AZRE Sept/Oct 2018

SEPTEMBER-OCTOBER 2018

BUILDING BLOCKS

INSIDE:

Cool Offices p. 24 | Loop 202 p. 36

|

NAIOP p. 41

change the industry change the world ONE PROJECT AT A TIME advanced technology. higher education. life sciences. commercial. healthcare.

Beus Center for Law and Society at Arizona State University

PHOENIX | 222 N. 44th Street I Phoenix, Arizona I 85034 I 602 808 0500

Things just keep getting bigger, better

H

uman nature is to always seek more. We want bigger, better things to enrich our lives. Our lives are enriched by bigger televisions, better food, bigger bank accounts and better relationships.

In 2018, the commercial real estate market in Phoenix has been one of enrichment that we’ve never seen before.

We’ve recorded some of the biggest deals ever struck in Arizona during 2018, including a $311 million deal in August for a portfolio of multifamily housing developments all over the Valley.

We’ve seen the tallest building in Arizona, the Chase Tower, sold.

In this edition of AZRE Magazine, you’ll read stories about how we’ve got bigger industrial buildings than ever before rising out of the desert. The first 40-foot clearance height facilities in our state are in various stages of completion in the West Valley. These massive projects are needed in our modern, ever-evolving e-commerce world.

You’ll also learn how even the mundane in our lives is getting better due to our thriving commercial real estate industry. A day at the office isn’t what it used to be, as the perks and amenities at office buildings are better than ever. Today’s office worker can eat, workout, socialize and play games, all without leaving the complex.

Like the industry we cover, our goal is to get better in each edition. With the rate our commercial real estate market is growing and improving, that’s a lofty goal indeed.

President and CEO: Michael Atkinson Publisher: Cheryl Green Vice president of operations: Audrey Webb EDITORIAL Editor in chief: Michael Gossie Associate editor: Steve Burks Intern: Noelle Schon Contributing writers: Jesse A. Millard | Suzanne Kinney Deb Sydenham | Tim Lawless | Tom Dunn Richard Wilkie | Keyvan Ghahreman ART Art director: Mike Mertes Design director: Bruce Andersen MARKETING/EVENTS Marketing & events manager: Cristal Rodriguez Marketing specialist: Gloria Del Grosso Marketing designer: Justie Lim Marketing intern: Brenda Sanchez OFFICE Special projects manager: Sara Fregapane Executive assistant: Mayra Rivera Database solutions manager: Amanda Bruno AZ BUSINESS MAGAZINE Senior account manager: David Harken Account managers: April Rice | Tom Patterson AZRE | ARIZONA COMMERCIAL REAL ESTATE Director of sales: Ann McSherry AZ BUSINESS LEADERS Director of sales: Sheri Brown RANKING ARIZONA Director of sales: Sheri King

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

EXPERIENCE ARIZONA | PLAY BALL Director of sales: Donna Roberts HOME & DESIGN Director of sales: Kim Bailey

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. ©2018 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 2018

Whiskey Row Gilbert AZRE Red Award Best Retail Project

MS Chandler Airpark AZRE Red Award Best Industrial Project

2018

WINNER

Designing your vision.

Building your future.

From concept to completion, LGE is the leading provider of design-build architectural and general contracting services with more than 1,000 completed projects extending over 20 million square feet. Spanning markets from commercial real estate, light and heavy industrial, office, hospitality, healthcare and mixed-use, our experience and our team are the difference in every project.

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CONTENTS

FEATURES 2 Editor’s Letter 6 Trendsetters 10 Executive Profile 12 After Hours 14 New to Market 16 Big Deals

20 Legislative Update

24

24 Cool Offices

30 Arizona Multihousing Association 36 Loop 202

30

41 NAIOP

41

On the cover: Block 23 @ CityScape is one of the NAIOP member projects profiled in this edition.

4 | September-October 2018

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

36

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Custom Bird Feeders and Totems made from repurposed architectural materials

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By Appointment Only • 602.677.5999

TRENDSETTERS Construction by submarket

Rate of construction may not meet

OFFICE SUPPLY DEMAND The more than 2.7 million square feet of office space now under construction in metro Phoenix is the most seen since 2015.

But, according to the Q2 2018 Phoenix Office Insight report from the Phoenix office of JLL, it still may not be enough to meet an estimated 4.6 million square feet of demand that is in play by companies ranging from business and financial services to high-tech and healthcare.

“The healthy mix of industries active in Phoenix is a good sign for the market’s continued success,” said JLL senior vice president Brett Abramson. “Gone are the days where there are hubs of certain

industries all locating in one 36% Chandler submarket. What we’re seeing now is simply a heavy dose of demand, coming from varied industry interest in most Downtown 8% submarkets.”

According to JLL, nearly 29% Tempe 100 companies are now in the market — looking for 20,000 square feet or greater of Phoenix Camelback 4% office product. Of those, 24 Corridor percent are business services companies, 21 percent are 12% South Tempe healthcare, 14 percent are high-tech South 5% and 10 percent are financial services.

Scottsdale 6% Airport Area Together, they represent 4.6 million Source: JLL square feet of demand. This is above and beyond the 2.7 million square feet of office be the Southeast Valley, which represents 77 space that is currently under construction ­— percent of active office construction — 36 which itself is already 30 percent pre-leased. percent in Chandler, 29 percent in Tempe and If there is one geographical leader on the 12 percent in South Tempe. construction front, Abramson says it would

RETAIL MARKET RETURNS to pre-recession levels

Office market sees rent, availability numbers rise Savills Studley, a global commercial real estate services firm, released the Q2 Phoenix edition of its Office Market Report and the numbers are positive for the market.

“Availability has slowly started to increase as the pace of larger corporate relocations slows and new construction activity heats up. Tenants are finding a few more options in the Central Corridor and Camelback Corridor,” says Tiffany Winne, executive vice president at Savills Studley.

Some of the most notable numbers: 19.4% - The availability rate for the region ticked up 20 basis points to 19.4%. The Class A availability rate also increased by 20 basis points, rising to 19.5%.

3.3% - The overall asking rent in Phoenix jumped by 3.3% to $26.32 per square foot and rose by 7.3% year-over-year. $2.1 billion - Office property sales during the six months through May of 2018 totaled $2.1 billion, a 166% increase compared to the previous six-month total of $798 million.

7.2 million square feet - Leasing deal volume totaled 7.2 million square feet during the first four most recent quarters, falling short of the long-term average of 10.2 million square feet.

6 | September-October 2018

It has been a long ten years, but the vacancy rate for the Phoenix retail market has returned to levels not recorded since 2008. As of the second quarter 2018, the vacancy rate is 7.8%, compared to 2008 when the vacancy was 7.9%. This improvement is remarkable as the market still has a glut of vacant big boxes (spaces over 10,000 square feet), and an ever-growing retail base which now tops 175 million square feet of space.

“It has taken a decade to return to these pre-recession levels,” said Dave Cheatham, president of Velocity Retail Group. “The improvement has been slow and steady, but we are now seeing the end of the recession’s grip on the Phoenix retail market.”

What is notable is that the vacancy rate in the Southeast Valley has improved 700 basis points from its 2011 high of 14.6%. Today, the vacancy in this region is 7.6%.

Velocity Retail’s research department tracks information on over 4,250 retail buildings totaling nearly 176 million square feet. The market is further analyzed in six regional trade areas giving a more complete picture of each area.

12

9

6

3

0

Source: Velocity Retail Group

7

in th

The International Interior Design Association Southwest Chapter announced its new board for the 2018-2019 term.

Corinne Wetten from Faciliteq is the new chapter president, and Aileen Montelongo from DBSI is the president-elect and will become

Chapter Accountant — Linda Swetland

president for the 2019-2020 year.

Danielle Hensley moves from president to immediate past president. Here are the other board members:

VP of Advocacy — Nicki Ahlschwede Director of Advocacy — Allison Laak VP of City Centers — Melissa Almquist Albuquerque City Center Director — Jennifer Cox Las Vegas City Center Director — Michelle Rimler Phoenix City Center Director — Erica Freshley Tucson City Center Director — Jamie Torres VP of Communications — Melissa Alexander Director of Communications — Yuki Corella Co-Director of Graphics — Emily Keller Co-Director of Graphics — Janene Wong-Brehmer Director of Media — Lauren Gonzales VP of Membership — Dan Lynn VP of Professional Development — Kathleen Moreland Director of Professional Development — Felicia Chavez VP of Sponsorship — Alissa Franconi Director of Sponsorship — Nancy Stelljes VP of Student Affairs — Kiana Taie Director of Student Affairs — Erin Keith Affiliate Director — Andy Green Affiliate Director — Jenny Armstrong

INATES LIST ARIZONA DOM

BEST

Phoenix, Tempe, and Chandler are

best places to rent With moving season reaching its peak and the median rental price rising 2.8% in the past year, the personal-finance website WalletHub released its report on 2018’s Best & Worst Places to Rent in America.

To help prospective renters get the most bang for their buck, WalletHub

compared more than 180 U.S. cities based on 22 key indicators of rental attractiveness and quality of life.

The data set ranges from historical rental-price changes to cost of living to job market.

Arizona cities were well represented in the top 20, with six in the top 10 and 8 of the top 20.

HOTTEST MARKETS for apartment construction

Besides affordable rent prices, those living in Phoenix metro have another reason to rejoice as developers are planning to build over 10,000 new apartments this year, 55% more than they did last year, according to Yardi Matrix market data. The metro saw its population soar by 2% in the last year while job growth was also strong at 2.8%.

Home to employers like JP Morgan Chase, UPS or Santander Consumer USA, Phoenix is seeing a boost 1,915 both in its job market, as well as in its apartment construction. The city is planning on adding 4,152 new units by the end of the year, an increase from last year when it only delivered 2,316 1,030 1,075 new apartments.

Total Score

Rental Market & Affordability Rank

Quality of Life Rank

1. Scottsdale, AZ

69.26

14

1

2. Peoria, AZ

66.72

12

2

3. Chandler, AZ

66.41

22

3

4. Gilbert, AZ

66.16

7

9

9. Mesa, AZ

59.56

38

23

10. Tempe, AZ

59.50

28

28

15. Phoenix, AZ

58.63

44

30

396

416

458

18. Glendale, AZ

57.52

37

40

Mesa

Glendale

Gilbert

For the complete list of 182 cities, visit wallethub.com/edu/best-cities-for-renters/23010/

4,152

486 Peoria

Scottsdale Chandler

Tempe

Phoenix

Source: Yardi Matrix 7

TRENDSETTERS

60 YEARS and going strong This year marks the 60th anniversary of CVL Consultants Inc., an Arizona-founded engineering and design consultation firm with a large presence in the Arizona and Colorado states.

When the firm, formerly Coe & Van Loo, opened up in 1958, it specialized in agricultural engineering, working notably in the irrigation department. But as the business broke new land, it began expanding its horizons to other crucial services such as land surveying, land planning, and more.

“One thing that sets us apart is we are a complete design firm,” President and CEO of Arizona Operations Ryan Weed said in the firm’s 60th anniversary video. “We have an integration between planning and landscaping, working side-by-side with our civil engineering and survey teams.”

The company takes pride in its employees, creating an environment where they are free to succeed and to make mistakes, which coincides with the firm’s ever-learning approach to business. In addition, the firm and its employees give back to the community, participating in several charitable events as part of what it calls its “social responsibility.”

Throughout the years, CVL has taken on many projects around the Valley, including the Arizona Mills Mall, the Mountain Shadows Resort and Kierland.

A+

Justice Center earns

The Salt River Pima Maricopa Indian Community’s new Justice Center, designed by Gould Evans, was recently selected as a 2018 Architizer A+Awards winner in the Government & Municipal Buildings category. The Justice Center, a tribal court and practitioners’ building located in the Sonoran Desert, was designed to uphold the tribe’s unique sense of identity, beauty and humility. The design solidifies a balance of tribal sovereignty along side pressures of modernization within the southwest region.

“We’re honored to be recognized by the Architizer A+Awards for our work on SRPMIC,” said Krista Shepherd, Principal of the Phoenix Studio. “Our national design practice focuses on people and place specificity. We were delighted to engage the Community in the challenges of imagining the evolving meanings and forms of tribal Justice. After all, we joined a partnership with the Community to build a framework for which Tribal Justice is meant to consider.”

The new 93,000 square foot facility addresses both the demands of a contemporary justice system, as well as creates a sense of tribal modernity, sovereignty and historical familiarity. The Justice Center’s interior spaces are orchestrated around exterior space and the building is conceived as a backdrop to a variety of outdoor rooms. Much of the landscape, which create ties to native lands, is untouched and left to forces of the desert.

8 | September-October 2018

CVL Consultants Inc. celebrates 60 years in 2018. Key members of the CVL family are, from left, Timothy Starkey, director of landscape architecture; Eric Laurin, director of water/ wastewater; Carolyn Both, CFO; Ryan Weed, CEO and president; Kristina Locke, director of business development; Richard Alcocer, director of land survey; and Curt Johnson, vice president.

DELIVERY

DONE RIGHT

A growing problem for multi-family facility managers is how to handle the growing number of package deliveries. A Boston-based company, Package Concierge, is providing a solution to this problem with smart-phone operated package lockers.

Simply, the delivery company scans and loads a package into the Package Concierge system.

An alert and code is then sent to the recipient’s phone letting them know a package is ready to be picked up and then the resident enters the code to open the locker with their package.

“It really doesn’t take long to learn to use this system,” said Andri Rahardjo, business manager at The Palladium at Scottsdale Civic Center apartments, which is managed by Alliance Residential. “It’s also very convenient for the resident because they are not bound by the time the leasing office is open.”

The Package Concierge systems are installed in areas accessible to residents at all hours of the day and have cameras to track package drop-off and pickup. The system also limits management liability for lost or undelivered packages.

“Since we don’t handle packages here in the office anymore, any missing or delayed packages, we refer the resident back to the vendor or delivery company,” Rahardjo said.

ARE YOU IN THE KNOW?

FIND OUT NOVEMBER 2018

AZRE Magazine combines the top people to know with the top projects to know—all in one annual issue. Let PTK Magazine introduce you to the best commercial real estate people and projects that define the industry. Make sure you’re in the know, and pick up a copy of PTK when it launches in November.

EXECUTIVE PROFILE

GAME CHANGER Jerry Colangelo continues to shape Arizona, now as a real estate developer

By MICHAEL GOSSIE

J

erry Colangelo prides himself on being a storyteller.

“I have lots of stories,” says Colangelo, a partner in JDM Partners, a Phoenix-based real estate development company. “I should have lots of stories. I was around when nothing existed.”

Most of Colangelo’s stories stem from his time as one of the most influential sports executives in the world. He molded the Phoenix Suns into one of the most successful organizations in the NBA, helped bring Major League Baseball to the Valley in 1998 and served as managing general partner of the Arizona Diamondbacks and was instrumental in bringing the NHL’s Arizona Coyotes to the Valley.

But these days, Colangelo’s commitment to the Valley has transcended sports and he is shaping the community through commercial real estate. AZRE sat down with Colangelo to talk sports and real estate.

AZRE: What is more difficult: Professional sports or commercial real estate?

JERRY COLANGELO: To me, it’s all a game. In professional sports, it’s about the ball. Sports is a big part of American culture and a part of everyone’s life. Real estate is another game. It’s competitive. It’s all about product — putting a good team on a floor or putting a beautiful building into a complex. Sports and commercial real estate are much the same, but with 10 | September-October 2018

different terminology. I like the feel of commercial real estate. I’ve always been a guy who enjoys the action and I’m not one to sit back. In December, we concluded the largest commercial real estate transaction in the history of Arizona when we purchased the State Farm $2 billion project on Tempe Town Lake. I like those things. I like being first. I like winning.

AZRE: How was the transition from sports to real estate?

JC: I’m still very involved with sports.

I’m chairman of USA basketball and will be through the 2020 Olympics and I’m chairman of the Naismith Memorial Basketball Hall of Fame. So while I’m still very involved in sports, a lot of those same people are involved in real estate. Those relationships have led to me enjoying coming to work every day because there is something new to speak about with every phone call.

AZRE: What has been the biggest change you seen since you came to Arizona?

ROLE PLAYER: “It’s all about jobs,” says Jerry Colangelo of JDM Partners.

“Wherever the jobs come from are the sectors that we should focus on.”

PHOTO BY MIKE MERTES, AZ BIG MEDIA

JC: When I arrived in 1968, I thought Phoenix was a sleepy town, a frontier town compared with Chicago, where I came from. There were 700,000 people when I arrived and today there are more than 5 million. We’ve become more sophisticated. Phoenix is a big city. I had hopes and expectations of being part of reviving and developing downtown Phoenix, because that’s the heart of the city and I’m an urban person by nature. To actually see that become a reality is very exciting.

If anyone had predicted back in the 1970s that Phoenix would become an urban center, I would have said, “Not in our lifetime.” But here we are. It’s becoming an urban center and the future in America is urbanization. To see Phoenix as a leader in urbanization says a lot about what we are, what we’ve become and what the future holds.

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AFTER HOURS

Driven

In and out of the office, Schleicher relishes challenges of competing in triathlons

By STEVE BURKS

I

t’s something in his DNA that drives Chad Schleicher to excel and not settle for simple success. It’s that drive that helped him become the director of business development with a firm like SmithGroup, one with a global reach and a history that dates back to the 1800’s.

“It’s a personality type of wanting to accomplish goals and push harder and not really be satisfied,” Schleicher said.

“I don’t want to be just average and just coast through anything, I want to be the best.”

That drive and willingness to challenge himself naturally led Schleicher into doing triathlons.

Schleicher’s path to becoming a triathlete began right about the time he was working as a property accountant at Cole Capital in Phoenix. A representative from Team in Training, an fundraising organization for the Leukemia & Lymphoma Society, came by the office to give a presentation.

Schleicher signed up for the program, along with several C-level executives.

“I started training with the people who were five rungs above me and really became friends with them,” Schleicher said. “When I look back, I believe those relationships gave me some of my better opportunities professionally.”

He completed his first Olympicdistance triathlon in 2013. Olympic triathlons are typically comprised of a 0.9-mile swim, a 24.8-mile bike ride and a 6.2-mile run. It’s that first time in the water that typically is a shock for most novice triathletes, and Schleicher felt that.

“I was well trained for the swim and

12 | September-October 2018

you’re running in and you’re around so many bodies, a person kicked me in my nose, hard enough that it stunned me,” Schleicher said. “I remember slowing down and getting out of the way of the big rush. I had to start breaststroking just to catch my breath. It was mental. I knew I could swim it, but my brain was saying I was struggling for air.”

Schleicher made a couple other rookie mistakes during the race, including knocking over another competitors bike during the transition from the swim to the bike, and dropping his water bottle early in his 24.8-mile bike ride.

“Thought about going back to get it, decided not to,” he said. “Which was a bad decision because at the very end of it, I was dying for water.”

So far, Schleicher has finished six Olympic distance triathlons and has another one scheduled for September in Malibu. He has his eyes on competing in the Escape from Alcatraz triathlon, one of the most challenging events that isn’t of Ironman distance (2.4-mile swim, 112-mile bike and 26.2-mile run).

“Some of the people I know who’ve done it, they say the current is so strong it can take you a few hundred yards off course,” Schleicher said. “And those waters are full of great white’s and killer whales and then, obviously, San Francisco is just pure hills, so that’s what you’re biking through. That would be my pinnacle of Olympic level.

I think if I did that and felt fine, I think I would try a full.”

NEW TO MARKET A

D

E

OFFICE A TEMPE WATERFRONT DEVELOPER: KDC GENERAL CONTRACTOR: The Weitz Company ARCHITECT: SmithGroup LOCATION: E. Rio Salado Pkwy and Vista del Lago Dr., Tempe SIZE: 400,000 SF

14 | September-October 2018

OFFICE D ICON AT PERIMETER CENTER DEVELOPER: DBM Ventures GENERAL CONTRACTOR: LGE Design Build ARCHITECT: LGE Design Build LOCATION: 8399 E. Hartford Dr., Scottsdale SIZE: 32,054 SF BROKERAGE FIRM: Colliers International VALUE: $9M START: 4th Quarter, 2018 COMPLETION: Summer, 2019

HEALTHCARE OFFICE E WESTGATE HEALTHCARE CAMPUS DEVELOPER: 101 W Healthcare LLC GENERAL CONTRACTOR: A.R. Mays Construction ARCHITECT: Butler Design Group LOCATION: NWC Glendale Ave & 99th Ave, Glendale SIZE: 13,896 SF BROKERAGE FIRM: N/A VALUE: $2.3M START: July 2018

C

B

F

INDUSTRIAL B WEST 202 LOGISTICS CENTER DEVELOPER: Trammell Crow Company GENERAL CONTRACTOR: Willmeng Construction, Inc. ARCHITECT: Butler Design Group LOCATION: 59th Ave. and Lower Buckeye Rd., Phoenix SIZE: 38.5 acres/554,000 SF BROKERAGE FIRM: CBRE VALUE: Undisclosed START: 3rd Quarter, 2018 COMPLETION: June 2019

MULTIFAMILY C AVIVA DEVELOPER: Housing Trust Group GENERAL CONTRACTOR: Chasse Building Team ARCHITECT: Biltform Architecture Group LOCATION: Baseline & US 60 in Mesa SIZE (SF): 16 acres/325 units BROKERAGE FIRM: NA VALUE: $63M START: December 2016 COMPLETION: April 2018

RECREATION F MYSTIC COMMUNITY CENTER DEVELOPER: Voyager Properties GENERAL CONTRACTOR: Caruso Construction ARCHITECT: DPA Architects LOCATION: Westland Road and 123rd Ave., Peoria SIZE: 7,000 SF BROKERAGE FIRM: N/A VALUE: $2.5M START: 1st Quarter 2019 COMPLETION: Fall, 2019

15

JLL brokers historic deal

6 apartment portfolio sells for $311 million By STEVE BURKS

Finisterra

F

resh off a $210 million deal in February on the sale and recapitalization of Optima Sonoran Village Phases I & II, JLL brokered another historic multifamily deal in the Valley in early August.

In one of the largest dollar amount transactions in Arizona history, Blackstone Real Estate Investment Trust Inc., or BREIT, purchased a six-property portfolio for $311 Charles Steele million. JLL’s John Cunningham and Charles Steele led the team that brokered the deal between BREIT and sellers DRA Advisors LLC and The Milestone Group.

“It’s the biggest deal I’ve worked on as a broker,” said Steele, JLL’s managing director who also brokered the Optima Sonoran Village deal. “I’ve purchased a portfolio when I worked for Alliance Residential in 2006 that was almost $500 million, but that was in three states and four cities. This is by far the largest portfolio I’ve done exclusively in Arizona.”

The process at JLL began back in

16 | September-October 2018

April when they launched the sale of this portfolio of multifamily facilities scattered across the Valley.

“We did not go to the masses, it was kind of a targeted marketing campaign,” said Steele. “We wanted to ideally find a portfolio buyer, which we inevitably did.”

The deal was put under contracts by the end of May and then closed in early August, which is a standard due diligence and closing timeline, according to Steele.

The six properties that BREIT purchased in this deal are part of a recent push into the market. According to Business Real Estate Weekly of Arizona, since 2017, BREIT has invested $649 million into the Phoenix market to buy 3,751 apartments in 12 units.

“I think they see Phoenix as a strong growth possibility,” said Steele. “We have some of the most affordable rents in the west. I think its easier to grow rents from a lower base and I think they see the affordability of Phoenix is better than other western markets, so you should be able to grow rents better because your residents can afford them.”

The newest of the six facilities in the deal is The Residences at Stadium Village in Surprise, which was built in 2009 and the Waterford at Peoria

property was built in 2008. The other four complexes were built in 2000 or earlier and Steele expects BREIT to make some improvements to those older facilities to increase their value.

“There was definitely some value-add in the older builds,” Steele said. “For those older ones, they definitely saw some upside to asset management or doing some renovations.”

The Sierra Canyon apartments in Glendale was built in 2000, Sierra Foothills in Phoenix was built in 1999, Finisterra apartments in Tempe were built in 1996 and Lumber Chandler was built in 1995.

The most expensive of the six properties was the 382-unit The Residences at Stadium Village, which sold for $67.85 million.

According to its website, Blackstone is the world’s largest alternative asset manager, with $439 billion in assets under management, including $119 billion in commercial real estate.

“They’ve been active in other markets, so this isn’t their primary market,” Steele said. “They are selling a portfolio as well, right now. That portfolio is not going to be as large from a dollar amount, but they definitely like Phoenix. They definitely like the economic indicators of this market.”

It’s the big deals and the brokers who close them that make the market an interesting one to watch. Here are the top notable sales for the months of July and August.

Sources: Daniel Zawisha at Cushman & Wakefield Research.

OFFICE/SALES

$33.1M | 178,268 SF THE MADISON (2 property portfolio) 5353 and 5343 N. 16th St., Phoenix

BUYER: Admiral Capital Group

SELLER: CenterSquare Investment Management BROKER: Newmark Knight Frank

$28.5M | 102,121 SF

$19.4M | 102,611 SF

MACH ONE - BUILDING B 2290 E. Yeager Dr., Chandler BUYER: FAE Holdings 491935R LLC SELLER: Prudential Financial BROKER: N/A

FORUM NORTH 44 3033 N. 44th St., Phoenix BUYER: William Stock SELLER: HighBrook Investors BROKER: Cushman & Wakefield

$23M | 114,054 SF

$19M | 53,314 SF U.S. CITIZEN & IMMIGRATION SERVICES

WARNER COURTYARDS 301 W. Warner Rd., Tempe BUYER: Pat Simone Charitable FOUNDATION SELLER: Hannay Realty Advisors BROKER: JLL

LAND/SALES

1330 S. 16th St., Phoenix BUYER: Cal West Real Estate SELLER: Washington Alliance Capital LLC BROKER: N/A

INDUSTRIAL/SALES

IMAGERY ©2018 GOOGLE

IMAGERY ©2018 GOOGLE

$62.48M | 34,020,360 SF

$7.94M | 125,091 SF 35TH AVE. DISTRIBUTION CENTER

$31.35M | 5,445,000 SF

$3.38M | 50,000 SF

$13M | 1,619,561 SF

$3M | 16,350 SF

$12.25M | 1,658,719 SF

$2.87M | 19,552 SF

18101 W. Cactus Rd., Surprise BUYER: Toll Prasada LLC SELLER: Suburban Land Reserve Inc. BROKER: N/A

W. Deer Valley & N. Lake Pleasant Rd., Peoria BUYER: D.R. Horton SELLER: Arizona State Land Department BROKER: N/A

E. Germannn & S. McQueen Rd, Chandler BUYER: Lennar Homes SELLER: Pylman Land Company BROKER: N/A

N. 163rd Ave. & Pinnnacle Peak Rd., Surprise BUYER: Fulton Homes SELLER: New West Development BROKER: Land Advisors Organization

$11.72M | 39,891,377 SF SUNHAVEN RANCH

203rd Ave., Sun City West BUYER: Charles Dubroff SELLER: Sabal Financial Group BROKER: Nathan & Associates, Inc.

1601-1605 S. 35th Ave., Phoenix BUYER: Humphrey’s Fund I LLC SELLER: EastGroup Properties BROKER: N/A

4932 W. Pasadena Ave., Glendale BUYER: Pettstar Holdings LLC SELLER: Timothy Genrich BROKER: Cushman & Wakefield

19442 E. Warner Rd., Mesa BUYER: Whitton Plumbing, Inc. SELLER: Utility Construction Company BROKER: DPR Realty

7949 E. Acoma Dr., Scotsdale BUYER: Poulsen & Co. SELLER: Jewel Investment Company, LP BROKER: Lee & Associates

$2.6M | 45,904 SF

LADDER INDUSTRIES 1040 S. Camino Oro, Goodyear BUYER: The Riley Irrevocable Gift Trust SELLER: Larson Investments BROKER: Industrial Property Specialists 17

MULTIFAMILY/SALES

$94.52M | 475,623 SF ELEMENT DEER VALLEY

19940 N. 23rd Ave., Phoenix BUYER: Waterton Residential SELLER: CBRE Global Investors BROKER: N/A

$76M | 8,101 SF METROPOINTE

2345 E. Main St., Mesa BUYER: The Blackstone Group SELLER: Tricon Capital Group BROKER: Eastdil Secured

$60.5M | 257,400 SF

VELAIRE AT ASPERA 7700 W. Aspera Blvd., Glendale BUYER: The Blackstone Group SELLER: P.B. Bell Companies BROKER: N/A

$45.48M | 285,628 SF WILLOW CREEK APARTMENTS 2020 E. Broadway Rd., Tempe BUYER: JB Partners SELLER: Acacia Capital Corporation BROKER: Marcus & Millichap

$42.67M | 231,600 SF

VILLAGE AT LINDSAY PARK APARTMENTS 1441 S. Lindsay Rd., Mesa BUYER: Starwood Capital Group SELLER: Acacia Capital Corporation BROKER: CBRE

RETAIL/SALES

IMAGERY ©2018 GOOGLE

$45.45M | 263,661 SF THE MARKET AT ESTRELLA FALLS

1755-2075 N. Pebble Creek Pkwy, Goodyear BUYER: Stark Enterprises SELLER: Macerich Company BROKER: CBRE

$16.2M | 57,795 SF

SAFEWAY 28455 N. Vistancia Blvd., Peoria BUYER: John S. Winter SELLER: SAR Enterprises BROKER: The Kase Group

$12.08M | 103,294 SF

8680-8690 E. Raintree Dr., Scottsdale BUYER: 101 Mega Raintree LLC SELLER: N/A BROKER: N/A

$12.19M | 103,230 SF PAVILLIONS SHOPPING CENTER $11M | 61,255 SF PRIEST/ELLIOT PLAZA 1837-1955 W. Guadalupe Rd., Mesa BUYER: West Valley Properties SELLER: Transwest Properties BROKER: Romano Real Estate

18 | September-October 2018

1655 W. Elliot Rd., Tempe BUYER: The Niki Group SELLER: RSF Partners BROKER: CBRE

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19

LEGISLATIVE UPDATE

Gen Z is poised to impact the industry

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ust when you were getting tired of thinking about the impact of millennials, great news! It’s time to think about generation Z, the next demographic cohort in line. It is a tricky topic. Just as no one pattern to summarize the large millennial group exists, generalizations about generation Z will paint in broad brushstrokes trends that will subsume a great deal of variety in individual cases.

Making discussion even more difficult, demographers (both scholarly and pop) do not have consensus about the generational “dividing line” between millennials and generation Z, placing the start date for the cohort anywhere from 1995 to 2001.

Depending on the start date, gen Z is estimated in size at between 65 million and 75 million — a smaller cohort than millennials but still representing approximately one-fifth to one-quarter of the U.S. population currently. They are now the newest labor force entrants, and are poised to alter household formation patterns, consumption, and even workplace design preferences. In other words, real estate needs to prepare for changes, once again.

As a defining characteristic, generation Z has never known a lowstress social environment. They are the generation shaped by 9/11, the Great Recession, income inequality, and political polarization. They are also the first generation born into the age of the internet, the smartphone, incessant social media streams, and constant connectivity. As a group, they are at the center of a powerful

20 | September-October 2018

Deb Sydenham

Executive Director, ULI Arizona District Council push/pull of preferences. On one hand, their experience of stress orients them to pragmatism, caution, and personal security. On the other, technology’s impact makes them – at least at the level of devices – social, mobile, and interactive.

While seemingly tugged in both directions, though, generation Z doesn’t consider this a dilemma of choice, it is simply the way of its world.

How might generation Z affect real estate trends in the coming years?

■ In housing, this generation is likely to show the same initial preference for urban centers that the millennials did, although with a much higher desire for homeownership.

■ Gen Z identifies as a do-it-yourself (DIY) cluster, suggesting that lowercost fixer-upper houses could become a

wider-spread option.

■ Retailers will see the “gadgeteria” ethos of gen Z as both a challenge and an opportunity. Consumer immediacy is a gen Z characteristic.

■ Where millennials were all about collaborative workspace, the more competitive and more easily distracted generation Z needs and wants more structure. A soundbite comment reported by the Society of Human Resource Management is that “35 percent of gen Z would rather share their socks than their office space.”

Generation Z understands that it is hitting the job market at a time when talent is very much in demand.

These workers are willing to select a career path and high-quality work environment if employers will invest in their growth as well as their preferences for their physical surroundings. What was old may be new again.

This commmentary was excerpted from Emerging Trends in Real Estate 2018, a publication of the Urban Land Institute in partnership with PwC. Undertaken jointly

by PwC and the Urban Land Institute, Emerging Trends in Real Estate provides an outlook on real estate investment and development trends, real estate finance and capital markets, property sectors, metropolitan areas, and other real estate issues throughout the U.S. and Canada.

ABA focusing on two issues during midterm election M

uch of the political focus is on the off year election that will significantly impact our industry and the entire commercial real estate market. The Arizona Builders Alliance’s Legislative Committee is chaired by Bill Headley, Sr. Vice President of Holder Construction Company, and co-chaired by Keith Sabia, Principal in charge of Willmeng Construction.

The committee consists of active and involved members and leaders of the commercial construction industry. It meets throughout the year to analyze legislation and its impact on commercial contractors. The committee makes policy recommendations to the ABA’s board of directors that become the alliance’s legislative priorities. The committee has seen a frenzied amount of activity since the legislature’s regular session completed in May. We’ll focus on two significant issues effecting the industry: prompt pay for public works and the budget which included language changing k-12 procurement law.

SB1403 – ABA has been included in stakeholder meetings regarding a possible public prompt pay bill. Industry partners and specialty trade associations have begun discussions. The key issue in the proposed legislation is targeting transparency of the payment process.

Contractors and other partners prefer to be notified when the public entity owner has issued payment to the general contractor, allowing those payments to flow appropriately.

K-12 Procurement - Alternative Project Delivery Methods have been a benefit to public works projects and to taxpayers in the state of Arizona.

The taxpayer receives strong value and quality for their investments in our communities. ABA is leading efforts to protect choice in procurement, protecting the Arizona taxpayer investment. A major concern is that if selection based

Tom Dunn

President, Arizona Builders Alliance

solely on price survives repeal efforts, it may creep into other public works areas. ABA efforts include stakeholder participation in the rule-making process to ensure that commercial construction’s voice is heard and educating elected officials and staff of returning choice to K-12 procurement through Alternative Project Delivery Methods.

If you’re not at the table, you’re on the menu.

The legislative committee is discussing the importance of possible repeal legislation that promotes functional reforms of the system, open and fair competition, taxpayer choice in procurement that provides value, transparency in the procurement selection process, the need for extensive training and utilization of best practices in the procurement rules and processes.

Please contact me directly if you have concerns or details that would benefit these efforts at tdunn@azbuilders.org.

Tom Dunn is the president of the Arizona Builders Alliance. The ABA is the horizontal commercial construction industry’s leading advocate at the state legislature.

ABA’s membership consists of general contractors, specialty subcontractors and industry partners with more than 300 member firms active at the chapter.

21

LEGISLATIVE UPDATE

Make a difference in Arizona’s economy – Vote in 2018

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lection year in Arizona is upon us and with numerous legislative seats up for grabs and several ballot measures in play, the Arizona Association for Economic Development (AAED) will be watching and weighing-in as the campaigns and ballot initiative efforts unfold. As the professional association for economic developers and service providers in the state, AAED encourages you to learn about the candidates and their economic development positions and the impacts the ballot measures will have, not only on our existing businesses and our residents, but on our ability as a state to recruit companies that will create new, quality, high-paying jobs.

Richard Wilkie AAED

Keyvan Ghahreman AAED

Over the past several years AAED has supported legislation that has helped strengthen Arizona’s economy and enhance our state’s competitiveness. Some of these efforts 22 | September-October 2018

have included Quality Jobs and R&D tax credits; restoration of Highway User Revenue Funds (HURF) to county and local governments; Angel Investment Tax Credits; supporting Joint Technical Education Districts; re-authorizing the Arizona Commerce Authority (ACA); and the establishment of the State’s Deal Closing Fund. These efforts played an important role in our ability to attract and retain companies that created thousands of new high-paying jobs and billions of dollars of new capital investment. During this next legislative session it will be critically important that we continue to support and expand these efforts, find other ways to continue strengthening our education systems, and address other critical issues such as our water resources and public infrastructure.

Such promotion and advocacy will help Arizona remain competitive on regional, national, and global stages.

In addition, we encourage candidates to reach out to AAED, their local municipal economic developers, or Chambers of Commerce to learn more about our economy and the positive changes they can make by providing sound economic development tools.

Continuing to provide the right resources helps economic development professionals keep Arizona competitive in the attraction and retention of wealth-generating businesses with quality jobs. AAED is willing to meet with all candidates to discuss current economic development issues and how we can work together to address them, and share the Association’s legislative priorities for 2019 to enhance our economic ecosystem.

We encourage all readers to vote, as you ultimately will make a difference in our economy by who you send to the State Capitol in January 2019, and which ballot measures you support this year.

Richard Wilkie, CEcD, AZED Pro President, Arizona Association for Economic Development (Economic Development Director, City of Casa Grande) and Keyvan Ghahreman, Governmental Affairs Chair, Arizona Association for Economic Development (Director of Client & Preconstruction Services, Willmeng Construction, Inc.)

BOMA of Greater Phoenix opposed to so called “Invest in Education” ballot initiative

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uilding Owners and Managers Association (BOMA) of Greater Phoenix which is a consortium of property owners across multiple sectors that represent thousands of small business tenants and multiple millions of Arizona property, is OPPOSED to the so-called “Invest in Education” ballot proposition on the November ballot for

Tim Lawless

Executive Director BOMA of Greater Phoenix the following key reasons: It would nearly double Arizona’s income tax rate to 9% which would make our State the 5th highest income tax rate in the country and be the largest permanent tax increase in Arizona history which will harm our continued economic recovery; The tax increase is unfair for small business owners who file as individuals as the top rate is 9% while the top corporate income tax rate is 4.9%. This will harm small business job creation and drive these jobs and capital investments to other states like Texas; and will not accomplish getting more money in the classroom as it is poorly drafted and includes no reforms or accountability on how your tax money will be spent.

While BOMA of Greater Phoenix could support a sales tax increase with accountability measures to get increased monies into the classroom that would more fairly spread the pain to all residents and visitors to fund K-12 education, this initiative fails this worthy objective and goal and should be turned down by voters.

Elections will impact growth NAIOP seeks solutions to keep Arizona economy moving

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he commercial real estate market in the Valley continues to be strong. Several external factors influence this continued strength. Our population is growing quickly. In 2017, Metro Phoenix was the second most rapidly growing metropolitan statistical area in the country according to the U.S. Census Bureau.

Hiring is robust. The Valley is outpacing most other metros in new jobs, with 61,400 added in June 2018 compared to a year ago, according to the U.S. Bureau of Labor Statistics.

Many of these are jobs in industries offering higher than median wages. They include health care, technology, and advanced manufacturing. Arizona also enjoys a favorable tax and regulatory environment that keeps the costs of doing business affordable.

The outcome of the 2018 election could influence whether growth stays hot or begins to cool. High profile races for governor, Phoenix mayor, and U.S. Senate will set the tone for the state’s political leadership moving forward.

The balance of power in the state senate could also shift as Democrats are expected to pick up some seats.

Several initiatives that will likely appear on the ballot in November could impact the state’s fiscal condition or business attraction efforts. The “Invest in Ed” initiative, which nearly doubles the income tax rates on a few wealthy residents, could have a chilling effect on the Valley’s growth prospects in 2019 and beyond.

Currently, Arizona gets about a third of its income tax revenue from approximately 3 percent of filers. These

Suzanne Kinney NAIOP-AZ

are the very residents who are the most mobile. Other states such as Maryland that have similarly increased their income tax rates on high earners experienced an exodus of these taxpayers.

Even more concerning is the impact this act would have on small businesses, most of whom are S Corps or LLCs. These businesses file taxes under the individual income tax code, meaning a portion of their revenue would be subject to much higher taxation.

According to the U.S. Census Bureau, Arizona small businesses employ one million people or 44.5 percent of the private workforce. As more of their earnings go towards income taxes, less will be left to invest in growing their workforce or making capital improvements. If this occurs, the steady growth we’ve been experiencing would slow dramatically. For commercial real estate, this would mean reduced demand for office space and industrial facilities.

The need to infuse additional resources into Arizona’s public schools is very real. However, identifying a sustainable

revenue source that all stakeholders can agree to has proved illusive for many years. The last time Arizona’s school finance formula was overhauled was in 1980 in response to a court case that required the legislature to come up with a formula that provided more equitable per-pupil funding for all districts.

Since 1980, much has changed in Arizona’s public schools. We have tens of thousands more students; many come from more diverse backgrounds. We’ve experimented with various approaches to educating English Language Learners.

Charter schools now educate 16 percent of public school students. Online learning has become a reality for many students.

With every new presidential administration comes a slew of new federal laws and guidelines. Yet, we continue to put band-aids on a fundamentally outdated funding structure. The inadequacy of this piecemeal approach became evident this spring with the teacher strike.

Once we get through November, the business community’s goal should be to rally around improvements to our school funding formula that will provide adequate support to district and charter schools without damaging our state’s job creators. If we fail to do this, we will likely continue to face proposals similar to “Invest in Ed,” which could derail the steady economic progress we’ve been making since the end of the Great Recession.

At NAIOP Arizona, we are looking for a win-win scenario that provides students with an excellent education and keeps the market on track for new business attraction and organic business growth.

23

COOL OFFICES

Comfort zone These Valley offices look, feel like something special

By STEVE BURKS

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hese are the places people, employees and visitors alike, talk about.

Designed with form and function in mind as well as creating an environment that people want to be in, these office spaces are some of the “coolest” in the Valley.

A well-designed office space can be a company’s biggest asset. Employees want to work in an office that was designed with them in mind. A place where they are comfortable, feel connected to their colleagues and are motivated to be the best employee.

These “cool offices” will grab your attention and keep it until the work day ends.

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Jones Studio

General Contractor: Build Inc. Architect: Jones Studio Brokerage firm: NA Location: 205 S Wilson St., Tempe Size: 6,687 SF Start/Completion: Aug. 2014/Apr. 2016 Why it’s awesome: The North and West walls are open to exterior gardens providing beautiful and calming views. To insure fresh air at all times, there is a 9’ tall Ficus tree in the middle of the office. Jones Studio is currently building a hydroponic garden to help supplement healthy food choice for our employees. Triple beer tap keeps the family together. All water for gardens and landscaping around the office is supplied from locally harvested and stored rain water from a 2500 gal. tank located under the parking lot.

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DPR Construction

General Contractor: DPR Construction Architect: SmithGroup Brokerage firm: N/A Location: Phoenix Size: 16,533 SF Value: $4,500,000 Start/Completion: Apr. 2011/ Nov. 2011 Why it’s awesome: A living laboratory for the community, DPR’s new office is a unique example of urban revitalization and sustainability. Conceptualized as a “netzero energy workplace of the future”, DPR created an open-office environment housing 58 workstations and floater spaces, support spaces, fully-equipped gym/locker facilities, and a zen room for a quiet retreat. A firstof-its-kind commercial building in the Valley, the project achieved LEED-NC Platinum Certification and was the first Net Zero Energy commercial office in Arizona.

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Varsity Tutors

General Contractor: Jokake Construction Architect: Ware Malcomb Brokerage firm: JLL Location: 2120 E Rio Salado Pkwy, Tempe Size: 35,000 SF Start/Completion: Sept. 2017/Jan. 2018

Why it’s awesome: Varsity Tutors’ new office and sales center features a modern design, with existing raw building materials and other elements left exposed throughout the space. This included an open ceiling, exposed concrete block wall and tilt-up panels. Books are suspended in between light fixtures in the breakroom paying homage to the company’s foundation in education. The project features open office space, a training room, conference rooms, a large break room, and multiple collaboration areas.

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The Grid

General Contractor: Alexander Building Company Architect: Corgan Brokerage firm: ABI Location: 5227 North 7th Street, Phoenix Size: 16,000 SF Start/Completion: Nov. 2017/ April 2018 Why it’s awesome: Many of the building’s original features are emphasized in the new space including concrete double tees on the first floor, exterior staircases, and exposed block walls. Designed to accommodate coworking on the first floor, the building also includes a large multipurpose room for entertaining, training, and a community yoga room. Balancing raw materials with a sleek modern feel, a perforated metal canopy and second skin was added to create new dynamic exterior spaces and protect the building from the elements.

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COOL OFFICES E

CBRE Workplace 360

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General Contractor: Layton Construction Company Architect/Designer: Gensler Brokerage firm: CBRE Location: 4th, 5th and 6th floors of Tower IV at The Esplanade (2575 E. Camelback Rd., Ste. 500 in Phoenix) Size: 75,000 SF Value (or cost of the project) : Confidential Start/Completion: June 2017/Dec. 2017 Why it’s awesome: The new office is part of CBRE’s global Workplace360 initiative. In the new space, employees are no longer tethered to assigned desks or cubicles, but instead can choose from a variety of collaborative and private work settings that align with their changing needs throughout the day. The high-tech lobby called ‘The Heart’ features both a nine-screen media wall and an immersive, multi-screen presentation tool called Liquid Galaxy. Health and wellness components of the office include sit/stand and treadmill desks, wellness rooms, healthy snacks and hydration stations.

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GoDaddy Global Technology Center

Owner: Elm Tree General Contractor: Ryan Companies US, Inc. Architect/Designer: SmithGroup (Interior), Patrick Hayes Architecture (Exterior) Brokerage Firm: CBRE, Cushman and Wakefield Location: 2155 East GoDaddy Way Tempe Size: 150,000 SF Value: Confidential Start/Completion: May 2013/Sept. 2014

Why it’s awesome: Ryan Companies helped to support a creative work style for 1,300 employees, including engineers, developers and customer-care representatives.

The two-story, 150,000-square-foot build-to-suit facility, complete with slide and climbing wall, serves as one of nine facilities nationwide for the GoDaddy. “Ryan has built a killer facility. It embodies our GoDaddy spirit, which is energetic, innovative and passionate...it’s just a great place to get work done.” Blake Irving, CEO, GoDaddy.

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Meltmedia

Developer: The Boyer Company General Contractor: Stevens Leinweber Construction Architect: Krause Location: 2120 E. Rio Salado Pkwy.; Ste. 201 Tempe Size: 22,500 SF Brokerage Firm: Keyser Value: $1.4 Million.

Start/Completion: Jan. 2018/Apr. 2018 Why it’s awesome: Designed to reflect meltmedia’s unique personality and work style. Iconic features include an employee café serving local beer, coffee; 120 SF of moss walls; and an entryway specially designed for a dog-friendly work environment, part of the company’s culture. The office is also intended to serve as a gathering place for design, development, and technology meetup groups, with large classrooms and presentation spaces.

26 | September-October 2018

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COOL OFFICES I

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Zion & Zion

Owner: Architekton General Contractor: Bistany, PLC Architect: Architekton Location: 432 S. Farmer Ave. Tempe Size: 14,241 SF Brokerage Firm: N/A Value: $4.3 million Start/Completion: Jun. 2015/Jan. 2016 Why it’s awesome: This office features a game room with shuffle board, pool table, old-school arcade games, darts, and giant jenga; multiple beautiful and functional meeting spaces, one with a view of A Mountain; thousands of square feet of whiteboard wall for brainstorms and a no-cubicle floorplan that promotes open interaction and collaboration.

It also has a fully equipped kitchen, with double kegs (one for cold brew, one for beer!), integrated technology, beautiful architecture and color throughout the two floors, all in a dog-friendly environment.

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Norris Design

General Contractor: SAB Architect: Dan O’Brien Brokerage firm: Lee & Associates Location: 901 E Madison, Phoenix Size: 13,500 SF Value: $2,500,000 Start/Completion: Oct. 2016/Dec. 2017

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Why it’s Awesome: Employees can walk to Chase Field, walk to light rail. Building was originally constructed in the 1920s and began as a produce warehouse. The redesign created an open/collaborative work space with sandblasted original wooden trusses and exposed original brick walls and concrete floors. There are three conference rooms, an indoor/outdoor bar area with a glass garage door closure. Open kitchen concept with two refrigerators, dishwashers and microwaves.

Activities include ping pong tables, a basketball hoop, bag toss, office bicycles and a grill.

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JDA Software

General Contractor: Jokake Construction Architect: Corgan Brokerage firm: Cushman & Wakefield Location: 15059 N. Scottsdale Rd., Ste. 300 Scottsdale Size: 13,000 SF Start/Completion: Apr. 2017/ May 2018 Why it’s awesome: The new JDA Customer Experience Center overhauls the traditional showroom with large touch screen displays, interchangeable wall panels, clear acrylic floor tiles with reactive sensor lighting, and flexible furniture. While a roaming robot navigates through the high-tech interactive digital playground’s guest reception and lounge area, employees can also find dedicated spaces for individual and group work in a variety of huddle rooms, office spaces, or in a 30-person board room.

28 | September-October 2018

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Solera at The Monroe

General Contractor: Southwest Architectural Builders/SAB Architect: Ajanta Design/Brian Braganza Brokerage firm: Kevin Lange at Camelback Realty Group (Tenant), Michael Crystal at NGFK (Landlord) Location: 111 W. Monroe, Ste. 300, Phoenix Size: 19,300 SF Value: $983,698 Start/Completion: Oct. 2017/Jan. 2018

Owner: Clayton Companies General Contractor: Paxton Construction Architect: Clayton Design Brokerage firm: Lee & Associates Location: 8100 E. Indian School Rd., Ste. 201, Scottsdale Size: 4,000 SF Start/Completion: 2017/Feb. 2018

Why it’s awesome: Solera had the vision of providing a unique urban environment for their employment base. The entire team executed flawlessly, combining the rawness and historical elements of the building with a modern design, delivering one of the most abstract office spaces in the entire valley with an open floorplan, huddle spaces spread throughout, and a dedicated patio.

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Houzz

Small Giants

Why it’s awesome: This new office is in an ideal location, with nearby amenities and a fun, modern atmosphere. The bold colors, clean lines and trendy interior design elements all reflect the company’s brand.

Floor-to-ceiling glass partitions line the walls of the conference rooms and private offices. Chalkboard walls allow clients and employees to doodle and track creative ideas. Camp SG was created as a fun, playful space where employees and their kids can escape from the office, well sort of. The bullpen is where company meetings take place along with larger brainstorming sessions and training seminars.

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Southland Industries

General Contractor: Nitti/Graycor Architect: SmithGroup Brokerage firm: Savills-Studley (Southland), Metro Commercial (Papago Buttes Corporate Plaza) Location: 1500 N. Priest, Ste. 114, Tempe Size: 10K SF Value: $1 million Start/Completion: Sept. 2014/Feb. 2015

Why it’s awesome: Open, collaborative, funky & and functional, this office can host meetings with 50 people, or reconfigure for smaller, intimate groups. Office features actual reclaimed barnwood on the walls along with graphics from actual Southland blueprints.

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General Contractor: Sonoran Crest Construction Architect: Phoenix Design One (PDO) Brokerage firm: Cousins Location: 80 E Rio Salado Pkwy., Tempe Size: 33,059 SF Value: $1.4 million Start/Completion: Feb. 2018/May 2018 Why it’s awesome: Each meeting room was given to a team of Houzz employees to design with a theme of a room or space you’d find in a home.

The teams were able to morph a blank space into a really unique meeting space. Who else has a functional meeting room with a bathtub in it? Also, the Houzz folks incorporated a lot of little family touches – the employee’s children created artwork for the kids room and they also incorporated a family photo wall in their main space.

29

ARIZONA MULTIHOUSING ASSOCIATION

Home Sweeter Home Multifamily industry adjusting to new wave of renters by choice

By STEVE BURKS

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partment living was once thought of as a time of transition. Young people, fresh out of their teens and just setting off in the world, lived in apartments or rented condominiums during that transition time when they moved out of their parents house and pooled resources with a couple friends to find a cheap place to live. For young professionals, apartments were temporary as they moved to new cities to pursue their careers. As people got older, the expectation was they would find a house and leave apartment living for the younger set. That’s not the case anymore.

“We’re seeing a much higher percentage of renters by choice, people who could afford a home and baby boomers who choose to rent,” said Chapin Bell, president and CEO at P.B. Bell. “As a result, we need to cater to the desires off that resident profile.”

Renters by choice want the full meal with all of the trimmings, but they don’t want to cook it and today’s modern multifamily complex delivers a very full plate of amenities for those renters.

“Multifamily residents want interiors with large, open spaces and outdoor areas with more open spaces,” said John Carlson, president at Mark-Taylor, one of the largest multifamily housing developers and managers in Arizona.

“Dog parks, barbecues and outdoor recreational areas are areas we see a significant amount of use by residents.”

Inside today’s apartment or condo is much different than the product of the

30 | September-October 2018

1980s and 1990s. Open floor plans are industry standard, along with finishes that were once considered high-end but now come with the basic package.

“With the new product, the standard in-unit amenities are granite or quartz countertops, tile backsplashes in the kitchen, upgraded appliance packages, including washer and dryer in the unit, that’s a typical package,” said Bell, who’s company has been developing and managing multifamily projects in the Valley for more than 40 years. “Floor-to-ceiling tile in the bath, hard-surface flooring,

upgraded lighting… that’s how they are being finished today.”

Another perk of living in a modern multi-family community is they are trying to keep up with the latest technology. Carlson says that his company has seen the value in providing access to reliable technology.

“While we always strive to have the latest technology in our communities, we balance this with the fact that new technology is always fleeting,” Carlson said. “We’ve found over the years that reliable internet/wi-fi and cable is what attracts and keeps the most residents.”

FULL PLATE OF AMENITIES: Communities are offering amenities that are attractive to young, active tenants like bike storage and repair rooms like the one at Noria Robson Luxury Apartments in Chandler. A dog play area and pet washing station is shown at District Lofts apartment complex in Gilbert.

Outdoor gas grills and food preparation areas, like the one shown from Level at Sixteenth in Phoenix, are common at complexes around the Valley. PHOTOS COURTESY P.B. BELL AND MARK-TAYLOR.

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AMA FULL PLATE OF AMENITIES: Top, the fitness center at Optima Kierland is large and well equipped with the latest exercise equipment. Bottom, the pool area at Noria Robson Luxury Apartments in Chandler. PHOTOS COURTESY OPTIMA AND P.B. BELL.

While inside the units is improving, outside is where the biggest changes are occurring. New facilities in the Valley look more like resorts than apartment or condominium complexes.

Bell said that in the past, a 20-foot by 20-foot room with a couple treadmills and a few weights would suffice for a fitness room. Today, walk into a fitness room in a apartment complex and you’ll think you are in an upscale health club.

“We are seeing that our residents gravitate toward amenities like larger fitness and exercise facilities with modern equipment,” said Carlson. “We have found these kinds of amenities to be the most used, successful and create better retention in our communities.”

These fitness rooms are larger and offer more workout options, from treadmills, to elliptical trainers to spin classes or fitness on-demand classes.

Bell said that the on-demand service offers hundreds of workouts that residents can access through a touchscreen kiosk and follow the workout on a large-screen monitor.

“They can choose different workouts, whether its yoga or spin or Zumba, they have those options,” Bell said.

After a hard workout, residents need a place to cool down, relax or socialize and the complex common areas have grown up in the last decade.

The swimming pools at new communities are larger, with cabanas or outdoor kitchens. Complexes also have areas for outdoor gatherings that include bocce ball courts, outdoor ping pong tables and pool tables.

“You’re creating resident entertainment areas where these types of things are being provided and you’re creating a backyard space for your residents because today’s residents want that,” Bell said. “Millennials are spending more time at home.”

32 | September-October 2018

Other amenities that are gaining in popularity with the new rental tenant are lounge areas that can open to the outdoors, bike storage and repair facilities, recycling programs and theater rooms residents can reserve.

Security measures are also improving, with onsite security personnel and package delivery lockers to limit theft of the ever-growing number of packages delivered to residents.

“One of the most important factors our residents consider when moving into our communities is security,” said Carlson. “They want gated communities, onsite security and ongoing safety measures to give them

and their families peace of mind. All of our community developments take this priority into consideration and it is an ongoing focus in all of our properties.”

In high-rise complexes, residents are drawn to amenities like rooftop lounges or pools that give them a view of the landscape around them, a free amenity for Arizona residents.

“When you’ve got a higher density product and you’re building a rooftop resident area that generally has TVs and outdoor kitchens and a lounge area that people can go to and watch the sunsets and entertain,” Bell said. “You have great views and those are great amenities that residents really like.”

Greystar Executive Director of Real Estate Mike Clow (center) and his Arizona leadership team

C O N G R AT U L AT I O N S , M I K E C L O W !

On behalf of the entire Greystar™ Arizona team, we want to congratulate Mike on his upcoming installation as 2019 National Apartment Association Chairman of the Board.

National Platform, Local Expertise

Property Management | Investment Management | Development & Construction Services

AMA

NATIONAL STAGE Clow will be 2nd chairman of NAA from Arizona

By STEVE BURKS

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here were no short cuts on Mike Clow’s path to becoming chairman-elect of the board of directors for the National Apartment Association.

Clow began his journey in 1992 by joining the Arizona Multihousing Association early in his professional career. He served on committees and held various officer positions with the AMA before becoming chairperson back in 2008.

“When you kind of reach that level in the state affiliation, I just started to become active in the national association,” said Clow, who is the executive director for Greystar’s West Division, based in Phoenix.

With the NAA, Clow took a similar path, serving as a regional vice President for Arizona, Nevada, Washington and Oregon, and then serving on different committees before deciding he wanted to serve as an officer in the organization. In 2017, he was elected vice chairman and then in 2018 became chairman-elect. He will serve as chairman of the organization for 2019.

“I’m only the second person from Arizona to be chairman (of the NAA),” Clow said. “The one before me was Tom Shelton in 2003.”

The NAA is based in Arlington, VA and has 160 affiliates, including the AMA. The NAA boasts more than 75,000 member companies.

Serving as chairman of a national organization of that size does take up a good chunk of time, but the rewards of it are worth it. Clow estimates he’ll

34 | September-October 2018

devote roughly 20 days of his year to NAA activates with meetings, conference calls, trade shows and industry events.

“Greystar has given me the time and the flexibility to do that and that says a lot on their part,” Clow said.

“Greystar has always been huge believers in giving back to the communities where we operate and to the industry that we operate in.”

Clow said the biggest issue facing the multi housing industry is affordable housing and rent control. The industry is facing a shortage of housing for vital low- to middleincome workers like teachers, fire fighters, nurses and policemen.

“Obviously, prices have gone up and supply is not keeping up,” Clow said.

“Affordable housing is the hottest topic of the day.”

Clow said Phoenix is a great example of how demand is outpacing supply. He cited the rising population in Phoenix, with 100,000 people expected to move to the Valley each year for the next few years and approximately 7,500 apartment units and 15,000 houses are expected to be completed each year.

“If, on average, three people live in each unit, then you’ve got to create 30,000 places for people to live every year, and we’re clearly not doing that,” Clow said. “As this new millennial workforce wants to rent instead of buy, and the baby boomers want to sell, you’ve got a high rental demand.

“The question is, how do you solve that?”

While there may not be an easy solution, Clow will be leading the NAA as it tackles this issue and more.

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35

LOOP 202

OPPORTUNITY ROAD

By JESSE A. MILLARD

I-10 Straddle.

IMAGE COURTESY, ADOT

36 | September-October 2018

Unfinished Loop 202 expansion already sparking development

I

t’s not often when 22 miles of freeway is added to a major city in the U.S. It also isn’t often when a large area becomes ripe for a slew of economic development opportunities for a variety of markets.

Phoenix is set to see all of this become a reality when the South Mountain Freeway is finished in late 2019.

This brand-new stretch of freeway will serve as the connector between the East and West Valley and will not only add value to the existing southwest industrial submarket in Phoenix, but it will also pave the way for business parks, retail and housing developments.

The 22-mile extension of the Loop 202 will run East to West along Pecos Road stemming from the Interstate 10 and Santan Freeway south of Chandler Road.

The Loop 202 will then stretch around South Mountain, cutting north and south between 55th and 63rd avenues on the way to the Interstate 10 at 59th Avenue in the West Valley.

Where the $1.7 billion South

Mountain Freeway will go is, “projected to have some of the greatest growth in the Valley,” says Dustin Krugel, a public information officer at the Arizona Department of Transportation.

Krugel says the South Mountain Freeway is going save many Valley motorists time on their commutes, particularly folks who are traveling between the East and West Valley. Upon completion of the freeway, drivers can bypass downtown Phoenix.

Someone departing from the southeast part of the Valley, headed west, will be able to save about 25 minutes both ways in their commute, Krugel says.

South Mountain Freeway Facts

– The South Mountain Freeway is programed for $1.7 billion – $916 million of the budget was for design and right-of-way for the freeway – Well over 1,000 people are working on the project – 22 miles of new freeway – 3 general purpose lanes, 1 high occupancy vehicle lane – 13 interchanges – 11 miles of sound walls – 40 bridges and one pedestrian bridge

37

LOOP 202 A UNIQUE FLAVOR OF ARIZONA In the late 1920s, Frank Lloyd Wright had a desert camp near 32nd Street and the upcoming South Mountain Freeway. To commemorate the architectural legend, the Arizona Department of Transportation and the Frank Lloyd Wright Foundation teamed up to pay homage to Wright.

ADOT states that one of the freeway’s five distinct aesthetic character areas between Ahwatukee Foothills and the Interstate 10 and Loop 202 Santan Freeway Interchange is named and influenced off of Wright’s camp, Ocatillo (the name is intentionally misspelled from ocotillo).

When the South Mountain Freeway opens in 2019, be on the look-out for the design elements that are influenced by Wright’s unique architectural style. IMAGE COURTESY, ADOT

SHOVELS AT THE READY Land values along the South Mountain Freeway corridor have risen “substantially” since construction started and a timeline for completion was laid out, says Greg Vogel, founder and CEO of Land Advisors Organization.

Prices for residential plots in the Laveen area rose, and Vogel has seen developers begin plans for a new wave of multifamily projects in the Estrella Village area – something that hasn’t occurred in a while, he adds.

“There are well over a dozen parcels of land that are in some form of plating or planning, or in flow of a transaction as we speak,” Vogel says about the activity in the Laveen area.

The South Mountain Freeway is set to impact many commuters and residents across the Valley, and it will also smooth out the movement of trucks from the industrial areas.

While land rises for future residential projects, Vogel says that industrial land values in this area have been stable for the past five years.

Industrial parcels within this submarket, especially areas along Broadway and Lower Buckeye roads will still receive a benefit with easier access to the Interstate 10 for trucks and commerce, Vogel says.

“The idea that you’ll have proximity to that freeway, I think will be quite helpful,” he says.

South Mountain Freeway Construction.

IMAGE COURTESY, AARON WITT

38 | September-October 2018

Joe Trinkle, senior vice president, regional director - South and West Region for Liberty Property Trust, says industrial jobs north of Broadway Road will grow. There’s already a land constraint in that area, but many industrial land acquisitions occurred in the last 18 months, he adds.

Liberty Property Trust owns over 2.3 million square feet of industrial facilities within a five-mile radius of where the Loop 202 will meet the Interstate 10 at 59th Avenue, Trinkle says. The 2.3 million square feet of industrial space includes the 1.4 million-square-foot Liberty Logistics Center II at 71st Avenue and Buckeye Road.

That parcel has an additional 20 acres for development available still, Trinkle says. And in the past 24 months, his firm added about one million square feet to the southwest industrial submarket, he explains.

Liberty Property Trust is also actively looking for development opportunities in that sub-market near the Loop 202 extension, he adds.

EASE OF ACCESS The addition of the South Mountain Freeway is going to continue the maturation of the West Valley as it makes travelling across the Valley much easier.

Trinkle believes more residential

PHOENIX’S VISION During his 2017 State of the City Address, former Mayor Greg Stanton mentioned the city’s vision for the South Mountain Freeway corridor upon completion.

Stanton called for the city to tap into the talented workforce living in the West Valley by creating a technology corridor.

“We are creating the South Mountain Technology Corridor near the freeway alignment in West Phoenix along 59th Avenue. It will be an area complete with modern business parks for advanced manufacturing, business services and emerging industries,” Stanton said during his speech. “Think of it as a Price Corridor of the West Valley. And we have to get it right – it will mean tens of thousands of jobs over the next 20 years.

This will be a game-changer, not just for the West Valley but for the entire region.”

development is going to happen across the West Valley thanks to the addition of this freeway.

Specifically, residential development south of Broadway Road in the upcoming South Mountain Freeway corridor will receive additional development, Trinkle said.

“There’s more people wanting to live in the West Valley, because now they’re going to be able to commute to work on the 202 down to the East Valley much more quickly and much more easily than they can today,” he says.

With more residents in the area, there will be even more demand for other assets. Developers are planning to deliver too.

Kitchell is currently in the works of developing a multi-phase, mixeduse development on 170 acres near Baseline Road and the South Mountain Freeway. The first phase of this project will focus on retail and Kitchell plans to make more announcements about this project in October.

39

LOOP 202 A UNIQUE PARTNERSHIP For the first time ever on a freeway project, ADOT partnered with a private developer, Connect 202 Partners, to design, build and maintain the South Mountain Freeway.

ADOT states the public-private partnership is accelerating the creation of the South Mountain Freeway by turning it from a nine-phase project into a single phase. The project will also come online three years earlier, according to ADOT. ADOT is also saving $100 million by going this route. For the next 30 years, Connect 202 Partners will maintain the freeway. ADOT states this will ensure the freeway is built with the highest quality.

“In the last 18 months, we’ve definitely seen more developers trying to establish land positions in the corridor in preparation for the completion of the 202 at the end of 2019,” says Trinkle.

TAPPING INTO TALENT AND PHOENIX’S BIG PLANS WESTMARC recently did a comprehensive report on the population of the West Valley. Az Business magazine reported WESTMARC’s findings in July, that highlighted the incredible amounts of talented workers residing in the West Valley.

WESTMARC noted that 40 percent of Phoenix’s 1.5 million residents live west of interstate 17 and 1.6 million people live in the West Valley all together.

Of those living in the West Valley, 69 percent of the workforce commute to other regions in Maricopa County.

According to WESTMARC, 37 percent of healthcare workers living in Maricopa County live in the West Valley, while 21 percent of the healthcare jobs are in the region.

Meanwhile, 28 percent of manufacturing workers in the county live in the West Valley, with only 16 40 | September-October 2018

percent of those jobs located in the West Valley. And, 34 percent of the professional finance and insurance workers in Maricopa County call the West Valley home while only 12 percent of their jobs are located in the region.

The Loop 202 South Mountain Freeway will not only make the lives easier for those who are commuting from West to East, but the freeway will facilitate the creation of future jobs that are much closer for those workers.

“Around the Broadway Road area, is really where we see so much opportunity from an economic development standpoint to diversify the West Valley economy,” says Lori Collins, deputy director of the City of Phoenix Community and Economic Development Department.

By looking at the WESTMARC workforce data, Phoenix believes that a mix of the existing workforce residing in the West Valley, the new freeway accessibility and the right commercial real estate development along the corridor could create fresh opportunities for quality job growth, Collins says.

Phoenix envisions insurance, healthcare, technology and advanced

South Mountain Freeway Construction.

IMAGE COURTESY, AARON WITT

manufacturing companies creating jobs within this corridor, she says.

“That’s where we think there’s a great opportunity to capture some really talented people closer to where they live,” Collins says.

And with that extra job growth, housing and amenities would support that growth too, she adds.

This planned area by the city will be known as the South Mountain Technology Corridor. Phoenix wishes to see the development of modern business parks that would be able to house both technology and advanced manufacturing companies, Collins says. “(The Loop 202 extension) allows us to create a new employment corridor.

So, I think that helps to diversify the West Valley area where it’s not just going to be residential, and it’s not just going to be warehouse and distribution,” Collins says. “(The freeway) is a chance to create a brand-new employment corridor. It’s something you don’t run into very often as an economic developer.”

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NAIOP

Kinney’s fine-tuning keeps NAIOP running smoothly

By STEVE BURKS

W

hen Suzanne Kinney took over as president and CEO of the Arizona chapter of NAIOP in November of 2017, she knew she didn’t need a sledgehammer to make changes.

The chapter had built a solid foundation and had a long, well-established reputation as one of the leading voices of the commercial real estate industry in Arizona and nationwide.

“I was fortunate to come into an organization that was already in good shape in terms of our membership, our finances and our programs,” Kinney said. “My role is to take that from good to great and to evaluate everything that we’re doing and see where there are opportunities to modernize our approach to different things or to reach a broader audience.”

Kinney and her staff have already started fine-tuning. Simple things, like shortening the Best of NAIOP awards event or making it easier for members to register for events or programs, have been well received.

“Even on the administrative side, the way we communicate with our members, we’ve modernized that,” Kinney said.

“It should make the whole member experience easier and allow more opportunities for people to engage.”

On the membership engagement side of things, Kinney and her staff are currently implementing new software so that they can better identify members who may not be actively involved in the organization. That way, the organization can figure out what it can do to bring those members into more events so they have a fuller experience.

44 | September-October 2018

The member experience and networking is just one of the legs on the three-legged stool philosophy at NAIOP. The other two legs, education and public policy advocacy, are right in Kinney’s professional wheelhouse.

She came to NAIOP after serving as interim manager for the Arizona Mining Association. Before that, she was the CEO and founder of Southwest Business Policy, a public policy and communications consulting firm. From 2005-2013, she was an executive with the Arizona Chamber of Commerce and Industry, serving as senior vice president of public policy and founder/ executive director of the Arizona Chamber Foundation.

As NAIOP president, Kinney is devoted to keeping the chapter membership, which is made up of around 800 individuals and 100 corporate sponsors, educated and informed about what’s going on at the state legislature and city halls across the state.

“We have a lot of our members that haven’t been following our public policy work very closely, so I’m hoping to put out communications that really explain what we’re doing in that area and how it impacts their business and get them involved,” Kinney said. “Just to have that involvement during the legislative process is tremendously helpful because members of the legislature hear from professional lobbyists all of the time. It actually makes more of an impact when they hear directly from a business owner or business leader.”

NAIOP’s core public policy priority continues to be lowering the commercial property tax rate. However, the organization gets involved on a variety of other issues that could impact the industry.

“If a bill is being considered in the state legislature that could hamper our state’s business attraction, then we should care about that.It’s a lot harder to lease office or industrial space if there’s no new businesses moving into our state,” Kinney said.

“We have to be aware of all of those issues, in addition to the ones that directly impact our industry.”

Despite having over a decade of leadership experience and hundreds of hours spent meeting with elected officials over the years, Kinney approached her new role with an open mind. She said her approach fit well with the membership, and she listens to what the members want and then puts her action-oriented traits to work.

“I’m trying to have the right combination of listening and understanding what the membership wants from the organization but also being prepared to make decisions and shake up a few things,” Kinney said. “I stay in close communication with our members, and especially our board, so that I know what’s going on and they know what I’m working on. That way we’re all moving forward as a team.”

NAIOP

NAIOP’s ace New chairman Cheney joined organization early in career

By STEVE BURKS

T

ennis has given much to the Cheney family through the years, and Andrew Cheney owes a lot to the sport.

He was able to see the world playing on the ATP satellite circuit as a young pro coming out of the University of California-Irvine. Traveling to exotic locales like Vietnam, Greece, England and Jamaica to play tennis may sound like living the high life, but it wasn’t always pleasant.

“I had to sleep in a tent one time because there were no hotels available,” Cheney said. “I lived the best of it, and the absolute worst of it.”

Tennis also led Cheney to meet Daryl Burton, who had children who took tennis lessons from Cheney’s father, Brian, himself a legend on the tennis circuit here in Arizona and throughout the country.

“He told me, ‘Hey, whenever you’re done with tennis, I’ll set you up with some guys to talk to,’ ” Cheney said.

And Burton followed through, linking Cheney with Rick Robertson, principal at Lee & Associates in Phoenix. Robertson then gave Cheney’s resume to Craig Coppola, who took Cheney on as a Runner in 2003. After working together successfully for several years, the pair formed the Coppola-Cheney Group within Lee & Associates, and have grown it into the top office leasing and sales team in Lee & Associates history.

While tennis was a key factor in getting a young Cheney in the door to his profession, his involvement in the Arizona chapter of NAIOP has had a much greater impact in his adult life.

“My first week in the business, I went on the NAIOP bus tour, going out to see all of the new projects around town,” Cheney said. “And then I went to other NAIOP events. I just assumed,

46 | September-October 2018

since Craig (Coppola) was involved and because he was a top broker at that time as well, that everyone in the business goes to all of the NAIOP events.”

Cheney has risen up through the ranks at Lee & Associates and at NAIOP. He became a Principal at Lee & Associates in just six years, the fastest associate to complete that process in the Arizona office. He’s also one of 17 professionals in the state who have both CCIM and SIOR designations.

With NAIOP, Cheney got involved on committees early in his membership and has risen to become the NAIOP chairman for 2018.

“NAIOP was hugely valuable to me to get to meet other broker colleagues, architects, developers and many other industry players that I work with now on a regular basis,” Cheney said.

Most importantly, however,

“through friends at NAIOP, that’s how I met my wife. So, it’s been great for my career, obviously, both personally and professionally.”

As chairman, Cheney is a pivotal player in directing NAIOP’s focus for the year. NAIOP remains dedicated to advocating for office and industrial, and mixed-use development and keeping the Phoenix market attractive to do business in.

“Our number one goal is to reduce and oppose real estate taxes and regulations that increase costs for the commercial real estate industry, which helps everyone on down the line,” Cheney said. “We want to remain competitive with other regions competing for new companies coming here. That helps bring more talented people and jobs.”

If the current market is any indication, NAIOP has been very successful in its mission. Cheney feels that Phoenix is in a strong position in the southwest region and still has a lot of potential to become an even better option for companies looking for a place to do business.

“You look around the Southwestern U.S. and Phoenix is the most affordable option left,” Cheney said. “You go to Austin, Texas and office space is approaching 75 bucks a square foot.

Dallas is not much cheaper. Denver is expensive and California…. And then I would argue we are more vibrant than other similarly priced markets out West. So, where else are you going to go for affordable labor and real estate costs in a cool city?

“We’re also working to continually enhance our education offering, which I’m already very proud of. NAIOP is helping Arizona be competitive and there’s a very good future ahead of us.”

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NAIOP

HOLDING STEADY NAIOP-AZ leaders reflect on a strong 2018 and what can be done to maintain this momentum

ROUNDTABLE MEMBERS

By STEVE BURKS

T

he Phoenix market has seen these kinds of heady days before. Industrial space is filling up as fast as it can be built and the office sector is enjoying rising rents, healthy vacancy numbers and strong employment levels.

On top of that, Phoenix has seen its retail market buck the national trends with improving vacancy and rental rates.

The board members we gathered from NAIOP-AZ have more than 100 years of combined experience and they know all too well that what goes up will eventually come down.

These market experts sat down to field questions about how the Phoenix market has performed in 2018 and what has changed in the decade since the last boom/bust cycle swept through the industry and what the market can expect from 2019 and beyond.

Phil Breidenbach

Bryon Carney

Molly Ryan Carson

Executive vice president of Greater Phoenix, Colliers International PB

Managing principal, Cushman & Wakefield BC

Senior vice president, market leader Southwest Region, Ryan Companies MC

Andrew Cheney

Ericka LeMaster

Darren Pitts

Principal, Lee & Associates AC

Senior vice president commercial real estate, Alliance Bank of Arizona EL

Executive vice president, Velocity Retail Group DP

Danny Swancey

Chuck Vogel

Candace Rosauro

partner, ViaWest Group DS

Senior vice president, VEREIT CV

Director of business development, Jokake Construction Moderator: CR

CR: What is different in June 2018 in our local commercial real estate industry than a year ago?

EL: Urbanizing our suburban cities. Developers and cities

collaborating on core, urban mixed-use projects to enhance or gentrify the city's core. Creating mixed-use environments with more walkable amenities to multifamily and single family housing developments. Centering new development around entertainment.

MC: Construction costs are higher and continue to creep up; the tariffs imposed on steel and aluminum isn’t doing our industry any favors. Labor shortages in the construction field remain and have increased in most states. The rising interest rates and the impact of the 2017 tax law are also new variables since a year ago.

From a positive standpoint, new job growth continues in our state, in strong fields like finance, banking and manufacturing. We are also seeing even more companies expand their operations in the Valley. It’s just great for our state and helps continue our growth for several years to come.

DP: Our market continues to improve year over year and 2018 is no exception. One of the biggest things our clients 48 | September-October 2018

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NAIOP The office market activity feels similarly good with things continuing to tighten as positive absorption outstrips new supply – Danny Swancey talk about regularly is how the Phoenix housing market seems to finally be back on track. I would also say that we continue to diversify our economy in many key sectors including health care, technology, manufacturing, distribution which give our market a broader economic foundation and makes the economy much healthier than in prior years.

DS: The office market activity feels similarly good with things continuing to tighten as positive absorption outstrips new supply. On the general industrial front, we’ve seen vacancy tightening significantly with rents increasing accordingly causing many to kick off new speculative developments.

AC: The Metro Phoenix office market

has posted 1.4 million square feet of positive net absorption (net jobs added) as of June 2018. By this time in 2017 we had only absorbed 353,000 square feet. And right now there is 2.7 million square feet of new office buildings under construction, as opposed to 1.3 million in June of 2017.

PB: There is a level of freneticism, an

impatient anxiety to get stuff done we typically don’t see with developers.

Some of it is corporate user indecision, some of it is a race against rising costs, some of it concern over political volatility – whatever it is, the business is fun and interesting right now for sure.

CR: How would you compare our

Metro Phoenix commercial real estate market to other major markets throughout the nation and specifically the Western U.S.?

50 | September-October 2018

PB: We’ve always been more volatile,

but, this recovery has been led by a variety of more stable (and sustainable) industries (e.g. finance, education, healthcare) which has tempered that.

We are still a region leader in growth, and while we are not the low cost option (in terms of employee and cost of living) we once were, quality of life, access to talent, and business friendly political environment help us to continue to grow.

MC: Metro Phoenix continues to benefit from steady growth, that is the outcome of years of hard work and investment (that) the government, universities and larger business community have made. This is the slowest recovery greater Phoenix has experienced in more than 3 decades.

Because of this, we can expect this favorable environment to continue on, likely longer than some of our coastal neighbors. We have a strong workforce coming out of our universities, an affordable, high quality of life, a favorable tax structure and minimal risk of natural disasters. In short, Greater Phoenix remains a solid, cost effective choice for a large variety of corporations.

DP: Phoenix is one of the strongest growth markets in the nation and remains the “Bargain of the West”.

We are one of the country’s leading markets in new single family permits annually. Compared to the coastal markets of Seattle, Portland, San Francisco, Los Angeles and San Diego and inland markets of Las Vegas and Denver, our market here in Phoenix on both the residential and commercial

2018 OFFICE

OUTLOOK

1.7M Square feet of office space will be added to the Phoenix market in 2018

4.6% Increase in asking rents of office properties in Phoenix market

16.1% Vacancy rate in Phoenix market of office space, lowest since 2007 Source: Marcus & Millichap 2Q 2018 report

side remain very affordable. This is good news for corporate expansion and relocations where lifestyle and affordability are important.

AC: Our market can be misleading due

to the relatively high vacancy factor we have (currently 18.6%). Tenants and landlords that understand the nuances in our market, however, can capitalize on opportunities our vacancy figure provides. Due to our continually diverse economy, great labor force and quality of life, investors are increasingly considering Phoenix along with other western gateway cities.

BC: Phoenix’s population growth rate is twice the average of the Western U.S. and three times the national average.

NAIOP

New Phoenicians tend to be welleducated domestic migrants from high tax states like California and Illinois.

This population growth affects all of the building types in commercial real estate. High rent growth in multifamily is fueling a record amount of capital markets activity. Retail vacancies are below average, even after a decade of sustained e-commerce pressure.

Expensive west coast markets see Phoenix as a desirable location. Large financial users and software companies are leasing large amounts of office space. Warehouse and distribution space in the West Valley is increasingly attractive as an alternative to the Long Beach and Inland Empire markets.

CR: We now have a number of years of consistent expansion of the economy, both nationally and locally. How long will this continue? What do you think has the biggest chance of derailing the positive trajectory of Phoenix’s commercial real estate market?

AC: This has been the slowest

economic recovery on record, so I wouldn’t be surprised if it went on another 3 to 4 years. Whether its debt getting out of hand or just a feeling of lack of confidence in the national economy, I think the next downturn will be relatively soft. Then, as usual,

52 | September-October 2018

we will be due for a significant correction at the end of the next cycle.

CV: As we continue to have steady job gains and declining unemployment rate, we should see personal income growth. This is driving our continued economic expansion along with our population growth. Any national events that would have an impact on our economic expansion such as trade war or rising interest rates, could reduce our job growth and slowdown commercial real estate.

MC: Overbuilding, building to a rental rate that our market is not yet ready for. In addition, the current referendum on the Fall ballot promoting significant increases in taxes would reduce Arizona’s tax advantages compared to our neighbors.

PB: Our economists and research

team suggest we have several years of “runway”, but we are beginning to see the signs of an overheating market. I give us 2 years, maybe 3.

DP: I think the fundamentals are solid going forward in the near term. This long period of historically low interest rates has allowed businesses to grow and thrive. If I were to put on my worry hat, I continue to be concerned

MEETING: Members of the Board of Directors for NAIOP Arizona include, from left, Phil Breidenbach, Chuck Vogel, Danny Swancey, Candace Rosauro, Darren Pitts, Bryon Carney, Tom Jarvis and Keith Earnest.

about the federal government’s debt and deficit levels. Too much debt always kills a good thing. Obviously, any major geopolitical event could significantly change the current growth cycle as well. Arizona was slower recovering from the economy than most markets and has good momentum going forward.

EL: Economic growth could continue

for the foreseeable future if the State and our respective Cities remain focused on utilizing all economic tools available to win corporate relocations.

These strategic gains will add moderate to higher wage jobs in conjunction to the Valley’s existing job force. Access to an educated workforce, as well as payroll and property taxes remain meaningful factors with employer growth and retention.

DS: Ah, the million dollar question.

There’s nothing within the internal metrics that we track that is pointing

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NAIOP to an imminent downturn. A national recession will likely be what derails the Phoenix market, it’s just not clear to me what the impetus will be this time around. I also believe the proposed legislation to increase state income taxes on high-earners could have a substantial chilling effect.

Increasing taxes on high-earners who are often small business owners is generally counterproductive to economic expansion.

CR: Has Downtown Phoenix finally turned the corner? Do you believe a viable downtown is essential to our city’s success?”

DP: Yes, I’d say Phoenix has turned the corner probably in the last 12 months. The sentiment is positive and transactional volume is strong. I think it’s key for every market to have a healthy downtown. The expansion of the University of Arizona and Arizona State University’s campuses into downtown has been a game changer. Fry’s Food & Drug is under construction bring the first mainstream grocery store into downtown. The addition of significant residential product in downtown has been the key to transition downtown from an event destination into a viable submarket.

This has been the slowest economic recovery on record, so I wouldn’t be surprised if it went on another 3 to 4 years – Andrew Cheney DS: Yes and yes. It’s difficult to predict how quickly or slowly the positive trend will continue, but I think it’s become clear that a significant transformation is underway. There’s no doubt in my mind that a viable downtown is one of many key factors in determining which cities will be successful in the future.

young resident base, and social sentiment have made downtown “a thing”, but the resident base must continue to grow, along with more services for those residents, and with continued in-migration of businesses for Phoenix to have a truly significant downtown.

AC: Downtown Phoenix has indeed

CR: What is the hottest sub-market

DEMOGRAPHIC HIGHLIGHTS IC HIGHLIGHTS

turned a corner. Healthy occupancy rates, ASU Downtown campus, the Quicken Loans case study and the tremendous amount of capital infused into that submarket are proof we have a vibrant downtown. The renaissance of Renaissance Square and the birth of Block 23 are attracting a lot of tech and out-of-state tenants.

right now and what is the next hot sub-market?

MC: From an office standpoint, the submarkets with significant potential for new construction are Tempe and North Scottsdale. Trends for real estate to closely watch: Co-working facilities, self-driving cars, smart buildings/cities, Generation Z’s entrée into the workforce.

Office Research | Marke 2018 FORECAST JOB GROWTH AGE 20-34 *POPULATION *POPULATION * AST JOB GROWTH

3.2%

Metro

3.2%Metro 21% PB: Variety of industries, a vibrant

Metro

2

U.S. Average 1.2% for Phoenix Market DEMOGRAPHIC HIGHLIGHTS U.S. Avera U.S. Average 21%

verage 1.2%

Forecast jobHIGHLIGHTS growth Office-using MOGRAPHIC for 2018 job growth

Population of age 25+ with bachelor degree

Square feet per office worker

220 3.2 3.4 29 3.4% 3.2% 220 21% 3.4% 21% 2 29%

POPULATION 2018 JOB GROWTH POPULATION OF 25+ AGE SING JOB GROWTH *POPULATION AGE 20-34 % *POPULATION **SQ. FT. PER OFFICE 20-34 WOR 018 FORECAST JOB GROWTH %OFFICE-USING % AGE *PERCENT WITH BA *PERCENT WITHU.S.BACHELOR DEGREE+ U.S. Average 213 U.S. Average 1.2 U.S. Average 2.2 Average 29 Metro MetroMetro MetroMetro Source: Marcus & Millichap 2Q 2018 report U.S. Average 2.2%Metro verage 2.2% U.S. Average 213 U.S. Average 1.2% 21% U.S. Average U.S. Average 21% Metro %

54 | September-October 2018

%

%

U.S. Average 29%

U.S. Aver

NAIOP The addition of significant residential product in downtown has been the key to transition downtown from an event destination into a viable submarket.

– Darren Pitts DP: From a retail perspective, the growth markets of Surprise, Gilbert and Queen Creek are the hottest 3 markets in the Valley. New retail follows new rooftops and that’s certainly the case in these 3 growth trade areas.

PB: 1. Chandler; 2. Areas round

Chandler; 3. Watch out for a renaissance on Camelback Road.

Too many great neighborhoods, restaurants and companies are “circling the area” and with the new, renovated, and proposed projects on the corridor we believe even more growth is on the horizon.

AC: Tempe remains the hottest,

particularly along Tempe Town Lake.

The buzz is unmistakable. However, there is a buzz too in South and Central Scottsdale and Downtown Phoenix as these areas are constantly vying for the next hottest spot. Overall, vibrant, infill locations have flourished this cycle.

DS: No one can argue that Tempe,

specifically around the university/

56 | September-October 2018

lake, continues to be hot. It’s probably a toss-up after that with a lot of demand across several key sub-markets like North/South Scottsdale, Camelback, and Downtown.

BC: Hot Office: North Tempe, Next: Price Corridor, SoutheastValley Hot Industrial-Southwest Valley/ Goodyear for Distribution, Next: Gilbert, Chandler Airport, Mesa Gateway CR: Are there any product types or

submarkets where you feel supply and demand are out of balance?

AC: Central Scottsdale and the

Arrowhead area are substantially lacking in new Class A office product, and new construction. Rents in both areas have risen sharply there is minimal supply in the immediate pipeline.

DS: Yes, but it really depends on the dynamics of the micro-submarket and land basis.

PB: Chandler needs more industrial

space, and while real estate around Tempe Town Lake has been wildly successful, there are a lot of proposed projects that, if they build as planned could be a problem for that market.

DP: I would say that in retail, most of our markets are fairly balanced.

We continue to see a tremendous number of multi-family and selfstorage projects in nearly every submarket. Those sectors are very popular with today’s active lenders.

CR: Is the Phoenix market still ripe for spec building? If so, where and what type of building type?

MC: For industrial, yes. I believe we have a continued opportunity to capture industrial company expansions and new firms entering our market.

AC: Yes it is. Check out Phoenix’s office fundamentals compared to all major markets in the Southwestern United States. If you build it (spec, multi-story product), they (tenants) will come.

PB: Yes, and though it scares

developers and lenders to do it, the needs of Corporate America are more urgent such that having spec inventory offers the developer a significant competitive advantage to land the large institutional user.

CR: What is the current state of our

Metro Phoenix retail market? What is the biggest risk for Phoenix retail?

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NAIOP INDUSTRIAL MARKET | 2Q 2018

6.019M Square feet of industrial space under construction

7.2%

Vacancy rate (down 130 basis points from 2017)

3.0%

Asking rent increase per square foot per month

Source: Colliers International in Greater Phoenix

The underlying drivers of retail, population growth and job growth, are as strong in Phoenix as anywhere in the country – Bryon Carney DP: The Phoenix retail market overall is healthy again. Vacancy rates continue to fall. User activity is solid.

Aldi is a 23,000 square foot grocery store concept that is creating dozens of new retail opportunities around the metroplex. Costco, Lowe’s, At Home, Sprouts, TJ Maxx, Nordstrom Rack, Top Golf, Ashley Homestore and others have announced plans for new stores in the Valley. Restaurant activity has been very strong in all submarkets as busy lifestyles have families eating out more and more. We have still not seen a significant return of multi-tenant ground-up shopping centers - most of the activity is user buildings.

stay vacant for years. Phoenix has comparatively low replacement costs, so obsolete buildings are replaced more quickly than in peer markets.

The biggest risk in metro Phoenix continues to be the threat of internet retailers and ecommerce. Amazon had its IPO 21 years ago in 1997, so the playbook for the competitors is wellpracticed now. The successful malls and neighborhood and power centers will be able to replace struggling tenants quickly and keep shoppers interested with unique opportunities, experiences that are shared on social media, and competitive prices. Unsuccessful malls are targets for redevelopment.

BC: The underlying drivers of retail, population growth and job growth, are as strong in Phoenix as anywhere in the country, so new projects continue to deliver all over the Valley. Many other cities have trouble with replacing unwanted retail projects, so they

PB: Not being a retail specialist, not

58 | September-October 2018

certain I have a good opinion, but it seems like the restaurants popping up will not be able to sustain – a person only eats 3 meals a day…

CR: How has the increase in last

mile delivery impacted how investors and developers view industrial opportunities?

PB: Again, not my specialty, but

warehouses will keep getting bigger and more plentiful, and a new paradigm in delivery services (think Uber meets Amazon) will soon be a thing.

CV: As consumer expectations for fast delivery continue to grow, the last mile of distribution will increase in priority for both brick-and-mortar and online retailers. This has created a new niche for institutional investors who are now competing for small, previously obsolete Class-B, -C and -D industrial buildings in urban locations. For this reason, whole portfolios of this asset class are being purchased at an increasingly rapid rate.

These last-mile-focused retailers have taken advantage of older warehouse stock. Urban distribution centers prioritize fast delivery over large amounts of inventory which means high ceiling heights and conveyor belts are less of a priority.

Large modern facilities are no longer necessary, but parking for trucks and employees is now essential.

Development of last-mile strategies are still in the early stages, so the average distance traveled in many metro areas is likely to shrink in the coming years. I also expect to see different types of real estate considered for last mile centers. For

NAIOP

example, many old grocery facilities are being redeveloped and repurposed into modern logistics warehouses.

For industrial owners, renovating old spaces creates an opportunity to avoid the prohibitive price of land while generating rent growth.

CR: How have the needs of industrial occupiers changed with the acceleration of the e-commerce trend in recent years?

CV: There is a strong need to move

logistics centers to urban environments closer to the customer. In an effort to narrow the gap with brick-and-mortar stores, e-commerce and logistics companies are looking to accelerate their investment in last mile warehouse spaces. Global and domestic tenants are expanding their presence beyond single mega-warehouse facilities, to multiple U.S. locations, using logistics space to extend their reach and better connect with customers. At the same time, distribution models are changing and location strategy is more focused on proximity to labor and customers. As e-commerce operations mature, tenants will seek smaller distribution centers closer to urban centers. As demand for these spaces increase, finding the right location will be a challenge.

PB: They need bigger, better-located,

more sophisticated warehouse/ distribution center. Look for warehouse to be more expensive to build than office buildings – largely because of what’s inside.

60 | September-October 2018

DP: Most of our retailer clients are expanding their e-commerce platforms and are building vast fulfillment centers to accommodate this growth.

Healthy retailers have both a successful fleet of stores as well as a strong e-commerce platform. This new world has created tremendous opportunities in the industrial sector beyond traditional distribution centers that service stores.

BC: More truck parking, more docks, and higher clear heights. Further down the line, increased robotics and more fresh food options should increase electrical demands on distribution buildings. Brick and mortar food retailers are leveraging their experience in nondurable goods logistics to both lower their costs and branch out into food delivery.

Kroger, the parent company of Fry’s, announced a driverless grocery delivery service on June 28th.

CR: Do you see industrial cap rates

increasing, decreasing, or remaining stable over the next year?

EL: On average, I’d expect the cap

rates remain stable. The investor appetite appears to remain competitive among industrial for most product types with flex industrial lagging slightly. The institutional sector may experience more cap rate compression given Phoenix remains a core, value-add market with strong credit quality, size and scale of projects. This allows

investors to place capital at higher yields than gateway markets without taking on construction risk. Unless investors find short term bonds more appealing, stable industrial will continue to be the darling of commercial real estate.

CV: Industrial pricing remains strong. Investors and lenders alike continue to be under allocated in industrial product. The lack of product fuels this demand. Real rent growth is occurring across the country, particularly in infill locations. Cap rates have compressed significantly in the last year. I would expect this strong capital flow to continue for industrial properties and maintain pressure on cap rates to remain low.

MC: Though I see cap rates remaining relatively stable for 2018 and 19, cap rates historically have crept up as interest rates have risen.

DS: I think they’re likely to remain stable. Even with rising interest rates, I think the embedded growth in rents on existing product will provide a counterbalance keeping cap rates relatively stable.

PB: It’s hard to fathom cap rates

going much lower, but with the general demand for more industrial, rising construction costs, and the continued availability of hungry investment capital, a sharp increase in interest rates would be necessary for any real change.

NAIOP

Amenity Games Offices look for competitive edge to attract and retain tenants

By STEVE BURKS

I

t’s not entirely clear when or where this competition started, but clues point to Silicon Valley as the origin of these highly-competitive office amenities games.

“I think we can all agree that the tech industry started this trend and continues to be the catalyst to sustain this trend,” said John Orsak, director of real estate for Lincoln Property Company. “The Googles of the world were creating campuses that gave an incentive for employees to stay at work longer.”

Office complexes began rolling out amenities for their tenants that were previously unheard of. Fitness centers with locker facilities, free or inexpensive meal options, dry cleaning and transportation options drew widespread attention when they began popping up on corporate campuses. In the late 1990s and early 2000s, tech companies were miles ahead of the competition, but new office facilities are catching up, and perhaps even passing those trendsetters. Building owners know that in order to keep pace or stay ahead of the competition, they must provide winning amenities, and the businesses that lease space in these buildings need those amenities as well.

62 | September-October 2018

SCOTTSDALE LANDING: Rec room.

IMAGE COURTESY, CUSHMAN & WAKEFIELD

63

NAIOP ANCHOR CENTRE: Tenants can relax in a lounge area that includes stylish furnishings, a pool table and shuffleboard table. IMAGE COURTESY, CUSHMAN & WAKEFIELD

“The competitive environment to recruit and retain employees is pushing the facility amenities,” said Bryan Taute, executive vice president at CBRE. “The buildings with the best amenities are typically leasing faster and getting higher rents.”

“The buzz around amenities outweighs the number of buildings that actually have amenities to offer,” added Chris Walker, managing director at Cushman & Wakefield in Phoenix. “Those that provide them and provide them in a well thought out, impactful manner, will likely see increased occupancy and potentially will be able to hold rental rates better than the competition.”

How office developers and building owners decide what amenities to incorporate in their facilities depends on the market and what type of tenant they are trying to appeal to.

“On the front end, we analyze the profile of the tenants in the complex and those that we want to attract,” said Steven Schwarz, founding partner at ViaWest Group. “We then brainstorm what drives those tenants’ decisions and actions. For example, it could be maximizing time for a wealthy demographic (like lawyers, accountants and real estate brokers), in which case laundry delivery, on-site car wash and some concierge services are most significant. In other cases, a tenant could want random collisions, so a gathering place is more appropriate.”

Another factor that owners must consider is how much space to devote to amenities. After all, a 2,000-square foot fitness facility that rarely gets used is space that could be leased to a tenant.

“We are being very considerate of how these spaces can turn back into rentable square footage,” said Jennie Mayer, principal at Phoenix Design One. “Generally, we try to take the undesirable spaces in the property to 64 | September-October 2018

install these amenities. Views to the smoking area can easily be a café. Very little natural light suites can become conference centers.”

So what are the basic, must-have amenities; what amenities will draw a lot of attention and what are the gold medal-winning amenities that put office owners on top of the podium?

Let’s take a look:

BRONZE These are the must-have amenities in every office. Without these, offices will struggle to attract high-quality, longterm tenants.

Premium building finishes with modern design: First and foremost, the facility must look good. “You’re looking for expensive finishes, unique elements to the space, furniture with function and design, etc.,” said Orsak. “You can no longer slap down new carpet and paint an accent wall or two.”

Fast, reliable Wi-Fi: This is a must in modern office environments. Employees need to stay connected, no matter where in the complex they may be.

Shared meeting spaces: Companies want to lease as little space as they can to lower costs, so they may not have their own spaces for larger gatherings.

Access to a meeting space with modern technology like video and audio conferencing and a projection system is important.

Restaurant or coffee house on site: Tenants want their workers to stay at work, so having coffee or food options within walking distance is important.

Ample parking: Struggling to find a place to park should not be the first task employees face when they come to work. New office facilities are being built with large parking structures to ensure tenants aren’t scrambling for spots on the street or in pay lots.

SILVER Some of these amenities may be outside-the-box concepts, but fit perfectly for select tenants and get the attention of the executives making the decisions about where to locate their office.

Food options: While an on-site

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NAIOP

restaurant is nice, the choices are likely very limited. In order to appeal and serve a larger number of employees, office facilities that are isolated from areas with restaurant options are getting creative.

“We are seeing more food options with the advent of food trucks and Fooda,” said Schwarz. “Many buildings without on-site amenities are able to solve this amenity issue without using up rentable square feet.”

Fooda is a service that partners with local businesses to set up popup restaurants on site. Individual companies or office complexes can bring in a rotating group of restaurants to serve employees. Food trucks and Fooda provide more options to keep tenants well-fed and happy.

Fitness center with locker facilities: Building owners have a love/hate relationship with on-site fitness centers.

“Every prospective tenant asked to see the gym on the tour,” said Orsak.

“You really have to check that box, but in practice, that fitness center gets more tours than actual users it seems.”

While it may not get used much, the well-equipped fitness center is an eye66 | September-October 2018

catcher for perspective renters and one that both the landlord and tenant can brag about having.

“A number of amenities are definite check-the-box items, such as light rail and a gym,” Schwarz said. “However, generally speaking, neither of these are as heavily used as the corporate decision maker thinks.”

Tech-free areas and quiet spaces: During a busy workday, sometimes the best thing for an employee is to unplug and unwind for 15 minutes and providing spaces to do that is becoming more common.

“For years we have been designing to try to connect people in spontaneous ways,” said Mayer. ”It seems people are becoming a bit more introverted. I believe that is because technology and social media actually isolate us and make us a little more lonely.

“We’re seeing living rooms or other communal spaces that are tech free. Resimercial design, which is commercial spaces with a residential fit and finish or feel is more common.

I think we may also see virtual reality rooms in the future and prayer/ meditation rooms.”

SCOTTSDALE LANDING: Tenants have access to high-quality exercise equipment in the fitness facility. IMAGE COURTESY, CUSHMAN & WAKEFIELD

GOLD Amenities like these draw and hold the best tenants and provide a winning office environment.

Concierge services: A busy executive has little time to handle many common non-work tasks, like going to the dry cleaners, buying groceries or getting car repairs. A concierge service can handle those tasks so the employee can focus on the job while at work and have more time to spend with family at the end of the day.

Pet friendly environment: More and more workplaces are allowing pets, and some are even catering to them with on site grooming facilities and dog runs. However, for multi-tenant office complexes, allowing pets can be somewhat problematic.

“While not necessarily outlandish, we have heard discussion in the market of creating spaces that are pet friendly within the common space of an office

NAIOP building,” said Walker, “which seems to be a little different than what you would expect in an office space.”

Wellness programs: Fitness centers are nice, but if a person struggles for motivation and direction, they will steer clear of them. A wellness program can give participants guidance and the added benefit of being part of a group.

“One of my largest tenants has integrated an entire wellness program and is on track to be the first WELL certified building in the Valley,” said Mayer. “We designed a full service gym with yoga and spin room, focus rooms for quiet reflection, mother/ nursing rooms, a full service cafeteria with operator that implements a WELL menu which has strict regulations for sugar content and calorie counts. We THE ALAMEDA: An inviting lounge and dining area await tenants. IMAGE COURTESY, CUSHMAN & WAKEFIELD

68 | September-October 2018

designed in a ‘track’ represented by a flooring change for users to get in their steps, and water bottle filler stations were within 75 feet of any direction.

“We are seeing that larger tenants are implementing wellness as a way of life in the workplace and our design philosophy is to implement this whenever we can. Not only through design but through case studies that encourage tenants that this does improve productivity.”

Modern work environment: For some, a modern workspace has adjustable monitors that allows employees to sit or stand at their desk.

For others, a modern workplace means there are no desks, just places to sit and work, either alone or with a group and at any time of day.

“I see more flexible work environments that aren’t traditional 9-to-5 hours,” said Taute.

For building owners, this freeflowing trend will mean designing

spaces with more open floorpans with less private office space.

“In 5 years, I believe we will not need as much real estate. People may not need an actual desk or office to work in,” added Mayer. “We may see it go totally mobile with less office and workstation and more communal work space.” “‘Tech’ is a buzzword and there is a push to make buildings more modern and ‘techy’ to capitalize on the influx of tech companies,” added Walker.

“Appealing to the younger generation requires changing the mindset of the ‘traditional model’ and utilizing forward thinking to offer competitive space that is appealing to their values and culture.”

Transportation solutions: Getting to work can be a major challenge for many employees, so offices are trying to provide amenities that make the commute less of a hassle. Ride-share programs as well as designated rideshare drop-off areas, buildings close to light rail stations and bike parking and repair facilities are just some ways offices are helping ease the stress of getting to the office.

“Bike storage is gaining in popularity because people are trying to be more urban,” said Taute.

Tenant lounge or community gathering spaces: Spaces that employees can gather and socialize are vital to tenant satisfaction.

“The less important amenities on a prospect tour, such as liquor lockers, ping-pong tables, and well-located/ multi-use tenant lounges receive more utilization than typically anticipated,” said Schwarz.

The most sought-after of these spaces are the elevated, or rooftop, outdoor lounges. Some of these modern lounges throw in the extra perk of providing liquor lockers for the tenants. Buildings that have rooftop lounges definitely stand out from the crowd.

“Our new project, The Grand 2, will have over 20,000 square feet of amenity space between a ground floor café, conference center, fitness facility and a stunning rooftop lounge,” Orsak said.

“Much of that space could have been monetized through leasing, but we made the easy decision as the owners and developers to include those vital amenity spaces in the project.”

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NAIOP

FUTURE IS NOW

Industrial buildings evolve quickly and adapt to technology

By STEVE BURKS

70 | September-October 2018

A

sk a developer what an industrial building will look like in the future and they will likely tell you that you’re already seeing the future.

Today’s industrial buildings are marvels of technology, built bigger and better than the same product 10 years ago. They have an eye on sustainability, as well as connectivity and efficiency, and they are built to adapt as technology changes.

“If you build a speculative building,

you have to build to what you know the demand is now,” said Pat Harlan, executive vice president at JLL. “Until you know exactly what the technology will be in the future, until you start seeing real life examples, it’s hard to build it.”

What is being built in the Phoenix market is cutting edge, including buildings that reach new heights, and the state is poised to be a major player in the industrial market for the foreseeable future.

HI-TECH FROM FLOOR TO CEILING Today’s industrial product is being designed and built to accommodate everevolving manufacturing, warehousing and distribution systems. These facilities have more demands placed on them by tenants, from higher electrical power needs to stronger floors.

“These are specialty deals. It’s not just a slab, four walls and a roof,” said Keith Earnest, executive vice president for VanTrust Realty. “These are very sophisticated, technologically sound

71

NAIOP

buildings. There’s an evolution of that product type and people are excited about it. It’s a lot more expensive, a lot more technology, but it’s cool stuff.”

More and more industrial facilities are built with the future in mind. New structures are more energy efficient, with reflective roofs, drought tolerant landscaping and better insulation.

“Environmentally sustainable buildings are becoming more common,” said Tom Jarvis, vice president of sales for Willmeng Constructon. “Elements like full-building energy management systems typically used in a traditional office setting are being incorporated in warehouses. We are also seeing more solar power and less ‘grid power’, more efficient lighting, thermal glass and better R-value from insulation/ roof systems.”

The REI Distribution Center in the Loop 303 Business Park in Goodyear is a perfect example of developers taking the lead in sustainability.

“Not only did this building earn the market’s first LEED Platinum certification, but it is also selfsustaining, complete with higher R-Factor insulation on the ceiling, in walls and doors for greater efficiency,” 72 | September-October 2018

said Rusty Kennedy, senior vice president at CBRE. The REI distribution center features a solar array on its roof that produces 2.2 megawatts of electricity, enough to power the facility. This level of sustainability is being mimicked in other large-scale facilities, like the Prologis Park Riverside facility that is now home to an Amazon fulfillment center. That building features sustainable elements such as low VOC paint, high efficiency mechanical units and LED lighting throughout the facility to achieve LEED certification.

“Eighty-two percent of our operating portfolio has efficient lighting and 40 percent of our portfolio has cool roofs,” said Jeff Foster, vice president of Prologis. “Today, solar capacity in our portfolio is 175 megawatts, which is enough clean energy to power 26,000 average U.S. homes each year.

In Arizona, we have insulated roof decks with an R19 or greater insulation factor under the deck to reduce interior ambient temperature.”

Building efficiency is not the only thing that is rising. The buildings themselves are growing in height. Less than 10 years ago, 32-feet of clearance

AMAZON: The exterior of the Prologlis Park Riverside Building 3, which is now an Amazon fulfillment center. IMAGE BY KYLE ZIRKUS, COURTESY, GRAYCOR

height in a building was considered leading edge. That number has notso-slowly grown to 40 foot clearance height becoming common in new construction.

“If you look at the timeline, during this last evolution, kind of the low water mark in clear heights for new speculative product is 36 feet,” said Harlan. “If you go back as recently as five years, it was really 32. So now we’re seeing facilities that are being built in the 36- to 40-foot range. It’s becoming less of a theory and more of a true reality where users are figuring out ways to efficiently use space north of 32 feet.”

Arizona’s first 40-foot clear height building is the Lincoln Logistics 40 facility in Goodyear. Lincoln Property Company’s facility, currently in the final phases of construction by Layton Construction, was followed closely

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NAIOP INDUSTRIAL: More and more automation and technology is going into industrial and manufacturing buildings like the Dolphin Precision Investment Castings facility in Phoenix and Huhtamaki’s food packaging manufacturing center in Goodyear. IMAGE COURTESY, WILLMENG CONSTRUCTION

by the TEN Distribution Center, which is being developed by Irwin G. Pasternack AIA + Associates PC and built by Graycor. The JLL-brokered TEN Distribution Center, located on 83rd Avenue, close to the confluence of Interstate 10 and the Loop 101 in Phoenix, also features 40-foot clearance heights and 1.1 million square feet.

“We’re seeing more efficient interior layouts with fewer columns and increased clear heights for multi-level automated functions,” said Cathy Thuringer, principal for Trammell Crow.

“There is greater structural loading capacities in the floor and roofs.”

A big reason why clearance heights are going up is that the technology to stack and sort products as well as move manufacturing materials is getting better. In the past, warehouse facilities relied on humans driving around forklifts, which limited how high they could stack products and how quickly they could locate and retrieve items when they needed them.

Now, automated storage and retrieval systems (ASRS) are revolutionizing how companies sort, store and retrieve products in their facilities.

“We see more industrial facilities using automated manufacturing technology and/or interior autonomous vehicles,” Jarvis said. “Society talks more about autonomous vehicles out on the roads but autonomous vehicles are already in use inside the controlled environment of industrial buildings.

Deploying autonomous lifts or pallet robots in a warehouse environment reduces risks that exist on the road and maximizes product handling efficiencies. The racked aisles can be denser and structures taller with less human traffic.

“Automatic picking machines can be deployed, extend 30-feet in the air to grab a product and return to the 74 | September-October 2018

packaging area before some humans can find the keys to their lift.”

Facilities like the REI Distribution Center in Goodyear or Amazon distribution and fulfillment centers utilize highly-efficient ASRS technology with humans doing less of the product moving than ever.

“So, the days of the old guy driving around on a forklift are gone,” said Earnest. “You’ve got automation in the floor of the warehouse buildings where the robotic forklift goes along and is able to finesse down an aisle a heck of a lot better than the human.”

With stacks getting higher and higher and robots needing precise guidance systems to move products around the facility, more and more attention is being paid to precision construction. The concrete floors must be precisely built and able to withstand greater load capacities.

“As you stack, you’ve got to have a deeper floor and a more heavily reinforced floor,” said Harlan. “We’re seeing floors for 40-foot buildings in the 8-inch range and greater, as opposed to 6 1/2 inch reinforced floor or 7 inch of unreinforced. When you go north of 32 feet, you’re talking about a floor slab that is more reinforced to support that additional height.”

WHAT’S AHEAD While automation is already widespread inside the modern industrial facility, outside technology is a little slower to get on the road. One of the next big breakthroughs in shipping will be autonomous vehicles delivering products to industrial facilities.

Already, companies are road testing commercial transport vehicles in the United States. Since 2017, one of those companies, Embark, has been testing

NAIOP autonomous tractor-trailers hauling refrigerators between El Paso, Texas and Palm Springs, California.

“We believe artificial intelligence will have a massive impact on the trucking industry as drivers can only be on the road for certain periods of time,” said Kennedy. “With driver-less trucks, this will allow industrial users to deliver their product to broader populations within a single day. From what we can see today, the actual facilities will have higher clear heights and vary in locations.”

Current industrial buildings have tight loading docks already, but have to leave ample maneuvering space for human driven tractor-trailers and even more space for trailer storage. With autonomous trucks, those spaces can be paired down greatly, leaving room for larger buildings in the future.

“If there is a delivery vehicle or tractor trailer that is completely automated and you are removing the human element, then I would envision that your truck courts actually could get tighter and that would increase the floor area ratio that you could build

76 | September-October 2018

on a site,” said Harlan. “Maybe if a traditional occupier of a space needs­ — including trailer storage — 185 feet to maneuver in a truck court, maybe with the automated vehicles, they’re down to 145 feet. If they dial in that technology, you’re removing a lot of unneeded space to work around.”

Like automated trucking, unmanned aerial vehicles, or drones, are already being tested as delivery vehicles in the United States. In August, a subsidiary of Alphabet (Google’s parent company) called Wing delivered ice cream to a residence in Montgomery County, Virginia. Amazon has been experimenting with delivering packages with drones since 2016.

“Certainly, unmanned aerial vehicle use is increasing more in rural areas,” said Jarvis. “I saw a documentary about a company called Zipline which is delivering 500 medical orders a day in Africa. Zipline is doing some very cool stuff, but I’m not sure the (Federal Aviation Administration) is ready to release the drones in Metro Phoenix yet with Sky Harbor in the center of town.”

Already, industrial designers are

planning for drone delivery in their new buildings. These aircraft would likely be launched from higher points in the facility, and most new buildings have either windows or doors that can easily convert to decks to land aerial vehicles and launch them for deliveries.

“They don’t put in the second floor doors yet, but they’ve engineered those panels to be knocked out in the future if the drone usage comes along,” said Earnest. “We’re thinking about that and incorporating that kind of technology, because it’s not that expensive to leave out the rebar in certain locations so that can be accommodated down the road.”

Another way industrial facilities are evolving is through the use of multiple floors. In highly-populated parts of the world where land is at a premium, like Asia and American coastal cities, industrial and warehouse builders are AMAZON: The interior of the Prologlis Park Riverside Building 3, which is now an Amazon fulfillment center. IMAGE BY KYLE ZIRKUS, COURTESY, GRAYCOR

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NAIOP building multi-level facilities, complete with drive up ramps large enough for delivery trucks. Prologis has been the leader in developing multi-level warehouse facilities and is building the first two such facilities in the United States, one in Seattle and the other in San Francisco. These new-age facilities maximize the available building footprint and increase overall cubic feet efficiency in high-density areas that need warehouse space.

“Prologis’ track record of industryleading innovation is nowhere more apparent than in our global portfolio of green technology and business process projects,” Foster said. “In buildings and TOLLESON LOGISTICS CENTER: State-ofthe-art facility features 330,000 square feet with 36-foot clear heights. IMAGE COURTESY, VANTRUST REALTY

78 | September-October 2018

in partnerships with customers across the globe, we test new technologies and develop new processes that advance the sustainability goals and capabilities of our company and our customers.”

For Phoenix, the need for multi-level facilities isn’t there yet. With ample land available in the Valley, specifically in the southwest and west of Phoenix, the need for multi-level industrial facilities hasn’t quite arrived. However, as more and more of this type of product is built around the globe, it may not be too far off.

“There’s is potential that we will see this on a build-to-suit basis,” said Thuringer. “But not likely much over 40 feet on a speculative basis in the near term given zoning and code implications of increased building clear height beyond 40 feet.”

“Tempe and downtown Phoenix will eventually need multi-story

industrial buildings to keep up with demand for e-commerce,” added Jarvis. “The logistics technology exists and multi-story warehouses exist in other dense urban markets, so it’s just a matter of time until we’re building them in Arizona.”

PHOENIX’S FUTURE OUTLOOK According the Q2 Greater Phoenix Industrial Market Report by Colliers International, there is 6 million square feet of industrial space currently under construction, with more on the way. Each of the industry experts interviewed feel that the Phoenix market is in prime position for more industrial growth in the future.

“More than any other state in the country, Arizona offers companies geographic and economic advantages that place the state at the top when it comes to warehouse space,” said Kennedy. “When shipping from Arizona, companies can distribute their products to roughly 33 million people within 400 miles. Combine that reach with our status as a right to work state, affordable and robust labor force, lucrative Foreign Trade Zones, availability of affordable housing and business-friendly government, we offer competitive advantages that today’s companies are looking for.”

Another factor that is helping Arizona attract and retain large companies that need large-scale industrial facilities is the rising costs and regulations of locations in Southern California.

“Arizona has some competitive advantages, especially relative to California, with its affordable housing and cost of living,” said Foster. “E-commerce users require three times the logistics space, or more, as compared with brick-andmortar. Having logistics space closer to customers can play a big role in reducing transportation costs and time to deliver, which is vital for the highly competitive e-commerce industry.”

“The entitlement issues in California, they are our best friend,” added Earnest.

“Entitlements and restrictions and municipalities and all of restrictions that they have on development in California are driving people to Phoenix and Las Vegas in droves.”

79

NAIOP

NAIOP member projects

I

t’s been a productive year for the 800-strong membership of NAIOP-Arizona and the companies they represent. A multitude of major projects have been underway or are getting started in all parts of the Valley and the following are just a small sample of what NAIOP members are building.

BLOCK 23 @ CITYSCAPE

Developer: Streetlights Residential, RED Development General Contractor: Whiting-Turner Archtect: Omniplan Architects Location: 101-125 E. Washington St., Phoenix Size: 1,146,000 square feet Brokerage Firm: CBRE (Residential); Cushman & Wakefield (Office) Value: $200 million Start/Completion date: Q2 2017/ July 2019 Subcontractors: PK Associates, Structural Engineer Project Description: This 1,145,000 SF project consists of a 13-story tower and a parking structure. This project includes 410,000 SF of Residential (330 units), 150,000 square feet of office, 50,000 square feet of retail/ restaurant, and a 55,000 square foot grocery store. The seven level, 480,000 square foot parking structure is three levels below grade, and four levels above grade.

80 | September-October 2018

CAMELBACK COLLECTIVE

Developer: Holualoa Companies and Lapour General Contractor: Graycor Architect: RSP Location: 2801 E Camelback Road Phoenix, AZ 85016 Size: 118,500 square feet Brokerage Firm: Cushman & Wakefield Value: $75 million Start/Completion: September 2017/September 2018 Project Description: With a modern, contemporary design tailored to meet the needs of today’s changing workforce, Camelback Collective is introducing a new standard in Phoenix’s most prestigious corridor. The mixed-use development will feature 115,000 square feet of state-of-the-art, Class A office, offering welcoming social spaces, flexible meeting space, fitness center, lounge/bar, coffee and dining amenities. Adjacent to office space will be a new AC by Marriott Hotel.

ESTRELLA MEDICAL PLAZA II

Developer: Plaza Companies General Contractor: Okland Construction Architect: Butler Design Group Location: 9321 West Thomas Road Size: 64,000 square feet Brokerage Firm: Plaza Companies Value: $18 million Start/Completion date: December 2017/January 2019 Subcontractors: See separate attachment.

Project Description: Estrella Medical Plaza II is a Class A, four-story medical office building totaling 64,000 square feet on the Banner Estrella Medical Center campus in west Phoenix. The building is designed to be complimentary to the highly successful Estrella Medical Plaza I, built about 12 years ago on the campus and continually near full occupancy. The building will be home to Valley Urologic Associates, The CORE Institure and Sonora Quest.

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NAIOP

FREEDOM FINANCIAL PHASE I & II

Developer: The Boyer Company General Contractor: Wespac Construction, Inc. Architect: Butler Design Group (Shell) | Corgan (TI) Location: 2114, 2116 E. Rio Salado Pkwy, Tempe Size: (Phase I) 159,150 square feet | (Phase II) 159,100 square feet Brokerage Firm: JLL Value: (Phase I) $34,118,442 | (Phase II) $37,810,316 Start/Completion date: (Phase I) March 2017/April 2018 | January 2018/February 2019

Subcontractors: AARA Construction, AK&J Sealants, Arizona Control Specialists, Aspen Interiors, Caretaker Landscaping, Coreslab Structures, DP Electric, Hunter Engineering, Integrated Masonry, JJ Sprague Utilities, MKB Construction, Olympic West Fire Protection, Otis Elevator, Rango, Riteway Thermal, Roofing SW, Ryan Mechanical, Saguaro Steel, Southwest Integrated Solutions, Spectrum Mechanical, Suntec Concrete, Walters and Wolf

total of 1,978 parking stalls. The interiors feature open office spaces consisting of meeting and training areas, with executive boardroom and offices on the top floor of Phase I and a full service kitchen on the first floor of Phase II.

Project Description: Both Phase I & II consist of two 4-story buildings that features steel construction, a glass curtain wall and two unique parking garage for a combined

KATERRA PHOENIX MANUFACTURING FACILITY

IRONWOOD MEDICAL OFFICE BUILDING II

Developer: Plaza Companies & Ryan Companies US, Inc. General Contractor: Ryan Companies US, Inc. Architect: Butler Design Group Location: Gantzel Road & Combs Road, Queen Creek Size: 60,000 square feet Brokerage Firm: Plaza Companies (Margaret Lloyd, Perry Gabuzzi & Bill Cook) Value: $14.25 million 82 | September-October 2018

Start/Completion date: 3rd Q 2018/ July 2019.

Developer: Katerra General Contractor: Sigma Contracting Inc. Architect: Katerra Architecture, Richärd+Bauer Architecture, ab Perrone + Associates, PLLC Location: 624 N. 44th Ave., Phoenix Size: 240,000 square feet Brokerage Firm: CBRE Value: $7.9 million Start/Completion: 4Q 2016/1Q 2018 Subcontractors: Statewide Electric, Lifetime Plumbing, R & M Concrete, J. Wolf Mechanical

Project Description: Ironwood Medical Office Building II is a three-story, Class A medical building located on Banner Ironwood Medical Center Campus. This innovative building will provide significant expansion of the current hospital campus as the Queen Creek area demand for medical care grows.

There will be physician ownership and investment opportunities.

Project Description: Sigma Contracting converted a distribution center into a factory for Katerra, a technology-driven offsite construction company. Sigma constructed 200,000 SF of single-story manufacturing area and 40,000 SF of two-story office space for Katerra’s design team. Today there are more than 100 staff members utilizing the office space and more than 100 working on the factory floor.

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NAIOP LIBERTY CENTER AT RIO SALADO

Developer: Liberty Property Trust General Contractor: Wespac Construction Architect: RSP Architects Location: 1870 W. Rio Salado Parkway, Tempe Size: 236,131 square feet Brokerage Firm: CB Richard Ellis (CBRE) – Brad Anderson, Mike Strittmatter, Lauren Anderson Start/Completion date: Oct. 2016/Jan. 2018 Subcontractors: Suntec Concrete, Coreslab, Schuff Steel, Wilson Electric, Alpine Mechanical, Ryan Plumbing, Wholesale Floors, Demers Glass, Roofing Southwest Project Description: This is a LEED Gold office build-to-suit. Exterior building features include a façade of more than 50% high efficiency glass, natural stone veneers and metal trellises for a sophisticated yet natural

aesthetic. Interior features include a 10,000 square foot full-service commercial kitchen, foodcourt and dining area with covered outdoor seating. Custom millwork can be seen throughout the office, daycare and

café; featuring plyboo wall paneling, solid surface tops and stained hardwood case work. These finishes extend into training rooms, a fitness center and locker rooms to enhance the employee experience.

Start/Completion date: December 2017/ August 2018 Subcontractors: Ricor Inc., Suntec Concrete, Sunland Asphalt, AF Steel Fabrication, Integrity Electrical Services Company.

LINCOLN LOGISTICS 40

Developer: Lincoln Property Company General Contractor: Layton Construction Company Architect: Butler Design Group

Location: 575 S. 143rd Ave., Goodyear Size: 901,700 square feet Brokerage Firm: CBRE (John Werstler, Rusty Kennedy, Cooper Fratt Value: $80 million

NORTHERN TRUST BUILDING II

Developer: Wentworth Property Company General Contractor: Wespac Construction, Inc. Architect: RSP Architects Location: 2190 E. Elliot Road, Tempe Size: 51,661 square feet Brokerage Firm: JLL Value: $4,064,835 Start/Completion date: May 2018/November 2018 Subcontractors: DP Electric, Pete King Drywall & Gemini Millwork Project Description: Northern Trust Building II is a first-generation tenant improvement project that will meet LEED Silver Version 4 Standards.

Once complete, Old Chicago will meet modern with the building’s unique blend of traditional millwork moldings, combined with trendsetting materials. Highlighted features of the facility will consist of conference rooms with writable and monitor walls, huddle rooms, collaboration areas, break rooms, business lounges, and Mother’s and Wellness Rooms.

84 | September-October 2018

Project Description: Lincoln Logistics 40 is Phoenix’s first speculative industrial project offering 40 foot clear height. It is also a Foreign Trade Zone Magnet Site, providing up to 72 percent personal property tax savings.

The project includes 169 dock/grade-level doors, 185 trailer stalls, fiber optic data, energy efficient insulation and lighting, and flexibility to incorporate mezzanines – all to help ultra-modern regional, national and international e-commerce and distribution tenants function at peak efficiency.

New Builds Tenant Improvement Clean Rooms Custom Cabinetry Steel Fabrication

www.sdb.com (480) 967-5810

85

NAIOP NORTHROP GRUMMAN INNOVATION SYSTEMS’ LAUNCH VEHICLE DIVISION HEADQUARTERS

PARC PINNACLE

Developer: JacksonShaw and LaPour General Contractor: Whiting Turner Contracting Company Architect: Ware Malcomb Location: 100-180 W. Pinnacle Peak Rd Size: 312,054 square feet in 3 buildings.

Brokerage Firm: JLL (Pat Harlan and Kyle Westfall)

Developer: Douglas Allred Company General Contractor: Willmeng Construction Architect: Balmer Architectural Group Location: SEC of Price and Willis roads, Chandler Size: 617,000 square feet Brokerage Firm: CBRE Value: $99,724,250 Start/Completion date: April 2018/ Q3 2019 Subcontractors: Earthwork; Pro Low Joint Venture Utilities; Apache Pipelines Concrete Structure; Suntec Concrete Structural Steel; Pro Steel Erectors Mechanical; HACI Mechanical Plumbing;

Value: $27 million Start/Completion date: June 2017/ April 2018 Project Description: Each building offers excellent street visibility for individual tenant identity from Pinnacle Peak Rd, up to 32’ clear heights and grade level,

Niemeyer Brothers Plumbing Electrical; Wilson Electric

Project Description: Project will include a 356,000 square foot office building and 278,000 square foot production building. In addition to extensive site improvements, the campus will include parking for 2,400 vehicles with a combination of surface lots and a 600-car parking garage.

The launch vehicles to be designed and manufactured here will be used to provide cargo to the International Space Station, launch satellites for earth and space science, as well as defend the nation.

dock and cross dock loading. Parc Pinnacle is convenient to over 1.2 million square feet of lifestyle retail/dining amenities as well as a variety of new housing and hospitality options. Features include full concrete truck courts, ESFR fire sprinklers, upgraded power, floor to ceiling glass at office entries, corporate landscaping design.

PROJECT CS

Developer: Merit Partners General Contractor: Renaissance Companies Architect: Butler Design Group Location: 4455 N. Cotton Lane Goodyear Size: 495,000 square feet Brokerage Firm: CBRE Value: $80 million Start/Completion date: June 2017/ June 2018 Subcontractors: Suntec Concrete – Concrete, Castle Steel Inc. – Steel, TDIndustries – Mechanical, AME Electric – Electrical, Above All Plumbing – Plumbing, Architectural Metals Inc. – Finish Metals, Aero Automatic Sprinkler Co. – Sprinklers, Scuderi – Tile Project Description: This project consists 86 | September-October 2018

of an approximately 493,000 square feet dock high, state-of-the-art manufacturing and distribution center for a single tenant with clear height ranges from 30’ in

the manufacturing area to 40’ in the warehouse. The site is located just west of the Loop 303 between Camelback Road and Indian School Road in Goodyear.

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87

NAIOP PROLOGIS I-17 LOGISTICS CENTER

Developer: Prologis General Contractor: Graycor Construction Company Architect: HPA Location: 2111-2145 S. 7th Street, Phoenix Size (SF): 7 buildings in 2 phases totaling 892,797 square feet.

Brokerage Firm: Lee & Associates (Ken McQueen, Chris McClurg, Matt McDougall, Peter Batschelet) Start/Completion date: April 2018/February 2019 (Phase 1); April 2020 (Phase 2) Project Description: Situated at 7th Street and the I-17 Freeway just south of downtown and minutes from Sky Harbor Intl Airport, Prologis I-17 Logistics Center is a 50 acre state of the art development with 1100’ of prime I-17 freeway frontage and direct access to the full diamond interchange to accommodate flexible bay sizes from 25,000 to 211,000 square feet. The buildings will have 32-feet clear height, ESFR sprinkler, LED motion sensor lighting with dock and grade loading to accommodate today’s modern logistics users seeking final mile solutions.

PV303 BUILDING B17

Developer: Merit Partners, Sunbelt Holdings General Contractor: Layton Architect: Butler Design Group Location: 16560 W. Sells Drive Goodyear, Arizona 85340 Size (SF): 640,000 square feet Brokerage Firm: CBRE Value: $41 million Start/Completion date: Sept 2017/May 2018 Subcontractors: Suntec Concrete – Concrete, IKON Steel – Steel, GRAZAK – Mechanical, Canyon State Electric – Electrical, DW Doty – Plumbing, Rite-Way Thermal – Isulation, Sprayfoam Southwest – Roofing, True Metal Solutions – Finish Metals, Olympic West Fire Protection

– Sprinklers, Precision Glass & Aluminum – Window Wall Systems

Project Description: The project consists of an approximately 640,000 square foot, cross-dock

warehouse and distribution center for a single tenant with a clear height of 36 feet and expansion capability at its East side. The site is located just East of the Loop 303 between Camelback Road and Indian School Road in Goodyear.

Center. Layton Construction completed the conference center. OTIS elevator completed the elevator cab renovation. Caretaker Landscape completed the courtyard landscape renovation. ACE Parking completed the garage renovation.

EPIC Signs completed the signage renovation. Lighting Unlimited completed the lighting retrofit. A number of subcontractors were utilized by the various General Contractors to complete these improvements and renovations.

Architect: RSP and Evolution Design Location: 2 North Central Avenue, 40 North Central Avenue Size: 985,000 square feet Brokerage Firm: Lee & Associates Value: $8,525,000 Start/Completion date: February 2017/June 2018

RENAISSANCE SQUARE

Owner: Joint Venture of Oaktree Capital & Cypress Office General Contractors: Wespac Construction was the General Contractor who oversaw the completion of Phase 1 and Phase 2 of the lobby remodels and connector. Hardison Downey completed Fitness 88 | September-October 2018

Project Description: A prestigious tenant mix occupies the two towers which now showcase completely remodeled and modernized main lobbies, new connector between buildings, conference and gaming center, elevator cabs, new LED lighting, fitness center, parking structure, exterior signage, a new exterior landscaped courtyard, and 80,000 square feet of spec suites.

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PRICING Member: $75 Developing Leader: $65 Non-Member: $125 Please email rsvp@naiopaz.org to purchase tickets or for further information.

89

NAIOP SKYSONG 5 AT SKYSONG, THE ASU SCOTTSDALE INNOVATION CENTER

Developer: Plaza Companies General Contractor: DPR Construction Architect: Butler Design Group Location: 1465 N. Scottsdale Road, Scottsdale Size: 151,318 square feet Brokerage Firm: Lee & Associates Value: $43 million Start/Completion date: June 2018/July 2019 Subcontractors: Baker Concrete, Suntec Concrete, Coreslab Structures, DP Electric, Interstate Mechanical Project Description: SkySong 5 will be constructed to meet LEED certification standards for green building practices. With the newest building, the total SkySong 5 project will reach about 868,457 square feet of commercial building.

The design of SkySong 5 includes extensive outdoor work and meeting spaces as well as public art features and a large second-story outdoor patio and event space.

SOUTH EAST VALLEY REGIONAL ASSOCIATION OF REALTORS PROFESIONAL ASSOCIATION HEADQUARTERS BUILDING

General Contractor: Haydon Building Corp Architect: John Douglas Architects Location: 1733 E. Northrop Blvd. Chandler Size: 21,000 square feet Brokerage Firm: Lee & Associates Value: $6.1 million Start/Completion date: June 2017/ June 2018 Subcontractors: Echo Canyon Electric, M.A.G. Construction, Tek Star Project Description: This new building on a three-acre site includes office and

administration space, large conference center, lobby, conference rooms, breakroom, storage space, classrooms, and restrooms. The new

facility creates a more centralized location for SEVRAR’s members and expands resources to provide additional classes, events, and services.

TEN DISTRIBUTION CENTER 1

Developer: Irwin G. Pasternack AIA, DBA Jenberly Distribution Center I LLC General Contractor: Graycor Construction Company Inc. Architect: Irwin G. Pasternack AIA + Associates PC Location: 8181 W. Roosevelt St., Phoenix Siz: 1.1 million square feet Brokerage Firm: JLL (Tony Lydon, Marc Hertzberg, Riley Gilbert) Value: $300 million for all phases (3.6 million square feet) Start/Completion date: January 2018/December 2018 Subcontractors: Suntec Concrete, Desert Structures, Scott’s Diversified Construction, Specified Electrical Contractors, Roofing Southwest, Ikon Steel Project Description: TEN Distribution Center 1 is a Class A industrial building representing the first 1.1 million sf in the $300 million, 3.6+ million sf TEN Distribution Center industrial park. TEN phase I is an ultra-modern, cross-dock industrial building with 40’ clear height and high-volume trailer storage, on a tax-saving Foreign Trade Zone site.

90 | September-October 2018

91

NAIOP THE COMMONS AT RIVULON

Developer: Nationwide Realty Investors General Contractor: Layton Construction Architect: Butler Design Group Location: 300 and 310 E. Rivulon Blvd., Gilbert Size: Two buildings (200,000 square feet total) Brokerage Firm: Lee & Associates Start/Completion date: May 2018/4Q 2018 Project Description: The campus will have a main entryway off Rivulon Boulevard with easy access from both Gilbert Road and Pecos Road. The first phase of development will include two highly customizable, two-story, 100,000 square-foot buildings with large, open floor plans. The dedicated neighborhood will feature outdoor communal spaces, access to walking paths, and nearby retail and restaurants.

THE GRAND AT PAPAGO PARK CENTER – PHASE 2

Developer: Lincoln Property Company & Goldman Sachs General Contractor: Whiting Turner Architect: HKS Location: 1127 N Papago Drive Tempe Size: 352,481 square feet Brokerage Firm: Cushman & Wakefield Value: $50 million Start/Completion date: 2Q 2018/April 2019

Project Description: The Grand Phase II is a state-of-the-art office with inviting outdoor space featuring vibrant landscaping, pedestrian walkways, and a two-acre prominent water feature. It is where mixed-use meets amenities, with two hotels onsite, 550-850 planned multifamily units, and onsite retail and restaurant options all located within minutes from downtown Tempe’s Mill Avenue district.

THE OFFICES AT CHANDLER VIRIDIAN

Developer: Hines & New York Life Real Estate Investors General Contractor: Whiting–Turner Architect: RSP Location: 3133 West Frye Road Chandler, AZ 85226 Size: 249,584 square feet Brokerage Firm: Cushman & Wakefield – Roberts/Boyle Team Value: $80 million Start/Completion date: September 2017/3Q 2018 Project Description: The Offices at Chandler Viridian are a 25-acre mixed-use project that includes the onsite Cambria Suites Hotel, Broadstone Luxury Apartments, and retail center. Adjacent to the property is the Chandler Fashion 92 | September-October 2018

Center Mall. The Offices are six-stories with up to 44,000 square feet of continuous space on

floors two through six and 28,000 square feet on the first floor.

Cousins is a proud supporter of NAIOP. Will Creyer 602.385.7317 wcreyer@cousins.com

cousins.com

CONNECT | DESIGN | BUILD Ottawa University Surprise Campus 95,000 SF | $21 MILLION

Cawley Architects is the project design firm for the athletic complex for Ottawa University in Surprise, Arizona. This project showcases sports programs and related student amenities at the university.

(602) 393- 5060

| cawleyarchitects.com

@ CawleyArchitects

93

NAIOP TOLLESON LOGISTICS CENTER

Developer: Trammell Crow Company General Contractor: Willmeng Construction, Inc. Architect: Butler Design Group Location: 200 North 99th Avenue, Tolleson Size: 329,400 square feet Brokerage Firm: Cushman & Wakefield Start/Completion date: January 2018/July 2018 Subcontractors: Suntec Concrete, Structures Group, Sunland Asphalt, Aero Automatic, Atwater Construction, Three Phase Electric Project Description: State-of-the art cross-dock industrial building has significant frontage/visibility along both arterials, and is designed with signature office entries, dock high and grade level ramp loading, north/south facing dock doors, 36’ clear height, concrete truck court and circulation drives, 200 feet of truck court maneuverability with abundant trailer parking, ample auto parking at the east and west ends of the building, and 3600amps of power.

Start/Completion date: Q2 2018/ Q4 2018 Subcontractors: Civil – Hunter Engineering, Electrical - DP Electric, Concrete – Riggs, Rough Carpentry – Desert Structures

TRIMACO, LLC

Developer: E&V Investments General Contractor: Wespac Construction Architect: Deutsch Architecture Group

WEST 202 LOGISTICS CENTER

Developer: Trammell Crow Company General Contractor: Willmeng Construction, Inc. Architect: Butler Design Group Location: 3333 South 59th Avenue, Phoenix Size: 554,000 square feet Brokerage Firm: CBRE Start/Completion date: September 2018/June 2019

Project Description: State-of-the art cross-dock industrial building fronts along 59th Avenue with significant visibility from Loop 202, and is designed with signature office entries, dock high and grade level ramp loading, north/south facing dock doors, 36’ clear height, concrete truck courts and circulation drives.

94 | September-October 2018

Location: 13600 W Sweetwater Avenue, Surprise Size: 276,000 square feet Brokerage Firm: Southwest Commercial Brokerage Value: $16 million

Project Description: Trimaco, LLC is pleased to announce their plans to build a 276,000 square feet, rail-served manufacturing plant and distribution center in Surprise. Employing more than 100 people, Trimaco manufactures paint accessories, and professional floor protection products for paint retail, auto body, and construction industries- both domestically and internationally.