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An open highway – or bumps in the road?

2018 commercial real estate forecast paints a year of growth, with some headwinds for retail, construction work force

With the Great Recession a good 10 years squarely in the rearview mirror, the road ahead for the Valley’s commercial real estate market is a combination of open highway and open potholes.

Leading indicators within the key industries in the market were the topic of discussion at Valley Partnership’s January Friday Morning Breakfast. Moderating the event was Mark Detmer, Managing Director, JLL – and pro soccer entrepreneur.

The panelists were Chris Anderson, Managing Director, Hines; Rick Butler, Principal, Butler Design Group; and Paul Engler, Senior Vice President, Alliance Bank. Arizona Congresswoman and U.S. Senate candidate Martha McSally was the guest speaker.

Engler offered a glimpse through the banking and finance crystal ball. Since architects tend to work at the earliest phases of development and their workload signals the health and growth in the market, Butler offered his prediction for 2018. Anderson shared insights into what’s ahead in commercial and residential development in Metro Phoenix.

What’s ahead for 2018 as it pertains to local economic trends?

“I’m not one to prognosticate, but when (economic guru) Elliott Pollack sounds optimistic that’s when it’s time to sell,” Anderson said with a laugh. “Our economy is showing signs of growth. We also have great leadership in the Arizona Commerce Authority, GPEC, people like John Graham. … Now we need to get an immigration policy figured out.”

Butler said 2017 was one of his firm’s most productive years in some time.

“I’m confident 2018 is going to be good or better (than 2017),” Butler said. “The consultants, general contractors, and others we work with expect another great year. Brokers are upbeat about the market sectors we’re in – industrial, retail, office.”

On technology and the pace of business:

·      Anderson: “Communication is going to dominate the big technological changes.”


·      Butler: “The information highway; that’s where change will happen.”


·      Engler: “Banking security will be a big concern.”


Their final thoughts and what challenges might be on the horizon:

·      Anderson: “Arizona is in good position if grown ups make good decisions and locations for development are well thought out. I think the market will be stable 2018 through 2019. Office activity will pick up. Right now, there is not a lot of supply.”


·      Butler: “The biggest challenge will be good, skilled talent. There is going to be positive growth, but construction labor could be an issue. There could be headwinds ahead for retail.”


·      Engler: “I’m cautiously optimistic. Tax reform will dominate the conversation.”




Grant Woods 2017:

The Good, The Bad, And The Ugly


As the final speaker annually at the December Valley Partnership Friday Morning Breakfast, Grant Woods leaves his audience laughing and gasping. But he always sends people home with a positive message.

“America has always been great,” the former Arizona Attorney General proudly said December 7 at the final breakfast of 2017. He was introduced by longtime friend and Maricopa County Sheriff Paul Penzone.




“Two years, five years, 20 years from now we can be greater. We will be greater. We all have to stand up and fight for basic American ideals,” Woods said.

After a tumultuous year on the political landscape both nationally and in Arizona, Woods had plenty of fodder. As only he can, Woods ran the gamut from allegations of sexual misconduct of high-profile political and entertainment figures to handicapping the Arizona Senate race.

On the topic of President Donald Trump, he said: “I just wish he had a better temperament. We as Americans have a special role in the world. We stand for freedom and for trying to be free.” 

The two most disturbing issues he sees facing America are racism and sexism. “Events that happened this year show we have a way to go. We have to fight hard and change it. You are the leaders here. We all have to do better.”

The December breakfast got off to a rousing start as the 2017 Community Project committee was recognized. This year’s event benefited the Society of St. Vincent de Paul urban garden. Check out the video of this year’s community project.


Happy holidays to all of our partners. See you in 2018.

November Breakfast

The Friendly Skies:

Economic development abounds at the Valley’s largest airports



Each time a commercial flight lands and takes off at one of the Valley’s airports, it means business is being conducted. Passengers and cargo both represent millions of dollars flowing in from these billion-dollar airports.

As the Valley takes advantage of these friendly skies, its leading airports have long-range plans to develop the land nearby their operations. New land development in the surrounding areas will offer businesses expanded opportunities with cargo and transportation operations.  

The November Valley Partnership Friday Breakfast featured leaders from two airports who offered insights into the scale and timing of these developments. Jordan Feld, Phoenix’s Deputy Aviation Director, discussed plans for a mixed-use transportation center, noise-land redevelopment, and major development in the Light Rail corridor.


Phoenix-Mesa Gateway Airport’s Business Development Director Shea Joachim offered an overview of the planned development of the Gateway Aerospace Park, the approximately 360 acres surrounding the reliever airport.


Todd Hamilton of Cutler Commercial shared recent industrial developments. Molly Ryan Carson of Ryan Companies served as moderator.


“Our airports have a direct correlation with economic development,” Carson said. “They are critical form a transportation standpoint. They are a big economic driver. Ours are and continue to be.”

Feld pointed out that a “city built for speed is made for success.” He added that the indirect economic impact of Phoenix Sky Harbor International Airport is approximately $40 billion a year. “That’s the total GDP of Lithuania,” he said with a laugh.

The dollar figures associated with projects under construction or in the pipeline at Sky Harbor range from $100 million to $600 million. This includes work at terminals 2, 3, and 4 and the Sky Train. Parcels of land surrounding the airport range from 30 acres to 120 acres.

“There are opportunities out there for developers and architects,” Feld said. “Do your research. There is a lot coming down the pike now.”

Joachim also touted the development opportunities and economic impact of the airport he overseas in the East Valley. Phoenix-Mesa Gateway is unique in that it is owned by six different government entities.

“This makes for an interesting dynamic,” Joachim said. “It creates a regional economic development asset with six entities invested.”

Phoenix-Mesa Gateway services 48 destinations. Passenger ridership was 1.4 million last year, up 7 percent from the prior year. “Some airports our size are going the other way,” Joachim said.

Speaking of development opportunities, he said: “It’s coming at us. The growth in the Southeast Valley is coming right towards the airport.”

The airport recently approved a deal for a proposed 360-acre office, industrial, and logistics project – Gateway Aerospace Park. Mesa SkyBridge has financial backing from a Mexico City-based commercial security and security technology company. The development includes plans for a Mexican government customs office to help speed up cross-border trade.

With another 700 acres on the east side of the airport, Joachim predicted “all kinds of commercial will develop around it.”

Arizona Rep. Paul Gosar opened the breakfast, making a pitch for the new tax code. “We really need to start rebuilding this country and reinvesting in it,” he said.


October Breakfast

Reinventing retail:


What used to be a tough sell is now a successful merger of brick-and-mortar retail and mixed-use development


There was a time in the Valley’s past when Park Central and Los Arcos malls were shopping destinations. Department stores in an open-air setting. Entertainment. Restaurants.

Fast forward to the present: Los Arcos Mall is now SkySong, a center for innovation and technology with a dash of retail. Park Central Mall is undergoing a massive facelift designed to make the Valley’s first mall relevant once more by becoming a mixed-use hub along the Metro light rail on Central Avenue.

Innovative commercial developers who are updating the look, feel, and experience of these and other retail centers in Metro Phoenix brought their projects to life at the October Valley Partnership Friday Breakfast.


· Sharon Harper, President & CEO of Plaza Companies: her company developed SkySong and recently purchased iconic Park Central Mall with plans to “reinvent” it into a modern, mixed-use development.

· Larry Pobuda, Senior Vice President of The Opus Group: his firm envisions its 7th Street mixed-use development in Downtown Tempe transforming 3.22 acres into a destination with retail, apartments, and hospitality amenities.

· Scott Nelson, Senior Vice President, Macerich: this long-time developer of regional malls around the country is focusing its efforts – and investing millions of dollars – on one of the Valley’s prominent retail centers, Scottsdale Fashion Square.

Jami Savage-Gray, First Vice President with CBRE, moderated the discussion.

“College towns are getting new housing,” Pobuda said, “but not necessarily dorms. People are finding college towns very appealing, and having a place near their alma mater is also appealing.”

The Opus Group’s 7th Street project will feature two high-rise towers with 407 apartments. The second tower will have 22 walk-up city homes and flats wrapping the first four stories of the tower. The project includes 31,000 square feet of retail space and plans for a 200-room hotel.

“With an urban mixed-use development on University and Mill and supported by Arizona State University, our goal is to have retail that makes it a destination and gives people a reason to come down to Tempe year round. Signs of this evolution are already going on along Mill Avenue as the business community migrates from the north.”


If there is a developer in the Valley that understands how to transform iconic neighborhoods, it’s Plaza Companies. Los Arcos Mall was a thorny issue in Scottsdale when Plaza Companies came on the scene, Harper said.


“By the time we were involved, there was blood in the water,” she said. “There were lots of issues. It was a big battle. The Coyotes left for Glendale. Neighbors didn’t want a proposed Walmart.”


A meeting between ASU President Michael Crow and former Scottsdale Mayor Mary Manross lit the fire, Harper recalls.


“They had this great vision how to reinvent an important intersection in Scottsdale by bringing new ideas and new business,” Harper said. “ASU had carefully researched what this idea could look like. It’s what Scottsdale wanted.” 


SkySong is now a 42-acre, mixed-use development with more than 1.2 million SF of space in four office buildings. It also features apartments and retail. More than 1,000 people work there.


“Creating that environment was inspired by experts in retail,” she added.


Park Central Mall is the next project in the Plaza Companies’ pipeline. Referred to as the “hole in the donut,” Harper says it is surrounded by a talented workforce, vibrant neighborhoods, and is connected with Phoenix College, ASU, UA, and NAU. It also sits along the light rail. It totals 337,000 SF.


“Predecessors who were considering (buying) it always saw it as something to bulldoze and start over,” Harper said. “This is what we’re trying to build at SkySong. It has the workforce, light rail, restaurants around it. It’s all about building culture and creativity and giving something back to our neighborhoods and tenants.”


With online shopping what it is today, listening to shoppers and consumers is more important than ever, Nelson said. Five years ago, Macerich had 73 regional shopping center assets. Today it has 48. In two or three years that number could drop to 40, he said.


“Our strategy is a flight to quality in the brick-and-mortar world,” Nelson said. “High quality real estate; high entry markets. We’re not trying to be the biggest, just the best assets in the industry.”


One of the most popular shopping destinations in the Valley is Scottsdale Fashion Square. It opened in 1951 with a Goldwater’s department store and 15 outdoor shops. Today it features Arizona’s only Nordstrom and a host of designer label stores including Prada, Gucci, and Louis Vuitton, to name a few.


Scottsdale Fashion Square is undergoing a $100 million makeover, Nelson said. When it comes to consumers and their choice of retail destinations, he said: “Shoppers vote with their wallets. Putting in a tenant that doesn’t resonate with them is a mistake.”


Shoppers didn’t open their wallets when SFS opened a Barneys. It closed. Now Macerich is turning that big box into a co-working space. It has already attracted a tech company, Nelson said.


“We’re looking for non-retail uses to help supplement our retail offerings,” Nelson said. “This includes entertainment and food and beverage. We’re trying to create what the Internet can’t do on its own. Scottsdale Fashion Square is well positioned. We certainly can’t rest on our laurels.”



Major League Mayors:

City leaders rally around ‘regional teamwork’ to keep Valley in game when it comes to attracting businesses

Valley Partnership Special Event for Board of Directors and Sponsors

Photo Credit: SRP

The Legislature. To GPLET or not to GPLET. The I-11 transportation corridor. Landing Amazon’s HQ2. The Legislature – again.

All were topics of interest Sept. 29, 2017 at the Arizona Country Club as Valley Partnership brought together a panel of five Valley mayors for an event attended by Valley Partnership Board Members, top Sponsors, and 2017-2018 Advocates class of future leaders in the real estate industry.

“Why is this event important as Valley Partnership closes 2017 and gears for 2018?” asked Valley Partnership President/CEO Cheryl Lombard. “Valley Partnership is different because we were founded to work directly with the cities on responsible development issues. This year these five cities are where we spent our time and the efforts of our city/county liaisons.”

From East to West, mayors in attendance included: John Giles, Mesa; Mark Mitchell, Tempe; Greg Stanton, Phoenix; Georgia Lord, Goodyear; and Sharon Wolcott, Surprise. Wellington “Duke” Reiter, Senior Advisor to the president at Arizona State University, moderated the event.

First up was a discussion about the importance of fostering cooperation among the five cities.

“Within a regional economy we compete together,” Mayor Stanton said, “but we do so in terms of building an exporting, innovative, diverse, and sustainable economy. We are doing it now.”

“We are very competitive,” Mayor Lord added, “but we’re honest about it. We don’t hide anything. I’m excited when my city gets something (development). If we have a problem in Goodyear and need some support, I go to these mayors and ask for help. We are a team.”

There was plenty of discussion as the mayors addressed the GPLET, or Government Property Lease Excise Tax. It was established by the State of Arizona as a redevelopment tool to initiate development by reducing a project's operating costs by replacing the real property tax with an excise tax.

In the last Legislative session, t
he Arizona House of Representatives approved compromised changes to property tax breaks used by cities for big developments and jobs projects. It approved an amended version of HB2213.

“Our toolbox is not as robust as it is in other areas (states),” Mayor Giles said. “That’s why the GPLET is attractive to the development community. We are banking on GPLET to continue to be a tool to use. We have to come back this Legislative session and point out we can’t do economic development if we don’t have the tools to be effective.”

One Valley city that has benefitted from the GPLET is Tempe.

“The GPLET can make or break a project, or affect the way it is developed,” Mayor Mitchell explained. “With it you can take a vacant lot making zero dollars and develop it. We need to make sure each city gets an opportunity for economic development. We are competing against cities that provide money for good, quality projects. Where GPLET tools come into play are in K-12 schools. We have to look forward to a modern technology economy. This includes amenities such as art and culture. It’s all tied together.”

A modern and viable transportation system in the Valley represents a home run for everyone, the mayors agreed. Having the proposed I-11 run through the Valley could be a game changer.

“Transportation is something I’m very passionate about,” Mayor Wolcott said. “Connectivity is critical to a region’s success. When I moved here from Minnesota what I saw that was missing – not enough north-south connectivity. I-17 is great, but it’s not adequate. I-11 won’t just be an asset to the West Valley, it will be a tremendous asset for all of us if we get it right.”

Other topics raised included immigration, DACA and NAFTA; what’s happening in Washington, D.C.; bidding on the lucrative Amazon HQ2; developing the Rio Salado; and making sure business leaders let the Legislature know they mean business.

“The best chances for us to win is for us to work together,” Mayor Stanton said. “We must leverage our assets as a community. We must be one economic unit and one economic region. We must act that way to be successful. We need to do what will make us a tier 1 region, not tier 2 or tier 3.

“We can get there, but only as teammates,” Mayor Stanton said.

These mayors hit it out of the park.

September Breakfast

If you build it, they will come:

Valley’s economic development leaders are leveraging a multitude of key amenities to attract new companies

While location is important when it comes to attracting and retaining major employers, there are new driving forces when companies look to open shop in a new city.


The September 20 Valley Partnership Friday Morning Breakfast brought together three economic development experts who shared their thoughts on these nuances.


“A new trend I’ve seen the past three years is that in eight times out of 10, the person leading the site selection team is the head of HR (human resources),” said panelist Christine Mackay, Economic Development Director for the City of Phoenix. “We had never seen that before.”


All three panelists agreed that most important asset of their respective municipalities is a talented and quality workforce.


“That’s the No. 1 thing we sell here,” said Michelle Lawrie, Economic Development Director for the City of Goodyear. “It has evolved over time. Cost and things like that used to drive decisions. Now it’s the quality of the workforce.”


Added Bill Jabjiniak, Economic Development Director for the City of Mesa: “We have a young and large workforce, not to mention great location. Think of the proximity to West Coast destinations and ports. That’s why we spend time recruiting in California. We are still affordable and have a talented workforce.”


Mackay added that it helps to have three major universities that are doing cutting edge research and are great partners.


“We’re leveraging our universities like never before,” she gushed.


Moderator and Senior Vice President of CBRE, Jerry Roberts, drew varied responses when he asked the panelists what industries their respective cities are looking to attract.


“In the West Valley we’re all about diversification,” Lawrie said. “We are looking to grow density and build in areas like Goodyear and Avondale. Really in the past couple of years we are seeing the fruits of our labor with the industrial opportunities we’ve had. We have lots of land in the 303 corridor. Aerospace and aviation are key industries (to attract). With healthcare the largest employer in Arizona, we are fortunate to have Abrazo West and Cancer Treatment Centers of America.”


“In Mesa, we’re picking up on the word diversity,” Jabjiniak said. “We are an older city and will be crossing the 500,000-resident threshold in the next year. Healthcare and the medical device field help drive our economy. We’ve always been strong in aerospace and aviation with two large and busy airports. Manufacturing to me is huge and in tremendous demand. We’d also like to play in the office environment.”


“Phoenix is more about, ‘yes, please,’” Mackay said with a laugh.


Phoenix is much different, she said, as it comprises 517 square miles.


“There is so much difference between all of the corridors,” Mackay said. “Between the ‘7s,’ traditionally it’s been social services, banks, financial institutions. Now it’s turning into a true tech hub. Tech is where the workforce wants to be.”


A telling sign of the times: In 2012, according to Mackay, there were 67 tech companies in Phoenix. Today there are 296. Mackay said she is also thrilled with the opening of the Loop 202 South Mountain Freeway.


“I never got to create an entire employment corridor,” she said. “That (the 202) is Phoenix’s next frontier for industrial.”


What are Valley cities lacking?


>> Jabjiniak: “There is always room for improved state incentives.”


>> Mackay: “The ability to redevelop existing infrastructure.”


>> Lawrie: “Infrastructure is the No. 1 issue we can enhance.”


How have employers’ wants and needs changed?


>> Mackay: “Employees are now asking how do they connect with the community and be an influence in the city. This is also the first year millennials will be managing Generation Z. To me that is going to be fascinating to see.”


>> Lawrie: “It’s about placemaking; working to attract people and not just companies. Cost has been taken over by the workforce. It’s a different conversation now.”


>> Jabjiniak: “Having the HR director at the table saying personnel is No. 1. It no longer is location or real estate cost.”


August Breakfast

Food Fight:

How the competitive, shifting grocery industry

is affecting real estate and consumer decisions

The August 18, 2017 Valley Partnership Friday Morning Breakfast event focused on the shifting grocery industry and how it is affecting real estate and consumer decisions.  A panel representing all segments from developer, grocer, and city decision-maker made this topic relevant to the Valley area.


The grocery store has long reigned as more than just a place to buy food. It serves as a gathering place. It provides an experience to those who shop there. In some cases, it’s what defines a neighborhood.


In the past five years, the grocery industry has undergone dramatic shifts. Behind these changes are consumer needs, competition, and most recently technology. As this industry evolves, so do the demands and impacts on the commercial real estate industry.


Why have grocery stores been the best anchor tenants in retail centers, asked panelist Gordon Kieg, Principal, Pennant Development?


“Because they provide gravity,” Kieg said. “Everyone knows where the closet grocery store is. These stores get between 20,000 and 25,000 shoppers a week. On a pure economic level, after paying the mortgage and the car loan, the third largest expenditure for a family is going to the grocery store.”


As competition for the grocery dollar has increased, a food fight of sorts has broken out. The food business is big business. It’s evident on every street corner. It’s also evident when consumers fire up their laptops, home computers, and smart phones to order their groceries online.


“There are so many different venues where you can buy groceries or food of any kind,” said Jan Martin, Senior Vice President of Real Estate, Safeway/Albertson’s Southwest Division. “There are dollar stores and drug stores. Online you have services like Blue Apron and Amazon.”


Online shopping is where Greg Laing, Principal, Phoenix Commercial Advisors, sees the biggest impact. He related that his daughter, who has small children, orders groceries online, opens the back of her SUV, and her groceries are loaded up.

“Some consumers aren’t making those two visits a week to the grocery store,” Laing said. “That means they’re not stopping next door to pick up a sandwich at Subway. That’s not doing well for sales (at other retailers in the center). They’re losing that little bit extra that people used to buy.”


While some neighborhood centers are losing customers, a new trend in grocery stores is evolving in Downtown Phoenix. For decades, it has been considered a food desert, an urban area in which it is difficult to buy affordable or good-quality fresh food.


Block 23, a mixed-use development scheduled to open in 2019, will feature the area’s first grocery store by Fry’s Food Stores. The project will include multi-family and office components. And it will be on the Metro light rail.


Councilman Daniel Valenzuela represents a great number of constituents in one of the Valley’s most diverse areas, District 5. More than 30 languages are spoken in his diverse and densely populated district. While he’s optimistic the city is working with the private sector on easing some building codes – Block 23 is being developed by RED Development – there are still some challenges.


“Some of the things we’re doing right now is mapping the city looking at where food deserts exist,” Valenzuela said, “and where our transportation corridors are. Light rail is crucial. If you’re going to a grocery store and not in a transportation corridor you might as well be in California.”


What does the future hold for the grocery industry? Plenty of changes, the panelists agreed. Will online grocery ordering replace stepping foot into the store? Do consumers want someone else to pick their bananas?


“Grocery shopping is a reasonably intimate experience,” said moderator Barry Shannahan, Executive Vice President, Acquisitions & Development, RED Development. “When it comes to picking produce, personally I want to touch and feel my own food.”


Competition will increase as well. Aldi, a sister company of Trader Joe’s, is entering the Arizona market. Online sales continue to increase. Amazon recently purchased Whole Foods. More than 50 percent of Costco’s sales are for food products. Then there’s Walmart, which isn’t going away.


Kieg predicts consumers will also see more remodeling of their favorite grocery stores.

“You will see novelty concepts like a bar, a sushi place,” he said. “Consumers want to go somewhere cool. It’s a real opportunity for brick and mortar stores that Amazon will not be able to provide.

“There is so much talk about disruption in every industry. In our economy in the 90s there was an enormous disruption in the grocery industry.”





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