Residential Development: Why The Caution?

By Peter Madrid
Cushman & Wakefield of Arizona, Inc.
With Arizona experiencing population and employment growth, why is it that housing sales are flat and not living up to expectations?
That was the topic discussed at Valley Partnership’s April breakfast, which was attended by a record 300 plus partners.
Jim Belfiore of Jim Belfiore Real Estate Consulting served as moderator. The panel featured three residential development experts: Jeff Gunderson, Senior Vice President-Land, Lennar Homes; Mike Jesberger, Principal, Terrawest Communities; and Susan Walker, Regional Manager, Wells Fargo Home Mortgage.
The Mayor’s Minute featured Sharon Wolcott from the City of Surprise. Her talk served as the perfect lead-in for the discussion. Surprise is a bustling suburb in the Southwest Valley with room to grow. It soon will benefit from the opening of the Loop 303, both on the residential and commercial side. Or will it?
A survey of the Valley’s housing market shows it is flat compared to last year. It is especially flat compared to 2012 when the housing market surged. The reasons? Buyer hesitation was mentioned as one of the factors, as was FHA loan limits.
“It’s tough to get deals done today,” Gunderson said. “Deals were getting done in 2012 because prices and absorption increased. And now, it’s about how people are feeling. About the economy. About their jobs. The largest purchase a person makes is now based on a feeling.”
Jesberger offered a solution, saying once municipalities get their balance sheets in order, they can begin to attract economic development.
“Patience, patience, patience. Jobs, jobs, jobs,” he said.
As Metro Phoenix continues to grow, the housing market should continue to grow as well – primarily along the freeway corridors. The Southeast Valley, we were told, will continue to be a dominant player.
The big issues?
Walker said it’s “the process.”
“We need to educate the consumers and get the message out: there is money to lend,” she said.
Jesberger said it’s setting up the future for his division.
“It’s all about lead time. And trying to predict what’s going to happen. We need to be able to set up for future success.”

Survivor Arizona: Out of the Downturn, Into the Future

By Peter Madrid
Cushman & Wakefield of Arizona, Inc.
Reshape. Revitalize. Enhance.
Coming out of the Great Recession, Arizona’s commercial real estate industry dug down, pulled itself back up and survived. That message was clear – and well delivered – at Valley Partnership’s March breakfast.
With Molly Ryan-Carson of the Ryan Companies moderating, the panel consisted of three individuals who witnessed their companies emerge from the downturn: Michael A. Pollack, President and Founder, Pollack Investments; Keith Earnest, Executive Vice President, Development, RED Development; and Rick Hearn, V.P., Leasing, Vestar.
The discussion started with each panelist recalling when they realized the industry was headed for trouble.
>> Hearn said the tipping point for him was 2007. With 2 million square feet of product under construction, his message asked and answered the question: “Was the bus the right size?”
>> Pollack said his concerns were raised in 2005. “We were overbuilding and no one was taking their foot off the throttle.” It didn’t help that some of his larger office tenants were filing for bankruptcy.
>> RED Development, Earnest said, was “getting deals done” and building this mixed-use project in Downtown Phoenix called CityScape. Still, there were uneasy moments.
Fast forward to 2014. According to Ryan-Carson, by taking risks – backed by hard work and people willing to stay during the hard times – Arizona’s commercial real estate industry has survived.
“We expanded our footprint through our acquisition component,” Hearn said.
“We adapted,” Earnest said. “Town & Country was a perfect example. We added to a component already there. ‘A shave and a haircut,’ we called it.”
“We diversified, and redeveloped,” Pollack said. “We took what was there and rebuilt.”
All three also talked about the importance of community, and working with industry groups such as Valley Partnership.
“Get involved,” Hearn said. “Give back where people live, work and play,” Earnest added.
Their advice:
>> “Be humble,” Earnest said.
>> “Embrace diversity,” Pollack said.

>> “Leave it better than you found it,” Hearn said.

Oh Canada: Commercial Development & Financing By Canadian Investors

By Peter Madrid
Cushman & Wakefield of Arizona, Inc.
While Arizona and the U.S. conduct billions of dollars worth of business with our neighbors to the south, the same amount – or maybe even more – of attention should be given to our Canadian neighbors.   

Throughout the Valley, Canadian investors are bringing dollars and jobs to the commercial real estate industry. February’s breakfast featured Canadian experts who shared the success of their international ventures.

With Karrin Taylor moderating, the panel consisted of Robert Leinbach, President, Walton Development and Management, N.A.; Glenn Williamson, Nest Ventures, a private equity and investment firm; and Chris Camacho, Executive Vice President with GPEC.
Kicking off the monthly event was Mesa Mayor and gubernatorial candidate Scott Smith. Mesa is undergoing a development boom, and as Mayor Scott said, “Two things that mayors enjoy are ground breakings and ribbon cuttings.”
Mayor Smith also keyed on two phrases important to his East Valley community: “Building a better Mesa,” and “Facilitate, don’t regulate.”
Williamson, whom the Phoenix Business Journal dubbed “Mr. Canada” in its latest issue, said that one Phoenix Sky Harbor is one of the “driving forces” to conducting business with Canada. The number of non-stop flights to Canada continues to increase, he said. He also mentioned that foreign direct investment (FDI) between Canada and the Valley is increasing as well.
Williamson pointed out several positive trends including:
>> Canadians ages 30 to 40 are coming to the Valley. The U.S. recession was a huge opportunity and many Canadians benefitted from coming here and buying property.
>> The Valley is challenging destinations such as Texas and Nevada for regional offices and headquarters for Canadian-based firms.
>> Proximity to Mexico from both the Canadian buyer and seller standpoints are key.
With Calgary, Alberta, located geographically above Arizona, many opportunities exist to do business, Leinbach said. Edmonton-based engineering consulting firm Stantec, for instance, has a huge presence in the Valley.
“Arizona is ideal for corporate headquarters,” Leinbach said.
Camacho closed by stressing the importance of FDI between the Valley and Canada and added, “The catalyst (of the Valley and Canada working together) is for better jobs.”

The only thing missing from the sold-out breakfast: Canadian bacon.

2014 Commercial Real Estate: Market Preview From the Experts
By Peter Madrid
Cushman & Wakefield of Arizona, Inc.
When experts speak, people listen.
That was the scenario at the first Valley Partnership Friday breakfast of 2014 at Phoenix Country Club. Another packed room heard market sector previews from Larry Downey, Vice Chairman at Cushman & Wakefield of Arizona; Mindy Korth, Executive Vice President at Colliers; and Matt Milinovich, Partner at Strategic Retail Group.
Mayor Vince Francia of Cave Creek addressed the crowd as part of the monthly “Mayor’s Minute” segment.
 Mayor Francia sang the praises of his municipality of 5,000 residents, telling the audience that growth, economic development and its historic core are all important issues. Retaining its Western charm (the mayor said there as many horses are there residents) is also key to Cave Creek.
Milinovich spoke first, giving his forecast of the retail market. Looking back, he said retail vacancy rates were a little more than 10 percent at the end of 2013. The market anticipates those rates will be at 9.5 percent or lower by the end of the year.
Among the best retail business types in Metro Phoenix are quick service restaurants, he said. One of Milinovich’s slides showed the logos of more than 15 local and national restaurant chains. Restaurants moving into adaptive re-use properties also showed an increase. Gym and fitness centers also filled some of that vacant space as well, he said.
On the office side of the ledger, Downey said that sector experienced a little under 2 million square feet of net absorption in 2013. For 2014, job growth will help lower the vacancy rate.
“Demand for office space will climb,” he said, adding that it will be an arduous climb.
One of the best submarkets heading into 2014 and beyond will be in Tempe, where State Farm is scheduled to move into a new, 2.1-million-square-foot campus starting in 2015.
In 2013, the sale of office properties totaled $1.4 billion, Korth said. The sale of retail properties reached almost $600 million and the sale of industrial properties totaled $962 million.

Her projection for the 2014 investment market: sale prices will increase, REO activity will be down, and cap rates will also come down for high-quality assets. 

The Good, the Bad, and the Ugly: Inside the Mind of Grant Woods

By Peter Madrid                        

Cushman & Wakefield of Arizona, Inc.
He’s irreverent, funny, opinionated – and did we mention he’s irreverent?
A standing-room-only audience – more than 200 Partners strong – was entertained at the final Valley Partnership breakfast of 2013 by the always-entertaining Grant Woods.
Even Goodyear Mayor Georgia Lord, this month’s “Mayor’s Minute” guest speaker, did not escape the good-humored barbs by perhaps Arizona’s most colorful former Attorney General.
Woods’ lively chat – which he has delivered to Valley Partnership for the past 7 years – was not for the faint of heart. And to his credit, he always warns the crowd. It’s also entertaining to see Valley Partnership President and CEO Richard Hubbard wince a bit as Woods takes the podium.
After Mayor Lord invited those in attendance to visit and also do business in her city, Woods came out swinging.
He offered his take on the Arizona governor’s race, told a hilarious story about a cab ride in Washington, D.C., and shared some anecdotes about Sen. John McCain. It was all presented in a way only Grant Woods can.
He did end on a semi-serious note by saying, “Leadership matters.” Whether it’s the oval office in D.C. or the governor’s office in Downtown Phoenix, “It does matter,” he said.
“We are the leaders,” Woods added. “Leadership counts, and we have great opportunities here. It matters.”
The January Valley Partnership breakfast will feature a panel discussing commercial market conditions for 2014.  That event is set for Jan. 24.
Happy holidays from your humble blogger …  

Life In The Fast Lane: The Loop 303

By Peter Madrid
Cushman & Wakefield of Arizona, Inc.
“Go West!”
With the Loop 303 corridor in the West Valley becoming one of the most active areas for new commercial projects in Metro Phoenix that was the rallying cry at Valley Partnership’s November breakfast.
Another sold-old audience – this time more than 270 partners strong – listened to guest speakers Jack Rasor, Partner, WDP Partners; Sheri Wakefield-Saenz, Director of Development Services, City of Goodyear; and Kevin Czerwinski, Principal and President, Merit Partners.
Moderating was Greg Vogel, CEO and Founder, Land Advisors Organization.
With Goodyear the third-fastest growing city in Arizona, the Loop 303 will have a huge impact. Goodyear, according to Wakefield-Saenz, is home to high quality employers including Cancer Treatment Centers of America, Dick’s Sporting Goods, and Sub-Zero Manufacturing.
Growth during the next 7 years – especially with developments springing up around the Loop 303 – is expected to play a key role. Wakefield-Saenz said Goodyear now has a population of 70,000. In 7 years, that number is expected to balloon to 175,000. She added that Goodyear will see an increase of 1,500 new homes built each year through 2020
Major projects planned for the 303 corridor are Estrella Falls regional mall and Prasada, Rasor told the audience. Estrella Falls is a few years behind schedule, he said, but a little something called “The Recession” had something to do with that. Both are back on track.
Czerwinski talked about Palm Valley 303, a 1,600-acre park on both sides of Loop 303 expected to include 20 million square feet of office, retail, warehouse and industrial space to be built over a 20-year period.
“Growth in the corridor will be pretty exciting,” Vogel said.

Welcome To The New Valley Partnership Website

Website Benefits For Our Partners

Welcome to Valley Partnership's New Website!  Thank you very much for visiting.  Valley Partnership has worked to create a new place for all our Partners and colleagues to visit and  to learn more about Valley Partnership, our Partners and the Commercial Real Estate Industry in the Valley.

With the new website you can:

1. Join as a Partner Company and add all your company's employees as Partners to receive all of the benefits of Valley Partnership.
2. Learn more about the numerous Valley Partnership Committees, where they meet, how to join and what other Valley Partnership Partners serve on the Committees.
3. Register for our Monthly Breakfast, the best place to meet and network with Commercial Real Estate Professionals in the Valley.
4. Renew your status as a Valley Partnership Partner, quickly easily and securely.
5. Explore the Valley Partnership Partner database to learn which colleagues are Partners with you in Valley Partnership.

Please take the time to explore our new website and let us know what you think.  Place your comments below or email them to info@valleypartnership.org

Thank you very much for visiting.

 

Valley Partnership, The Valley Of The Sun's Premiere Advocacy Group For Responsible Development.