The metropolitan Phoenix market differs from other western cities in terms of its affordability of housing, from first-time buyers to retirees. As the market comes out of this recession, Phoenix is poised with available, affordable residential and commercial properties. Also, there still is plenty of land area in which to expand, unlike our counterparts, who are bounded geographically from growth. Columbus, Ohio-based Glimcher Properties is developing the $270 million Scottsdale Quarter, a mixed-use, destination development that opened its first phase in March 2009. Phase II is scheduled to open this March. Located at the southeast corner of Scottsdale Road and the Greenway-Hayden Loop in the North Scottsdale submarket, the entire three-phase project totals nearly 1.25 million square feet and features retail, entertainment, residential/hotel and office components. While many other new Phoenix-area developments have been put on hold or canceled altogether, Scottsdale Quarter’s development continues. Located across from Kierland, Glimcher’s major infill development is able to piggyback on the first successful lifestyle center on the West Coast. Currently, Scottsdale Quarter has attracted national tenants new to Arizona, such as Williams-Sonoma Home, H&M, Brio Tuscan Grille, Oakville Grocery and west-elm. Others tenants, such as Gold Class Cinemas, Nike and Sunglass Hut, are …
Arizona
If there’s any good news to be had in today’s challenging economic climate, perhaps it’s that now is an opportune time to be an apartment investor in metropolitan Phoenix. While the credit crunch has undeniably put a dent in sales activity — the difference between $52 million so far this year compared to $600 million for all of 2008 and $3.5 billion during 2007 — interest from well-capitalized private investors hunting for bargains among the rising selection of lender-owned properties for sale may provide a boost moving forward. The number of distressed properties has crept into the double digits since early 2009. Offerings in good locations, where the pricing reflects the market correction, can easily garner 15 to 20 offers, on par with bidding activity occurring even during the best of economic times. Active investors are primarily individuals and private capital sources searching for positive leverage and high returns. Meanwhile, REITs and advisors looking to firm up balance sheets, developers needing to pay off maturing construction loans, and lenders hoping to unload distressed properties make up the bulk of sellers. Another piece of good news: tighter lending requirements, coupled with a downturn in population and job growth, have effectively put …
The Phoenix retail market expansion has slowed down considerably as it experiences the continued effects of the economic downturn. A decline in consumer spending, negative job growth and a housing market still struggling to recover will keep development to a minimum while vacancies increase in existing centers. At the end of 2008, the valley’s vacancy was 10 percent and should rise above 11 percent during 2009. A return to record vacancy rates seen during the 1980s is unlikely because of the slowdown in construction. In 2008, there was roughly 6.5 million square feet of new retail space delivered, but in 2009 planned projects will be put on hold. One reason is there is no pre-leasing being done, and in many cases banks require guaranteed tenants before they will consider construction loans. In response, developers are changing their focus from new ground-up development to infill and redevelopment properties. Expect more national, regional and local retailers to close during 2009. The list of major store closures in 2008 included national retailers Mervyn’s, Linens ‘n Things and Circuit City. There is still a short list of national retailers looking for space in the valley, including Wal-Mart, Fresh & Easy, Fry’s and Dunkin Donuts. …
What area is your expertise? Phoenix Metropolitan Area What trends do you see presently in multifamily development in your area? As construction on the first phase of the Phoenix light rail system wraps up, we’re seeing a major trend towards mixed-use projects with multifamily housing with commercial space along the line’s route from Central Phoenix to Tempe and Mesa. Developers are also targeting the renters-by-choice market by building upscale apartments that offer high-end amenities and finishes. Who are the active multifamily developers in your area? Alliance Residential, Embrey, Fairfield Residential, Trammell Crow Residential, Gray Development, Mark-Taylor, Greystone, Trillium Residential, and the Zaremba Group. Please name one or two significant multifamily developments in your area. What impact will these projects have on the market? CityScape — RED Development and CDK Partners are building this $900 million, 2.5 million-square-foot project in downtown Phoenix. CityScape will feature 1,200 multifamily units, along with a 600,000-square-foot office tower, shops, restaurants, and a 250-room hotel operated by San Francisco-based Kimpton Hotels & Restaurants. Office tenants already committed to the project include Wachovia (regional headquarters) and Squire, Sanders & Dempsey LLP (global law firm). This project is currently supporting more than 3,000 construction jobs, and on-site employment …
What area is your expertise? Phoenix metropolitan area — office What trends do you see presently in office development in your area? Deliveries of office buildings have slowed for the first time in several years. During first quarter 2008, only 66 buildings were delivered compared to 110 buildings second quarter 2007. However, there is still more than 6.8 million square feet under construction. Who are the active office developers in your area? Opus West, ALTER Group, Lincoln Properties, RYAN Companies, McShane Construction, DMB Associates and Higgins Development Partners. Please name one or two significant office developments in your area. What impact will these projects have on the market? Opus Pima Center — Scottsdale has virtually run out of land for new development. Therefore, developers chose to negotiate 65-year ground leases with the Native Americans to develop on their land. This project is part of a master development totaling over 3.5 million square feet of office, industrial, and retail. The project is a 209-acre, mixed-use business park located along the Loop 101 Freeway (major Valley freeway) at the Via De Ventura / Pima/90th Street interchanges in Scottsdale. The underlying land owner is the Salt River Pima-Maricopa Indian Community. The master developer …
What area is your expertise? Phoenix and Tucson What trends do you see presently in retail development in your area? Infill, redevelopment and lifestyle type centers. What type of retail product is doing well in your area? Grocery anchored, New Power Centers with added lifestyle hybrid, and Lifestyle Centers. What retailers are new to your area? Fresh N Easy, Cabellas, Bass Pro Shops, CineMark, Bloomingdales and IKEA. Who are the active retail developers in your area? Vestar, Macarich, General Growth, Kimco, DeRito Partners, and Pederson Group. Please name one or two significant retail developments in your area. What impact will these projects have on the market? City North is a 5.5 million-square-foot, mixed-use development by Thomas J. Klutznick Co. and Related Urban. The retail center is anchored by Bloomingdale’s and Nordstrom. The site will draw shoppers from all over the city, while initially hurting other successful retail development sales, but in the long term it will be a great addition to the Phoenix area. Where is the majority of development taking place? Why is this area doing well? Southeast Valley and West Valley. The new retail development is following the housing growth. What area do you expect to be the …
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