product at signature projects like SkySong and the Grand at Papago as well - recently inking their Union Bank deal. We have done an internal study that shows over 80-percent of builders who have gone spec, have been at stabilized occupancy within one-year of building delivery. RK: From an industrial viewpoint, there’s still a need for speculative building. Since 2008, there have been very few, if any, functional multitenant buildings built in the Southwest Valley that cater to the 5,000–45,000 SF tenant. These tenants have historically been key to our market’s success and will continue to be in the decades to come. However, with high construction costs, these kinds of buildings are not cheap to build. Any developer that can work through these challenges will certainly succeed.

RETAIL VACANCY ANALYSIS REPORT

SkySong, The ASU Scottsdale Innovation Center

KE: Phoenix is ripe for spec industrial buildings. The success of Wentworth, Opus and First Industrial proves that if you build it, they will come, or buy it empty for a good price. LP: Yes, selectively, with strong consideration for the best locations with the most compelling points of difference. Spec development by its very nature

Source: Q2 2017 Velocity Retail Group Report 64 | September-October 2017

is risky, and any spec development decision is predicated on demographics, location factors, workforce analysis, capital markets, investor interest, tenant demand, etc. Overall, I think Phoenix will continue to see spec development in the coming year in both the industrial and office sectors. DS: What is the current state of our Metro Phoenix retail market? What is the biggest risk for Phoenix retail? DP: I would suggest the term “steady improvement.” Vacancy, leasing activity and construction are all recording positive signs that the retail market is continuing its slow and steady improvement. The current vacancy rate is 9.3 percent, which is two percentage points less than it was 24 months ago. Current leasing activity (absorption) is currently 900,000 SF and is on track to be close to two-million SF by year end, surpassing the last three years. New construction will be just over one-million SF, with very little being speculative in nature. Biggest risk to retail would be retailers that don’t embrace and adapt to the systemic change involving technology and online commerce.

NAIOP

DS: Where is the hottest submarket right now and where will be the next? AC: Tempe, then South Scottsdale, then Downtown Phoenix. These three areas are attracting tech tenants, and have the most office space job creation. RK: My bets are all on the Southwest Valley. The area is now home to distribution centers for major companies such as UPS, REI and SubZero. Aldi will soon be opening a new distribution center for the Southwestern U.S. in addition to Huhtamäki, who recently purchased a 753,000 SF building. This momentum isn’t stopping any time soon as the area continues to fare well with large distributors and e-commerce companies. As for the next hottest submarket, I’d keep an eye out for the

59th Avenue corridor along the new Loop 202, as it promises to deliver some exciting success stories. LP: Depends on what product type you are talking about, yet the best news is that there is increasing strength Valleywide, which is different from a few years back. The multifamily explosion was largely centered in the East Valley but that is changing. Other commercial development that has been more East Valley centric is starting to shine in the West Valley, too. And at the heart of it, is a strengthening Phoenix with success in all areas – industrial, office, multifamily and healthcare. MC: From an office perspective, Tempe and Central Scottsdale continue to lead, South Scottsdale and Chandler are not far behind in activity and becoming a

coveted location for office tenants of all sizes and business segments. DS: Do you feel the Trump presidency has been net positive, negative or neutral to-date? Do you feel CRE will fare well under President Trump? KE: It’s too early to tell the impact of the Trump presidency on the Phoenix real estate market, but the stock market and the NASDAQ seem to like what he is doing so hopefully that translates to our industry as well. We remain very optimistic that our market, and those of our bordering states, will continue on an upward trend. Arizona is fortunate to have the leadership of Gov. Ducey who is making headway in attracting new business while focusing on education and job growth.

Tempe, Arizona 66 | September-October 2017

NAIOP

TIME FOR CHANGE Arizona’s most iconic core assets are being modernized to meet market demands By DAVID MCGLOTHLIN

t takes time for a landmark project to be considered a core asset. Its prestige and value are first-andforemost retained over time and compounded by reliable appreciation. Since first opening, core assets across the Valley have increased in value and demand, but current owners are now finding it time to re-imagine what it means to be a core asset in order to ensure relevancy given the competition and demands of today’s target tenants. “In order for a core asset to stay a core asset, reinvestment is necessary to keep the building up-to-date with changing trends and tastes,” explains Gary Linhart, managing principal at ViaWest Group, which currently owns the Biltmore Center within the Camelback Corridor. Formerly known as the Biltmore Financial Center, the property has long had a reputation as a core asset and Class A office complex, but it was stagnant and needed new energy to bring in activity from new prospective

70 | September-October 2017

tenants and to increase satisfaction from existing tenants. Typical tenants of core assets include major law firms, banks and corporate companies, but more attention is being applied to attracting tech startups and other creative office type users. While the target tenants for those properties as a place of business, commerce and recreation have slightly changed over the years so have the characteristics of core assets. Location, property value, land scarcity and an institutional tenant traditionally drove market demands for core assets. While most of this holds true today, now tenants are also seeking properties in more urban environments that boast walkability, unique on-site amenities and features to help attract and retain the best employees. The Arizona Center, Biltmore Center, Esplanade and Renaissance Square are currently undergoing multi-million dollar renovations to modernize while preserving the timeless landmark

nature of the properties, and creating a more interactive and enjoyable experience for tenants and visitors. Bob Hubbard, vice president and designated broker at LBA Realty, which currently owns the Esplanade, says, while things have changed over time and additions were made to the campus, there has never been a major renovation of this magnitude. Meanwhile, the $25 million renovation underway at the Arizona Center marks its first-ever renovation since officially opening in 1990. Matt Root, founding partner at Parallel Capital Partners, which currently owns the property, says, “The focus of the new Arizona Center is to take the current introverted space and open it to the surrounding streets and the urban neighborhood, creating a more interactive and spontaneous experience that connects to the existing fabric of Downtown Phoenix.” Today’s core assets are unique in the ability to transform a building and its

surroundings into a premiere destination by creating a first-class experience for those entering it. “These core assets are in areas where the top companies want to and need to be,” Linhart explains. “At any time, it has to offer to the top tenants in the marketplace the experience, technology and quality of space they demand.” The Esplanade, for instance, has long stood as one of the most prestigious employment hubs in Arizona, and at its peak, supported more than 5,000 jobs. Thus, “A lot of the initial modernization strategies involved eliminating some of the dated features at the properties,” explains Hubbard. “The current building owners are building highly efficient work spaces for future tenants that allow them to maximize the use of their spaces and attract the next generation of workers.” Design strategies must think beyond the architecture. Modernization efforts need to facilitate walkability, and consider how someone would interface

Brett Abramson

Andrew Cheney

Alissa Franconi

Bob Hubbard

Mark Jacobs

Gary Linhart

Matt Root

Mark Wayne

with the property. The old corporate environment of the 1980s and 90s is a distant memory. Instead, employees want options that fit their flex schedules and lifestyles. Thus, developers are increasingly designing more collaborative workspaces in offices with upgraded common areas, lounges and alternative work environments so employees don’t feel cooped up in their offices. After Renaissance Square was purchased for $151.25 million in a joint venture by Oaktree Capital Management and Cypress Office Properties last December, construction began in April on a $50 million renovation to create a setting that is more appealing to existing and future tenants because it will enable them to attract and retain the Valley’s top talent. “We’re not just changing the outdated image of Renaissance Square,” explains Mark Jacobs, concept creator and managing director at Oaktree Capital Management. “We’re showing the community and tenants that existing spaces can offer ‘blank-canvas’ opportunities to create new and trendsetting environments for today’s workplace.” The $10 million first phase includes upgrades to both building’s lobbies, the lower level lobby, elevators, the creation

of a 7,000-square-foot, multi-purpose conference facility and construction of multiple, high-end, move-in ready, office suites. Back in the day, a strong institutional corporate tenant and a few nearby quality restaurants were enough to attract high-end tenants to core assets. Today on the other hand, new landmark projects like the two-million square-foot mixed-use Marina Heights Campus, which was completed in 2016 for State Farm, boast amenities like the popular Matt’s Big Breakfast, Mountainside Fitness, an HonorHealth clinic and other retail spaces in addition to offices for more than 2,000 State Farm employees. “The nature of the office space users has changed over the years,” says Andrew Cheney, principal at Lee & Associates, which has the exclusive office leasing agreement for Renaissance Square. “We want to retain the landmark nature of the buildings, while preparing them for the next 25 years.” Regardless of when core assets were built, it is the prestige, location, property value, quality of the tenants and the experience people receive while there that makes a core asset more than just another building. 71

NAIOP

ARIZONA CENTER: SUCCESSFUL MIX OF LIVE, WORK, PLAY Address: 455 N. Third St., Phoenix Size: 696,960 SF (total); 19-stories, 342,614 SF (One Arizona Center); 20-stories, 450,000 SF (Two Arizona Center) Completed: 1990 (One Arizona Center); 1989 (Two Arizona Center)

When the Arizona Center first opened in 1990, it was said to be one of the first mixed-use developments in Phoenix with a hugely successful mix of live, work and play components. In addition to retail spaces and a 24-screen AMC theatre, the Arizona Center includes two office buildings known as One and Two Arizona Center, respectively. In December 2015, Parallel Capital Partners and Angelo, Gordon & Co. purchased the 16-acre mixeduse property for $126 million, which includes entitlements for an additional 3.9 million square feet of improvements. Matt Root, founding partner at Parallel Capital Partners, describes the Arizona Center as ahead of its time, but the property’s $25 million renovation that began in March will enable tenants to better benefit from the rapidly shifting social and demographic changes happening downtown. Specific transformative elements include new site furnishings, shade structures, landscape, lighting, new materials, fixtures and finishes, wayfinding and branded signage features. In addition, “Arizona Center includes a Class A office component that already is occupied by leading business entities,” explains Brett Abramson, senior vice president at JLL. “Modernizing the project’s mixeduse environment will allow the office 72 | September-October 2017

BEFORE

portion to continue to attract premier, Class A professional service tenants.” According to owners, New Yorkbased Skanska USA is handling construction management for the retail project. Gensler is the architecture firm working on the project. PdO is working on the interior redesign for One Arizona Center, and SmithGroupJJR is supporting development strategies for the entire property. Other projects at the Arizona

BEFORE

Center include a planned $100 million residential tower on the southeast corner of Arizona Center at Fifth Street and Van Buren Avenue, which was announced in May. The planned 31-story, 350unit tower will be the second tallest residential building in Downtown Phoenix. Additionally, the completion of a hotel and multifamily housing will increase the vibrancy of Downtown Phoenix making Arizona Center, once again, a true downtown destination.

NAIOP

BILTMORE CENTER: ACTIVATING NEW BUSINESSES WITH REVIVED ENERGY Address: 2390, 2394, 2398 E. Camelback Rd., Phoenix Size: 635,409 SF (total) Completed: 1985 (Building 2390); 1987 (Building 2398); 1988 (Building 2394) When ViaWest Group took ownership of the three Class A office buildings in 2015, tenants were asked what were the things they most wanted to change or to add to the property that would make Biltmore Center a better place for them and for their visiting clients. Ownership then listened and turned that feedback directly into actions to significantly change the property and help recreate the Class A office image with a fresher, more modern appearance and amenity offerings. The over $10 million renovation project delivered a new tenant lounge area with a state-of-the-art media wall, shuffleboard, table tennis and adjacent conference room, as well as a fully renovated fitness center with completely new exercise equipment and management, and renovated café. 74 | September-October 2017

BEFORE

The tenant lounge, called “HUB24,” is a huge new boon for tenants and their clients, providing an informal meeting space, a place to relax away from the office, or a place to purchase grad-andgo sundry items. Additional property improvements include a new Bike Sharing Program with property branded bicycles available for tenant use, new lobby furniture and outdoor seating, and even campus-wide public Wi-Fi have updated the property and given it a fresh new look and feel. Two notable recent leases signed at Biltmore Center involve 30,091 square feet for Zenreach, a tech startup from

BEFORE

San Francisco, and 18,358 square feet for CoWork, LLC, a company developing co-working spaces. Overall, the project has attracted several high-caliber new tenants and experienced a significant number of tenant renewals and expansions as a result of the comprehensive repositioning that took place over the last two years. The Biltmore Center’s re-imagined environment enables new tenants to activate their businesses in new creative and unique ways that reflect the changing dynamics of the workplace in order to attract and retain the best employees.

NAIOP

ESPLANADE: OUT WITH THE OLD,

IN WITH THE NEW Address: 2401–2575 E. Camelback Rd., Phoenix Size: 1.7 million SF (total) Year Completed: 1989 (Esplanade I); 1990 (Esplanade II); 1997 (Esplanade III); 1999 (Esplanade IV); 2002 (Esplanade V) The Esplanade contains five Class A office buildings, a movie theatre, residential condo tower and hotel, which total 1.7-million square feet. In December 2015, Esplanade I, II, IV and V were sold by MetLife to current owners, LBA Realty, for $279 million, which totaled 978,495 square feet and marked the highest sale price for an office transaction at the time. Then in a completely separate transaction, Esplanade III, a 218,266-square-foot Class A office building, was sold to Crow Holdings for $74.3 million in March 2015. While the Esplanade has historically had a corporate service tenant base, Bob Hubbard, vice president and designated broker for LBA Realty

76 | September-October 2017

BEFORE

says, “We are also looking to attract technology and creative companies that are appropriate for the campus.” Since the multi-phase completion of the campus, no renovations of this size have occurred at Esplanade, which made it difficult to compete with newer assets. Hubbard believes the modernization of Esplanade will allow it to compete “extremely well” against new office and mixed-use projects in the Valley’s pipeline. “We have created an innovative, urban, mixed-use environment that includes a high-tech e-Center offering state-of-the-art conferencing with

indoor/outdoor event space, on-site restaurants, movie theater and hotel designed with stylish communal seating throughout the campus,” he explains. Most of the renovations consisted of eliminating outdated features like the old foliage including the bulky potted plants, the planters filled with oversized trees, and trellises covered with vines. The rounded concrete cap placed atop walls throughout the complex was also done away with. New additions will include two permanent valet stands at the east end of the property, and another in front of a future restaurant space along Camelback Road.

NAIOP

RENAISSANCE SQUARE: THE TALE OF TWO TOWERS Address: 2 & 40 N. Central Ave., Phoenix Size: 978,361 RSF (total); 26-stories, 498,445 RSF (Renaissance One); 28-stories, 479,916 RSF (Renaissance Two) Completed: 1987 (Renaissance One); 1989 (Renaissance Two)

April of this year, a $50 million renovation of Renaissance Square commenced at the iconic two-tower property in Downtown Phoenix, which has long served as the home of many prominent law firms, banks and other institutional tenants since each tower first opened in 1987 and 1990, respectively. “We are on the fast-track to transforming Renaissance Square into a contemporary, amenity rich environment,” says Mark Wayne, principal of Cypress Office Properties. The $10 million first phase will consist of cosmetic improvements to the building’s common areas, construction of a 7,000-square-foot conference facility and multiple, movein ready office suites. In addition, the improvements to each tower will feature a different theme. Renaissance One will have a “tech” atmosphere, with a lobby containing integrated technology for digital signage and collabration spaces. Renaissance Two will feature boutiquestyle interior finishes with a warm professional environment that features a live plant wall. Also, in what is being called “Project Future,” four Valley-based architect and design firms were selected to design futuristic office suites on the entire fourth floor of Renaissance One. Alissa Franconi, senior associate at RSP Architects, which was one of the firms selected for Project Future, says, “Each space incorporates features that have never been seen before, not just from a design standpoint, but in how they function as the workplace evolves.” 78 | September-October 2017

RENAISSANCE ONE

RENAISSANCE TWO

RENAISSANCE ONE-BEFORE

RENAISSANCE TWO-BEFORE

NAIOP

member projects T

he positive influence and impact of NAIOP-AZ’s 817 current members can be seen at commercial real estate jobsites across the Valley and state such as buildto-suit projects for companies relocating to the region and speculative builds to meet projections for future demand. Here’s a look at the latest NAIOP-AZ member projects catching people’s attention.

80 | September-October 2017

ARIZONA CENTER RETAIL REFRESH

Developer: Parallel Capital Partners General Contractor: Skanska Architect: Gensler Location: 400 E. Van Buren St., Phoenix Size: 16-acres (total) Value: $11.6M Start/Completion: March 2017 – February 2018 The Arizona Center is a landmark entertainment and retail destination located

in Downtown Phoenix, which originally opened in 1990. The project will transform the current introverted design to open the complex to the surrounding streets and neighborhood and create a vibrant sense of place. Renovations to the Class A, 16-acre mixed-use campus incorporate new shade structures, landscaping, pavers and lighting to create a welcoming atmosphere for visitors. Upgrades to the exterior finishes will include metal panels, glazing, stucco, paint, concrete and signage to help establish a revitalized brand identity for the mall.

AZ 202 COMMERCE PARK

Developer: ViaWest Properties General Contractor: Alexander Building Company Architect: Ware Malcomb Location: SWC of Willis & Hamilton roads, Chandler Size: 106,000 SF Brokerage: Cushman & Wakefield Value: $8.25M Start/Completion: August 2017 – Q1 2018 This 106,000 SF, 28-foot clear-height, rear-loaded industrial facility will be delivered early 2018 for the Arizona operations of PODS. With a reinforced-concrete staging area and capability for future divisibility, the building has significant residual value for future users.

CENTRAL & WILLETTA

Developer: Ryan Companies US, Inc.; Tilton Development Company General Contractor: Ryan Companies US, Inc. Architect: Studio Meng Strazzara Location: Central & Willetta avenues, Phoenix Size: 293,000 SF Brokerage: Colliers International (buyer); CBRE (seller) Value: WND Start/Completion: July 2017 – Summer 2018 The project will include four levels of residential apartments over two parking levels, as well as five, two-story townhomes and two creative office suites. The residential units include studio, one-bedroom, one-bedroom plus den, and two-bedroom units averaging between 530 square feet and 1,230 square feet. The building design features two amenity decks

that will include lush landscaping, swimming pool, outdoor cooking area with large screen television and trellis structure, fire-pit seating area, table tennis facilities, a cabana structure,

large umbrella structures, bocce ball court and table tennis. The community will also offer a 24-hour fitness center, leasing office, business center, coffee and juice bar lounge, sports lounge and a pet park.

CHANDLER CORPORATE CENTER

Developer: VanTrust Real Estate General Contractor: Layton Construction Company Architect: Butler Design Group Location: Chandler Boulevard & McClintock Drive, Chandler Size: 115,000 SF Brokerage: Colliers International Value: $23M Start/Completion: September 2017 – August 2018 VanTrust acquired the 26-acre parcel of vacant land that was part of the Chandler Corporate Center development in May 2016. The first phase includes a 115,000-square-foot office building on 10-acres at Chandler Boulevard & McClintock Drive. 81

NAIOP CHAPARRAL COMMERCE CENTER BUILDING 3

Developer: Ryan Companies US, Inc. General Contractor: Ryan Companies US, Inc. Architect: Butler Design Group Location: Pima Road between Jackrabbit & McDonald roads, Scottsdale Size: 120,000 SF Brokerage: Cushman & Wakefield Value: $23M Start/Completion: Q4 2017 – Q4 2018 The multi-tenant office building at Chaparral Commerce Center, adjacent to the McKesson campus currently under construction, will feature 6:1,000 parking, efficient floor plates and excellent freeway visibility and signage opportunities.

DESTINY SPRINGS BEHAVIORAL HEALTH

Developer: Caddis Healthcare Real Estate General Contractor: Jokake Construction Architect: Devenney Group Architects Location: 17300 N. Dysart Rd., Surprise Size: 69,000 SF Value: $16.5M Start/Completion: July 2017 – August 2018 Subcontractors: Ace Asphalt; McCain Construction; Sig Survey; Torrent Resources The new ground-up two-story behavioral health facility will feature 90 beds and outside amenities.

THE GRAND AT PAPAGO PARK CENTER

Developer: Lincoln Property Company; Papago Park Center, Inc. General Contractor: Whiting - Turner Architect: HKS Architects Location: 1101 W. Washington St., Tempe Size: 213,056 SF (building one) Brokerage: CBRE Value: $80M Start/Completion: April 2016 – February 2017 Subcontractors: Coreslab Structures; Delta Electric; Harder Mechanical Contractors; KT Fabrication; Suntec Concrete

82 | September-October 2017

This is the first office building at The Grand at Papago Park Center to be completed, marking the start of a 60-acre urban campus that will total 3.2-million SF of office, retail and hotel uses in the heart of Tempe. As a public-private partnership between LPC and Papago Park Center, Inc., LPC

will develop approximately 1.8-million SF of office space in six Class A buildings, skinned in striking architectural glass and boasting one-half mile of freeway frontage, major water feature, walking paths, modern tenant lounge, café and two light rail stops.

NAIOP KYRENE 202 BUSINESS PARK (PHASE 2)

McKinney Glass; Miner Southwest; SEC Electrical Contractor; Specialty Roofing; The Structures Group Southwest

three business distribution buildings totaling 166,280 square feet. Upon completion, this six-building business park will total 410,000 square feet. Its location facilitates those working with the electronics industry as well as those serving both Phoenix and Tucson from a single location.

Sitting below Camelback Mountain, the boutique property’s bold, indefinable energy draws you in to discover a truly unique destination, while the resort condominiums

invite you to experience the exclusive lifestyle. Offering 42 units for purchase, the luxury condos range from 1,000 to 3,400 SF with 17 units having adjacent lock-off units.

Developer: EastGroup Properties General Contractor: Willmeng Construction Kyrene 202 Business Park is a new state-ofArchitect: Butler Design Group (exterior); the-art development located near the Loop 202 Evolution Design (interior) Freeway and Kyrene Road. Phase 2 consists of Location: 154, 158 & 170 S. Kyrene Rd., Chandler Size: 166,280 SF Brokerage: Colliers International Value: WND Start/Completion: May 2017 – Q4 2017 Subcontractors: 3D Contracting; Ace Asphalt of Arizona; Adobe Drywall; Alliance Fire Protection Co.; Butler Design Group; ELS Construction; Fyffe Masonry & Plastering; Hardrock Concrete Placement Co.; Ikon Steel; King Insulation of Arizona;

MOUNTAIN SHADOWS RESORT CONDOMINIUMS

Developer: Woodbine Development; Westroc Hospitality General Contractor: Balfour Beatty Construction Architect: Allen + Philp Partners Location: 5455 E. Lincoln Dr., Paradise Valley Size: 80,263 SF (building area); 34,968 SF (parking garage) Value: WND Start/Completion: August 2016 – November 2017 Subcontractors: AROK; Bergelectric; Buesing Corp.; Canyon Plastering; Carlson Glass; Castle Steel; Complete Fire; Flynn Industries; Harder Mechanical Contractors; Real Wood Floors; RKS Plumbing & Mechanical; Southwest Interiors; Suntec Concrete; Western Millwork

PHOENIX RISING FC SOCCER COMPLEX

Developer: Phoenix Rising FC General Contractor: Kitchell Contractors Architect: DLR Group Development Manager: JLL Location: 751 N. McClintock Dr., Tempe Size: 15.84 acres; 6,200 seats Value: WND Start/Completion: February 1, 2017 – March 25, 2017 Subcontractors: Trademark; T&B Equipment

84 | September-October 2017

In only 52 days, JLL’s Project Development Services (PDS) team coordinated the fast-track construction of a new Phoenix Rising soccer “pop-up” stadium and training facility fronting the Loop 202 at the borders of Tempe, Mesa and Scottsdale. The 15.84-acre site includes a 6,200-seat soccer-specific stadium with three VIP suites, an owner’s suite, locker rooms and an adjacent, soccer-specific training field that (like the main stadium) has natural grass. The goal of Phoenix Rising is to replace its pop-up facility with a permanent facility in the same location by 2020.

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2017 WINNER

2017 General Contractor of the Year

NAIOP RAPID RECOVERY CENTER OF SURPRISE

Developer: Mainstreet Investments, LLC General Contractor: Balfour Beatty Construction Architect: Architectural Resource Team Location: 14660 W. Parkwood Dr., Surprise Size (SF): 77,000 Value: $16M Start/Completion: March 2016 – July 2017 Subcontractors: Alta Vista Masonry; AME Electrical; Castle Steel; Complete Fire; LR Cowan Concrete; Nickle Contracting; Pete King; Roofing Southwest; Tempe Mechanical; The Great Organization

RESERVE AT SAN TAN (PHASE 3) Developer: Orsett Properties General Contractor: TBD Architect: Butler Design Group Location: 343 E. Germann Rd., Gilbert Size: 77,000 SF Brokerage: Newmark Knight Frank Value: $15M Start/Completion: Q4 2017 – Q3 2018 Subcontractors: TBD

Rapid Recovery Center is a healthcare model specializing in rehabilitation and care immediately following a hospital stay. The state-of-the-art skilled nursing facility provides short-stay, high acuity rehabilitation

and care across a broad spectrum of acuity and complexity. In addition to this project, Balfour Beatty was contracted with Mainstreet Investments to construct two similar projects of similar size in Chandler and Tucson.

the construction of two buildings with a common area connecting each, which will total 157,000 SF. Construction is planned

in a way to maintain the overall masterplan concept, yet retain flexibility to adjust to the market’s needs as they arise.

SF speculative office building, two hotels and planned supporting retail. Replacing a former construction landfill with a landmark

mixed-use project, Rio2100 will become a prominent fixture at the intersection of Loop 101 and Loop 202 in Tempe.

The Reserve at San Tan is a Class A, 39-acre business park conveniently located less than a half mile from the Loop 202 Freeway and Gilbert Road. Phase 3 of the project includes

RIO2100 (PHASE 2 & 3)

Developer: The Boyer Company General Contractor: Wespac Construction Architect: Butler Design Group Location: 2108 E. Rio Salado Pkwy., Tempe Size: 300,000 SF Brokerage: CBRE (landlord); JLL (tenant) Value: $50M Start/Completion: Q1 2017 – April 2018 Subcontractors: DP Electric; Coreslab; JD Sun Mechanical; MKB Construction; Olympic West Fire Protection; Recreate Companies; Saguaro Steel; Spectrum Mechanical Freedom Financial Network’s build-to-suit lease encompassing two, four-story buildings and two structured garages within the 52-acre, mixed-use Rio2100 development will bring 2,200 jobs to Tempe. The first of two build-to-suit buildings broke ground in Q1 2017. Rio2100 also includes a 100,000

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American Airlines Corporate Ofﬁce

McKesson Corporate Ofﬁce

CyrusOne Data Center

Southeast Ambulatory Care Center

D.P. ELECTRIC, INC. DEPENDABLE PEOPLE. DEPENDABLE PERFORMANCE.

dpelectric.com

480.858.9070

NAIOP SCOTTSDALE AIRPORT TERMINAL AREA REDEVELOPMENT

Developer: City of Scottsdale Aviation Department General Contractor: JE Dunn Construction Architect: DWL Architects + Planners, Inc. Engineer: Mead & Hunt Location: 15000 N. Airport Dr., Scottsdale Size: 90,000 SF Value: $27M Start/Completion: July 2017 – August 2018

campus. It includes a new Aviation Business Center, the Scottsdale Airport Thunderbird Field II Plaza and two new executive hangars

with a private, above ground fuel farm. The new business center will include a restaurant, outdoor patio seating and an event venue.

The mixed-use development will feature a 20-story and a 12-story tower with 407 market-rate apartments built on a five-level podium. The fifth level features a pool,

amenities, gathering space and a restaurant. The project will also add approximately 30,000 SF of retail and restaurant space to enhance the streetscape and pedestrian experience.

The Terminal Area Redevelopment project maximizes the use of the existing site through development of a new, efficient aviation

SEVENTH STREET MIXED-USE DEVELOPMENT

Developer: The Opus Group General Contractor: Sundt Construction Architect: Opus AE Group Location: 110 E. University Blvd., Tempe Size: 806,081 SF Brokerage: Cushman & Wakefield Value: $116M Start/Completion: December 2016 – July 2018 Subcontractors: Aero Automatic; E&K Companies; Encore Steel; Kovach Building Enclosures; Mirage Plastering; Southland Mechanical; Walters & Wolf; Wilson Electric

SKYSONG 5

Developer: Plaza Companies General Contractor: DPR Construction Architect: Butler Design Group Location: 1355 N. Scottsdale Rd., Scottsdale Size: 150,000 SF Brokerage: Lee & Associates Value: $41.8M Start/Completion: Q4 2017 – Q4 2018 The new six-story building will be located along the north side of SkySong Boulevard and west side of Innovation Place. It will have three ground floor lobby entrances, continuing to promote the strong, interconnected pedestrian spine both from the center court under the shade structure and from the parking fields that will serve the building. Like prior SkySong buildings, the project will be LEED Silver Certified.

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NAIOP TURBO RESOURCES CORPORATE HEADQUARTERS

Developer: Turbo Resources General Contractor: Layton Construction Architect: McCall & Associates Location: 2615 N. Arizona Ave., Chandler Size: 45,000 SF (office); 208,000 SF (warehouse) Value: $20M Start/Completion: June 2017 – November 2017 Turbo Resources’ new corporate headquarters was a pursuit to bring best-in-class office and

VANTAGE WEST DISTRIBUTION CENTER

Developer: VanTrust Real Estate General Contractor: Layton Construction Architect: HPA Architects Location: NWC W. Van Buren Street & N. Perryville Road, Buckeye Size: 2,200,000 SF Value: $190M Start/Completion: Q3 2017 – July 1, 2018 (Phase 1) The 160-acre site in Buckeye was acquired by VanTrust in 2015. The property is zoned for industrial uses and development plans

THE WATERMARK | TEMPE

Developer: Fenix Development General Contractor: Okland Construction Architect: Nelsen Partners Location: 430 N. Scottsdale Rd., Tempe Size: 253,000 SF (office); 44,000 SF (retail) Brokerage: Cushman & Wakefield Value: $140M Start/Completion: June 1, 2017 – Q4 2018 The mixed-use development located on the north bank of Tempe’s Town Lake contains over 1.9-million square feet of thoughtful and sustainable development. Watermark offers 360-degree views of Tempe Town Lake, the McDowell, Superstition and Camelback Mountains as well as the Papago Buttes.

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warehouse space together while simplifying main business functions. Turbo is a main player in the international aeronautical aftermarket industry. This new facility allows

the company to continue to scale its business, all while keeping company culture, best working amenity spaces, and employee choice at the forefront of the values.

include building over two-million square feet of big box distribution space at the center. The site’s location in the western portion

of Metro Phoenix area offers ideal access to Interstate 10, the primary trade route between California and Phoenix.

NAIOP

Tweets

from the Board

8 NAIOP-AZ board members highlight what to watch in 140-characters or less

By DAVID MCGLOTHLIN

aking industry and market predictions can be easy, but making accurate ones is where the challenge lies. It becomes even more difficult when you’re asked to make those predictions in the form of a Tweet, which is 140 character or less including spaces.

However, in light of the growing prominence and popularity of Twitter as a platform and source of daily news, especially from the White House, these NAIOP-AZ board members were put to the ultimate test – identify one thing in the commercial real estate market to watch and share it in the form of a Tweet.

AZRE: What’s one thing watch in CRE? @Colliers Office needs keep changingcompanies want to expand: new buildings get the tenants, old buildings not so much. Act now before the bust — Phil Breidenbach, executive vice president at Colliers International

@mortensonSW Technology’s imprint on CRE performance. Optimization uncovers hidden factors impacting return on assets and operating expenses — Tammy Carr, principal at Mortenson

@BuildWillmeng Phoenix Metro area continues construction growth. Cost of living, available properties & affordable land are attracting national companies — Tom Jarvis, vice president at Willmeng Construction

@SavillsStudley Will new developments coming to Camelback & Tempe grab record rents despite equal amenities in other submarkets at 15-20% less rent? — Tom Johnston, senior managing director at Savills Studley

@JLLphoenix Recent disruption within #supplychain logistics and e-commerce is creating significant demand for #industrial space. It’s a paradigm shift! — Anthony J. Lydon, managing director of industrial, supply chain & logistics solutions at JLL

@cbrephoenix In today’s capital market environment, there is a buyer for every office property that is priced right and has a good story to tell — Christopher Marchildon, senior associate at CBRE

@ryancompanies War for talent. Companies are making real estate decisions for employee retention & satisfaction such as location, design & WELL criteria — Molly Ryan Carson, vice president of development at Ryan Companies

@vereitinc Rising interest rates are often believed to negatively impact REITs. But stronger economy w/ higher interest rates = greater demand for CRE — Chuck Vogel, senior vice president of joint ventures & dispositions at Vereit, Inc.

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