Author Archives: Melissa Bordow

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GPEC: Plans To Revive The Economy

Look past the Valley’s long, slow climb out of a difficult recession to the next 10, 20, even 100 years and you see a potential hotbed of wealth and productivity: a regional economy that has diversified from its traditional reliance on growth and housing. That’s the vision painted by board members and financial supporters of the Greater Phoenix Economic Council ( GPEC ), which has been working since 1989 to leverage the many strengths of the entire metro area.

In the 22 years since its inception, GPEC already has assisted 488 companies in their moves to the Valley, which by its own count translates into 88,610 jobs, $9.96 billion
in capital investment and $3.1 billion in payroll.

In the next century, look for GPEC to shape the following sectors and services:

Municipalities

The greatest influence GPEC will have on Valley cities will be to help leaders think of themselves as a unified economy, says Mayor Scott Smith of Mesa, which is one of the 19 cities and towns that contribute financially to GPEC.

“That sounds like a simple thing, but it’s actually been a very challenging task,” Smith says, with the East Valley vying against the West Valley, city fighting city, and “Phoenix fighting everyone else” for economic development opportunities.

In the coming decades, economic activity will continue to consolidate in cities, Smith says. Already, about 85 percent of the nation’s gross domestic product is generated in cities and it is estimated that 90 percent of the new jobs created will be in metro areas. GPEC will continue to play a major role in helping cities get beyond parochialism and work together to create a regional economic powerhouse.

“The Sun Corridor is not some figment of someone’s imagination,” says Smith, referring to the corridor stretching from the middle of Yavapai County south to Tucson that is expected in the next century to merge into one integrated metro area. “We see it growing every day.”

“GPEC plays a central role in that,” he says. “We are learning how to work better together.”

Technology

The Arizona of the future will do a better job developing a culture of innovation for small, high-tech companies, says Steve Shope, president of Sandia Research Corporation and a
GPEC board member.

A short-term goal that may reap long-term benefits would be to help companies attain funding through the U.S. government’s Small Business Innovation Research program, which awards funds for research and development that has the potential to be commercialized.

“In Arizona, we’re not doing a very good job of bringing that money into the state,” says Shope, who would like to see the figure double to $50 million.

The state needs a better representation of venture capital in general, he says, and thus needs to nurture venturecapital-ready companies.

Shope is a member of GPEC’s new Innovation Council, which he says is developing a framework for how it will operate and hopes to have a master plan this year.

Another way GPEC will shape the future of the technology industry is by continuing to focus on clean tech companies, particularly renewable energy companies and those involved in residential construction and high-efficiency housing.

Unmanned aerial vehicles, a subset of Arizona’s already mature aerospace and defense industry, is a sector that “is in the Model T stage, but has potential for gigantic growth,” Shope says.

Housing

Looking back, one can see how homebuilding and construction became primary drivers of the state’s economy, says Andy Warren, president of Maracay Homes and a GPEC board member.

Looking forward to the next century, GPEC will play a major role in helping to diversify the Valley’s economy so housing plays a less dominant role in it. If GPEC can do that, Arizonans won’t be held hostage to vicious boom-and-bust cycles inherent in the real estate industry.

“If GPEC is successful, the housing industry will be a less significant player in our economy over the next century and that will be a wonderful thing,” Warren says. “The amplitude of those cycles can be pretty extreme.”

It has been estimated that Arizona has lost 300,000 jobs in the recession, with the bulk of those coming from the construction and retail sectors.

GPEC’s efforts to lure high-wage, high-quality jobs in the clean technology, healthcare and aerospace sectors and its efforts to strengthen manufacturing will be instrumental in diversifying the economy of the future, he says.

A key to that strategy is GPEC’s commitment to supporting competitive tax incentives and policies that promote growth, and its work bringing together officials and policy makers throughout the region. “It’s a great collaborative effort,” he says.

Law

When GPEC reaches out to businesses considering a site in the Valley, one of the first things business leaders ask is, “‘Do you have the legal talent in Arizona and in Phoenix to do the things we want done?’” says Barry Halpern, a GPEC board member and partner at Snell & Wilmer.

In that respect, GPEC and the legal community have a symbiotic relationship that will only deepen in the next century as GPEC brings more sophisticated and diverse industries to the Valley, Halpern says.

The legal profession in the Valley — already a diverse community — will have to rise to the needs of emergent industries.

Almost all aspects of economic development require legal representation, including the demand for capital financing or the need for representation in emerging niches like the solar industry, agrees Scott Henderson, a shareholder at Polsinelli Shughart and a GPEC board member.

“GPEC will shape the legal practice as it attracts more businesses and more industry and those businesses will require a greater depth of legal talent,” Henderson says. “To that extent, local law firms will want to play a greater role in the growth of the state. The growth of the economy helps everybody—lawyers are no exception.”

Banking

The near future for banking in Arizona is brightening as lending activity has increased and most banks’ biggest problems are behind them, says Jim Lundy, GPEC vice chairman and president and CEO of Alliance Bank of Arizona.

“The recovery is slow, it’s bumping along the bottom, but it is there,” says Lundy, who also serves as chairman of the Arizona Bankers Association.

The long-term prognosis for banks is a bit harder to predict, but Lundy says he is sure of one thing: it is inextricably linked with a diversified Arizona economy that is not dependent on population growth.

In that sense, GPEC’s goal of fostering cooperation between cities and creating a diversified economy will directly shape the industry.

“Our success and our growth depends on companies that actually produce something,” Lundy says. All the important emerging industries — like healthcare, clean tech and aerospace — create spin-offs in the economy that are good business for the banking sector.

“We need successful enterprises to make those loans to,” he says. “At the end of the day, if the banking sector is going to grow successfully it needs GPEC and its role in helping get Arizona’s economy growing again.”

Education

It’s not hard to figure out why leaders in the field of education sit on GPEC’s board of directors: education is essential to economic development, and vice versa.

“As we look to the future, we see that growing the right talent for the new markets that will be out there is imperative,” says GPEC chairman Bill Pepicello, president of the University of Phoenix.

That may require more coordination between Arizona’s “robust” array of higher education institutions—statefunded universities, community colleges and private institutions. “I envision campuses as multi-functional areas that are working cooperatively on the ground and online to serve Arizona,” he says.

Arizona’s education of the future will also need to be “efficient and effective,” says Rufus Glasper, chancellor of the Maricopa County Community College District.

In the next 30 years, he says more than 1.8 million new jobs will be created in Arizona and these jobs will require students who are competent in what is know as the STEM fields: science, technology, engineering and math.

Educational delivery systems will include more online, hybrid and fast-track training, he says, and willuse mobile devices and social media to create more access to new ideas, networks and educational exchanges.

Like Pepicello, Glasper envisions closer relationships between secondary schools, post-secondary colleges and universities.

Manufacturing

The Midwest has always been known as the heavy industry manufacturing hub of the United States. But Arizona in the next century could attract more technology manufacturing, says Steven Zylstra, president and CEO of the Arizona Technology Council, which has worked alongside GPEC in the past to nurture the tech industry here.

“To the surprise of a lot of people, manufacturing is actually coming back to the United States,” he says. Wages and manufacturing costs in China are rising, so companies that sent manufacturing overseas are finding that once they pay for shipping, it’s cheaper at home.

Areas of promise include the manufacturing of medical devices, bioscience-related products, renewable-energy equipment and the semiconductor industry.

When it comes to the semiconductor industry, that optimism is warranted, agrees Jason Bagley, a government affairs manager at Intel in Arizona.

Intel has always manufactured most of its leading-edge products in the United States, he says, and plans to continue doing so. Since 1996, it has invested $12 billion in manufacturing in Arizona, not including two projects currently under construction in Chandler.

For more information about GPEC visit, gpec.org

Arizona Business Magazine January/February 2012

GPEC - AZ Business Magazine January/February 2012

GPEC Leads Cooperative Effort To Draw More ‘Clean Tech’ Industry To Arizona

Insight into innovation: GPEC leads cooperative effort to draw more ‘clean tech’ industry to Arizona

Green technology is still a relatively small part of Arizona’s economy, but its potential for growth is a bright spot on the state’s horizon.

“At a time when other economic engines have been sputtering, anticipated green job growth among Arizona’s green economy firms is quite promising,” say authors of a report prepared for state economic development officials by The Council for Community and Economic Research. It is one of two recent reports that assesses the industry and its growth potential.

While there is no standard definition of “green tech” or “clean tech,” it has been described by Clean Edge, a clean-tech research firm, as “a diverse range of products, services, and processes that harness renewable materials and energy sources, dramatically reduce the use of natural resources, and cut or eliminate emissions and wastes.” So even defining “green tech” or “clean tech” can be difficult, The Council for Community and Economic Research acknowledges.

That is why the Greater Phoenix Economic Council ( GPEC ) is embarking on a 12- to 18-month study to better define Arizona’s clean tech sector, says its president and CEO Barry Broome.

It’s a big undertaking, Broome says, but an important one given the impact that clean tech, particularly renewable energy, will likely play in driving the state’s future economy.

In fact, Broome predicts that renewable energy — particularly solar energy companies and the extensive supply chains that grow up around them, as well as companies that produce energy-efficient technologies — will become major players in Arizona in the future.

“It’s going to be our biggest industry outside of healthcare,” he says. “In 10 years, 100 percent (of homes built in Arizona) will be solarized at some level.”

That economy includes not just traditional solar manufacturers, but also materials producers — companies that make smart meters, water-use monitors and biodegradable drywall, for example.

The numbers

Overall, Arizona was home to 30,716 green jobs in 2010, about 1.3 percent of total statewide employment, according to the research report, titled “Green Jobs in Arizona 2010.”

But it says green jobs were expected to grow at a healthy 8.6 percent clip in 2011, outpacing the projected rate of 0.7 percent for all other jobs.

A second report by Battelle, a non-profit research organization, parallels the assessment that the green economy in Arizona is still emerging, but can expect strong future growth, particularly in renewable energy, greenhouse gas reduction and energy-efficiency sectors.

One key factor in this growth is a state leadership that creates a business climate that promotes innovation, the report says.

Faces behind the numbers

If you want to put a name to those numbers, turn to Greg Armstrong, chief operation officer for Rioglass Solar, a Spanish company that makes tempered glass reflectors and is the primary manufacturer for Abengoa Solar, which is building a 280-megawat solar power plant near Gila Bend.

Rioglass placed its U.S. headquarters and manufacturing operation in Surprise and plans another $45 million in capital investments.

The company was considering sites in Denver, Albuquerque and even Mexico when it visited the Surprise location, Armstrong says. The method GPEC used to draw Rioglass Solar to Arizona is a good example of what the state needs to continue to do to lure renewable energy companies, he says.

GPEC organized a meeting on site, in a tent, that brought together all the principal players in the effort: state officials, Surprise representatives, utility employees and economic development officials.

That was a first for Rioglass, Armstrong says, and an indication of what came next:  Surprise waived some fees involved in the expensive process of siting the plant, invested in infrastructure upgrades and created an expedited permit package that enabled Rioglass to break ground in January and take occupancy by July.

For more information about GPEC, visit gpec.org.

Arizona Business Magazine January/February 2012

 

Barry Broome, GPEC - AZ Business Magazine January/February 2012

GPEC’s Barry Broome Outlines Plan To Attract More High-Paying Jobs

Roadmap for the future: GPEC President Barry Broome outlines plan to attract more high-paying jobs, keep the ones we have

The Greater Phoenix Economic Council ( GPEC ) is beginning 2012 with an updated roadmap, the first leg of a five-year strategic plan, says its CEO and President Barry Broome.

Along with its historical mission to attract high-quality, high-paying jobs to the Valley, Broome says 2012 will also see GPEC bolstering its retention and expansion efforts, particularly in the aerospace industry.

Broome took time recently to list four of this year’s goals in the strategic plan. Look for GPEC to:

1. Help the Arizona Commerce Authority get off the ground. The public-private entity was established last year to create jobs and investment in Arizona. Broome says GPEC is working to coordinate efforts, leverage each other’s strengths and avoid duplicating efforts.

2. Work more diligently on retention and expansion, particularly in the aerospace industry, which is facing potential cuts by Congress’ Joint Select Committee on Debt Reduction, otherwise known as the Supercommittee.

“We’re analyzing 800 aerospace companies as we speak,” Broome says. “We want to make sure we really understand the aerospace sector.”  Information gleaned from analyses will be used to help cities identify companies under threat of budget cuts and find ways to support them.

Using the analytical skills of GPEC’s research team and internalizing it to Arizona is a new undertaking, he says, one that will help everyone better understand the sectors that drive the Valley’s economy. Historically, researchers have — among other things — focused on understanding the California market and which companies there may be candidates for relocation.

3. Support with data and information solid economic development tools. GPEC will be “meticulously” going over Gov. Jan Brewer’s veto letter for Senate Bill 1041, which would have cut the rate at which a business’ property is assessed if it committed to constructing or expanding in Arizona. The bill was meant to complement the larger, business-friendly tax package passed earlier by the Legislature. Broome says if a policy effort emerges to resurrect some of those ideas, GPEC will support it with data and technical expertise.

4. Focus on science and technology. GPEC established an Innovation Council last summer whose mission is to better understand and cultivate opportunities in the high-tech sector, says GPEC board member Steve Shope, president of Sandia Research Corporation and a member of the council.

For more information about GPEC and CEO/President Barry Broome, visit gpec.org.

Arizona Business Magazine January/February 2012

 

Young Professionals - AZRE Magazine November/December 2011

Young Professionals Mentoring Up

BOMA’S YOUNG PROFESSIONALS REAPING BENEFITS OF LEARNING FROM ESTABLISHED INDUSTRY LEADERS

The young professionals of BOMA Greater Phoenix knew that the seasoned veterans they met at the organization’s events were a wealth of information.

Some had 20 or more years experience in property management and had weathered their share of mistakes and industry ups and downs.

So how could young professionals tap into that brain trust? They appreciated the peer mentoring available through BOMA’s special events and conferences, but they wanted more.

Like good problem-solving professionals, they came up with an answer: a formal mentoring program — Mentor Society of BOMA Greater Phoenix.

Since its inception in August, the Mentor Society has served as a way for people at the front-end of their careers to glean information, knowledge and wisdom from seasoned professionals in a personal, one-on-one setting.

“These are people who have been in the industry for 10, 20, 30 years and they have all this knowledge,” says Jamie Strecker, a property manager with FM Solutions and a member of BOMA Phoenix Young Professionals Group (YPG). “They’re what we’re calling our ‘elite.’ ”

Mentors who agree to be in the program are listed on the BOMA website, as are associate members — vendors who have worked in fields that serve or are affiliated with property management.

The program is self-managed, Strecker says, which means young professionals can contact a mentor on their own initiative by going to the BOMA website and clicking on a mentors’ biography and contact information.

They are then free to contact that person to set up a 30-minute interview.

Mentors must have at least five years experience in the commercial real estate industry, be a current member of BOMA, and have served on three or more committees or have sponsored five or more events.

Mentors agree to be an active participant by providing insight into the industry, to maintain confidentiality and professionalism, and to respond to a request within 24 hours.

The goal of the program is to increase knowledge among the young professionals of BOMA and to help the next generation of professionals feel vested in their fields and in the BOMA organization, says Colleen LeBlanc, a general manager with Universal Protection Services and an associate member of the YPG.

BOMA is all about building relationships, she says, and this is a great way to do that and strengthen the organization’s base. It’s also a good way to get your business in front of key players in the field.

Young Professionals Group member Mike Amico says he was eager to speak with mentor Tom Pritscher, an associate member mentor who is a commercial general contractor with ties to the facilities management profession since 1993.

Pritscher, Amico says, always seemed to draw a crowd at BOMA functions, so when he called him to “pick his brain” about how to develop network contacts and how to best take advantage of his BOMA ties, he knew Pritscher would have sound advice.

“It turned into a very good conversation,” says Amico, who is an insurance agent at Bennett & Porter Insurance Services, where he specializes in commercial property. “I felt like it was a very valuable use of my time. I asked Tom for 30 minutes and he gave me an hour.”

Pritscher, president of TEPCON Construction, Inc. in Tempe, says he was honored to be included as a mentor, and says he sees the value in passing down experience and knowledge. The Mentor Society is also a great way to take networking to a higher level.

“Even if you didn’t learn anything, you walk out of there knowing someone you didn’t know before,” he says. “But for people to share their experience with you at no cost is tremendous.”

He says, only half joking, “I’m thinking I may want to talk to a property manager — really, you can never stop learning.”

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Read about BOMA’s Tools of the Trade here.

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AZRE Magazine November/December 2011

BOMA Greater Phoenix - AZRE Magazine November/December 2011

BOMA Greater Phoenix: Tools Of The Trade

BOMA Greater Phoenix hammers home a trio of initiatives: advocacy, smart sustainability, better management practices

It’s still a jungle out there.

Commercial vacancy rates remain high, industry figures show, with some improvement in the industrial sector and a slight downtick in retail. But rates for office properties seem stuck at a persistent 26 percent. Additionally, average asking rental rates per square foot in all categories are still way down from their pre-recession highs.

In these uncertain times, property professionals can turn to BOMA Greater Phoenix to get the tools they need to operate in an economy that is only slowly emerging from recession.

“You need to know you’re doing the right things with your limited resources,” says Susan Engstrom, a senior real estate manager with ACP Property Services, LLC and a BOMA Greater Phoenix member since 1995.

A professional association such as BOMA Greater Phoenix has tremendous intrinsic value for those who tap into its extensive network of property professionals, Engstrom says. These are the people who can help you with either the small, incremental changes that make a difference in your bottom line or the big legislative policy changes that can have a multi-million dollar impact on the local commercial real estate market.

BOMA GREATER PHOENIX HAS MAJOR INITIATIVES UNDERWAY IN THESE IMPORTANT AREAS:

Advocacy

BOMA Greater Phoenix is a voice for the needs of the commercial property management industry, creating channels of communication with federal, state, and local lawmakers, say Engstrom, who is co-chair of the Government Affairs and Community Awareness Committee.

Last legislative session, Engstrom says members encouraged state lawmakers to pass Senate Bill 1001, the jobs incentive package that included a provision to reduce commercial property tax assessment ratio from 20 percent to 18 percent over four years starting in 2013.

This April, during BOMA Greater Phoenix’s annual Advocacy Day, 14 people from the chapter converged on the capitol to thank legislators who voted for the package and discuss other issues that may impact commercial real estate, says Janice Santiesteban, a member of the Government Affairs and Community Awareness Committee.

In her first two years on the committee, Santiesteban says she participated as a member of the group, but after being mentored by committee members was able to lead discussions, including one with  Congressman Ben Quayle (R-Az).

They asked Quayle to co-sponsor legislation to permanently reduce the timeline for depreciating leasehold improvements to 15 years and legislation to promote energy efficiency retrofits to commercial buildings through voluntary incentive programs.
BOMA’s advocacy has not only helped her advance the causes of the commercial real estate industry, she said it has helped her improve her professional footing.

“It’s the ability to have such a wide range of people to draw off of for knowledge,” says Santiesteban, a real estate manager for CB Richard Ellis. “For me, it’s important to be able to have that knowledge and say to my owner, ‘This is what I’m doing for you.’ I don’t think I would be able to do my job the way I do if I didn’t have BOMA.”

This year committee members are making an effort to contact U.S. Congressmen and Senators during the week each month they are in their home districts.

“It makes them aware of who BOMA is and what we stand for,” Engstrom says. “And we let them know, if there are any issues that come before them that impact the commercial real estate industry, give us a call.”

Smart Sustainability

In these economic times, it is important for building owners and managers to decrease energy and water consumption — and thereby boost their bottom lines.

BOMA Greater Phoenix’s Green Building Committee provides opportunities for property professionals to save energy, recycle waste and use green products and services.

One tool is the Kilowatt Krackdown program, a citywide competition open to non-members that steers owners and managers to the U.S. Department of Energy’s Energy Star benchmarking software.

Dave Munn, chief technical officer at Chelsea Group, Ltd., and chair of the committee, says benchmarking is a good way for building managers or engineers to track and assess energy and water consumption, with the aim of improving efficiencies.

“How can you manage what you don’t measure?” Munn asks.

BOMA Greater Phoenix awards property and facility managers who rate the highest in each of nine categories and those who show the most improvement from one year to the next.

Kilowatt Krackdown is one step in aligning the chapter with BOMA International’s 7-Point Challenge: to decrease energy consumption in commercial buildings by 30 percent by 2012. To date, 400 properties have joined the program.

BOMA Greater Phoenix offers free training sessions to property professionals four times a year, with Arizona Public Service and Salt River Project each sponsoring two sessions.

They walk participants through Portfolio Manager software, Munn says, and reassure participants that all data is held in strict confidence and never released to a third-party.

Munn says often participants don’t have to make big capital investments in their properties to make them more efficient. Sometimes, something as simple as raising awareness and making behavior changes can make a big difference to a bottom line.

Better Management Practices

BOMA Greater Phoenix has programs designed to encourage better management practices, and Engstrom says the BOMA 360 Performance Program is a promising one.

The BOMA 360 program evaluates six major areas of building operations and management and measures a building’s performance against industry standards.

Participants must apply and have four prerequisites in place, including having a standard operating procedures manual, a formal maintenance program and benchmarking via the Energy Star system.

The BOMA 360 designation not only improves a building’s operations, it’s a good way for a building to stand out and be more attractive to tenants.

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AZRE Magazine November/December 2011

Local Initiatives Support Corp. - AZRE Magazine September/October 2011

Local Initiatives Support Corp., Raza Development Fund Capitalize $20M Loan Fund

Cities along the light rail to benefit from $20M development loan fund, capitalized by Local Initiatives Support Corp. and the Raza Development Fund, to build affordable housing and other sustainable amenities.

Picture this:
You get on Metro light rail at your workplace in Phoenix and disembark in Mesa in front of your favorite organic grocery store. A shaded pedestrian path allows you to walk to your home on the 10th floor of a new apartment tower, which is populated by other working families. On the way you pick up your child at a local charter school.

There’s no car, no gas burned, no miles of driving on asphalt freeways.

Pipe dream? Perhaps not.

This type of urban development — denser, pedestrian-oriented, close to public transportation — may be more possible than you think.

A $20M loan fund for developers aiming to build affordable housing and other amenities along the Metro light rail line should spark activity in the Valley’s nascent urban development market.

Right now, says Mesa Mayor Scott Smith, that market is relatively immature and doesn’t have a critical mass of developers who are willing to risk financing urban projects.

Smith recently joined Tempe Mayor Hugh Hallman and Phoenix Mayor Phil Gordon — both of who have worked to promote transit-oriented development in their light rail cities — to tout the importance of the Sustainable Communities Development Fund.

Capitalized jointly by the Phoenix office of the Local Initiatives Support Corp. and the Raza Development Fund, the fund is expected to grow, hopefully reaching an eventual goal of $50M, says Shannon Scutari, who has been hired as a consultant by Local Initiatives Support Corp.

Scutari is coordinating efforts of the Sustainable Communities Working Group, a coalition of state, local, regional and non-profit organizations that are working to make equitable transit-oriented development a reality.

The coalition is a “signature effort,” Scutari says, a broad-based, intergovernmental, public/private partnership of people who share a goal: fostering sustainable, affordable urban neighborhoods near mass-transit corridors.

It’s new territory, far different than the development that spawned suburban sprawl, with far-flung housing developments connected not by a sense of community or shared-purpose, but by asphalt.

“This is not business as usual,” says Teresa Brice, director of Local Initiatives Support’s Arizona office, “This is something that will require (developers) to do something a little different than build three units per acre.”

Local Initiatives Support Corp. has hired a consultant to do a feasibility study to determine the affordable housing needs along the light rail line.

The study will attempt to determine the capital needs of the development community, assess what each jurisdiction will be able to bring to the table, and determine what the philanthropic sector can contribute.

Finally, Brice says the study will recommend how to structure the fund and create joint underwriting standards to govern it.

But, Brice and Scutari say they already are considering five or six proposals and may go ahead with one or more even if the study is not finished.

The fund will provide seed money or bridge funds that allow a developer to get started on a project.

Funding will not be limited to federal or local definitions of low-income housing. Coalition members will have discretion to examine each neighborhood to determine its needs, she says, whether that is affordable housing, a charter school, a community health center, or a small business.

A proposal submitted by developer Eric Brown seeks funding for a small apartment complex — perhaps nine to 12 units—at Fifth and Roosevelt streets.

Details are still in flux, but Brown says he envisions each unit costing between $600 to $950 a month in rent — well within reach of the commuters, ASU students and other downtown dwellers who use the light rail.

“There’s a lot of positive buzz about urban housing and living in the downtown right now,” says Brown, who is known for his urban developments Artisan Lofts, Artisan Village and Artisan Parkview by Chase Field.

“It takes some expertise — it’s not brain surgery but it does require a developer to understand how an urban person wants to live and what they will need,” Brown says.
And that is a process that is well underway, thanks to the light rail, Mesa’s Smith says.
“This could set the stage and create a foundation for private investors to come in and for the capital markets to adjust and recognize they should cut a check for the types of investment I think will pay off,” Smith says.

Currently the rail line extends only one mile into Mesa, ending just east of Dobson Road. But an extension is planned that will traverse downtown Mesa and end just east of Mesa Drive.

Then, Smith says Mesa hopes to spur the type of redevelopment that Tempe and Phoenix have witnessed along portions of the line. Hallman has credited the light rail for spurring $2.5B in redevelopment along Apache Boulevard.

“Individual projects in individual cities create a patchwork quilt of development,” Scutari says. “This is really a push for a regional policy approach” to development along the light rail. “This is the connective tissue for the corridor.”

For more information about the Local Initiatives Support Corp. and the Raza Development Fund, visit www.lisc.org or www.razafund.org.

 

AZRE Magazine September/October 2011

 

Solar Panels - AZRE Magazine July/August 2011

Solar Panels And Installations Make Good Financial Sense

Figuring out the bottom line return on investment figures for installing solar panels on commercial buildings is a bit like hitting a moving target. Incentives from utilities are apt to change and sow uncertainty in the market, thus access to capital can be iffy in these challenging economic times.

But some business owners who have installed systems in the past year agree: The right incentive package from Arizona Public Service or Salt River Project, combined with federal and state tax incentives, makes solar a good financial — as well as environmental — bet.

Here is a snapshot of two businesses that managed to put the right ingredients together.

Cowley Companies and APS

Cowley Companies, a Phoenix real estate investment firm, placed one of the largest commercial rooftop solar arrays in the country on one of its warehouses near 25th Avenue and Buckeye Road.

The project cost $11.5M and includes 7,872 panels, which generate about 2.4 megawatts of power. According to CEO Mike Cowley, the solar array is producing half of the electricity needed in the 850,000 SF building, which includes tenants with industrial refrigeration requirements. His annual bill had been running about $1M.

Cowley says he had to sign a non-disclosure agreement with APS and cannot reveal what the utility company is paying him per kilowatt hour, but the agreement obligates APS to pay incentives until 60% of the project costs — the amount he borrowed to finance the project — is paid off. The incentive payments cover the loan payments. Cowley estimates that will take about 12 years.

He’ll recoup 30% of the cost through a federal tax credit. Additionally, tenants now reimburse him for power used. With that mix of incentives and payments, he calculated his self-financed portion of the project, about 10%, will be paid off in about six years.

With a 25-year warranty on the panels, the decision to erect the array made good financial sense, Cowley says.

In 2009, APS established a reverse-auction system that requires commercial entities to bid for an incentive package. Spokesman Steven Gotfried says APS scores each application and awards the bid to those who produce the most electricity for the lowest incentives.

APS’ calculator takes into account the system size, the amount of energy it is expected to produce, the incentive requested and years of payment. The lower the score, the smaller the incentive per kilowatt hour requested. Incentives are then awarded starting with the lowest score. This continues until all the funds are allotted. It’s a competitive, market-driven process designed to lower incentives.

Lower incentives, Cowley says, would have made his deal less feasible.

“People are not going to get excited about a 20-year payback,” he says. Businesses may even “be waiting for SRP and APS to bring the rate back up to where solar makes sense again.”

Gotfried says APS is trying to find the right balance between offering too few and too many incentives, with a finite pool or resources.

“The goal at the end of the day is to drive down the cost of solar,” he says. “The incentives weren’t meant to go on forever, they were meant to get things started.”

The price of solar panels has dropped 50% in the past three years, says Lee Feliciano, president of the Arizona Solar Energy Industries Association and a solar developer with CarbonFree Technology.

There may come a time, he says, when the industry no longer offers incentives for the panels, but that day is not yet on the horizon.

“The incentives are there to position the industry,” Feliciano says. “A lot of the biggest industries in the country would not be here without incentives.”

Even with incentive amounts dropping, installing solar panels on a commercial building can still be a good deal, says Gary Held, sales and marketing manager with Harmon Solar, which worked on the Av-Air project.

With incentive rates running around 10 cents to 12 cents per kilowatt hour, someone with access to capital can have a system paid off in about eight years. With a 20-year production-based incentive, that still makes financial sense, he says.

An owner who leases a system can see the end of lease payments in about 12 years and have eight years of incentives.

“We shout from the rooftops: If you are a commercial business owner with cash or access to capital with good credit, putting solar on your rooftop is a sound investment,” Held says.

Av-Air and SRP

“I am extremely satisfied with the way it is turning out for us,” says Bob Ellis, president of Reason’s Aviation, the parent company of Av-Air, a Chandler-based company that offers aftermarket parts and services to the airline industry.

Harmon Solar of Phoenix installed a 151,800-watt photovoltaic system made up of 550 solar panels on Av-Air’s rooftop, which is equivalent to about 20 residential-sized systems.

Ellis says the total cost of the project was $808,000. About 30% of the cost was covered by a federal grant and $25,000 will come back to him as a state tax credit, which is available to companies whose solar systems are operational this year.

The solar array covers 100% of his energy needs and SRP, he says, is paying him an incentive of 21.4 cents per kilowatt hour for 10 years, which comes out to $6,000 a month. Add that to the approximate $4,000 a month his tenants pay him for solar generated electricity and the fact that he’s no longer paying an electric bill, and the decision to go solar was “a no-brainer.” Ellis says it will take him about four years to pay back his $560,000 in up-front, out-of-pocket expenses.

The only downside to the process occurred when none of the four or five banks he does business with would lend him money for the out-of-pocket expenses, saying they were too unfamiliar with the incentive process.

Ellis also concedes it may be difficult for companies today to replicate Av-Air’s circumstances because SRP’s incentives are much less generous than they were in 2009.

“It was a really good deal and I got in on it just at the right time,” he says.

Both SRP and APS have production based incentive (PBI) programs for medium- and large-sized commercial customers. PBIs pay a customer over time based on the amount of energy produced, as opposed to the up-front incentives given to homeowners or small-business owners.

SRP now offers a PBI of 12 cents per kilowatt hour for 20 years for the first two megawatts of power applied for, but lowers the funding to 11 cents and then 10 cents respectively for each successive two megawatts. Its annual pool is for six megawatts.

Lori Singleton, SRP manager for sustainable initiatives and technology, says the utility simply has a finite set of resources and is trying not to over-subsidize an emerging industry.

“As the cost of solar decreases and demand increases, we have restructured our solar incentives to reflect that,” Singleton says. “It has been our intent from the beginning to reduce the rates as prices come down, so one day the industry can stand on its own without incentives.”

Reducing incentives also allows SRP to provide them to more customers, she says.

For more information about solar panels and incentive programs, visit srpnet.com or aps.com.

AZRE Magazine July/August 2011

Solar Companies - AZRE Magazine March/April 2011

The Fight To Lure Solar Companies To The Valley Is Fierce

The fight to lure solar energy companies to Arizona will be fierce in 2011, as states become more competitive in their efforts to land solar companies that are themselves battling for funding in a stagnant capital market.

“(This year) will be more competitive than 2010 because the states are feeling more pressure and the idea that we’ll emerge out of this recession soon is just falling out of people’s heads,” says Barry Broome, president of the Greater Phoenix Economic Council, a major player in the efforts to bring solar and renewable energy companies to the Valley.

At least 10 renewable energy companies have located or announced plans to locate in Arizona since the state Legislature passed a tax-incentive program in 2009, Broome says. The most notable players are Chinese giant Suntech Power Holdings Co., the leading solar manufacturer in the world, and Power-One, which makes solar and wind inverter products.

Their arrival not only burnishes Arizona’s reputation as a potential leader in the effort to harness renewable energy, but also creates a burgeoning supply chain for solar energy manufacturers.

For example, United Kingdom-based FAIST GreenTek plans to open its first U.S. plant, a 56,000 SF facility in Phoenix, to provide metal steel containers for Power-One’s inverter boxes. Additionally, Spanish glass manufacturer Rioglass located to Arizona to provide materials for Abengoa’s Solana plant near Gila Bend, which is expected to be the largest concentrating solar energy power plant in the world.

“The tentacles that are caused by these companies will grow long over time,” says Eran Mahrer, director of renewable energy for Arizona Public Service, which will purchase the electricity generated at the Gila Bend site.

GPEC currently is working to lure two solar companies to the Valley, Broome says, adding, “I’m not saying we won’t see 10 companies again, but it’s much tougher. The industry is maturing and the capital markets haven’t recovered.”

He believes the market will see a roll up, or a decline in smaller, newer companies and will settle on fewer, major players.

The impact of solar companies on the commercial real estate market is significant. Solar-related companies gave a shot in the arm to Arizona’s persistently high industrial vacancy rates, says Pete Wentis, an industrial broker with CB Richard Ellis.

The second quarter of 2010 saw positive absorption in the industrial sector for the first time in a year and a half, Wentis says. By 4Q 2010, the market saw 4.4 MSF of positive absorption, which lowered the industrial vacancy rate in Maricopa County from 16.1% to 14.7%. Wentis estimates that solar companies contributed between 15% to 20% to that absorption.

The 14.7% vacancy rate means there is 40 MSF of industrial space available.

It is difficult to say whether there is enough available inventory for solar-related companies, as they don’t all require the same type of industrial space, Wentis says, adding that industrial is the most diversified of all the tenant types of space.

Solar proponents agree that Arizona is just starting to establish itself as a leader in the solar industry, but more needs to be done.

“Are we doing a good job? Yes,” Broome says. “Are we doing a great job? No. Could we be doing better? Yes.”

Factors that helped draw solar companies here and drive the production of solar generation include state tax incentives, utility incentives to customers for rooftop photovoltaic systems, a federal grant program that has been extended for one more year, and state renewable energy standards that require utilities to generate 15% of their kilowatt-hours sold from renewable sources by 2025.

Finally, the total installed cost of photovoltaics has dropped 40% in three years due to several factors, including better production, innovation, and the emergence of China into the market, says Nancy LaPlaca, a policy advisor and spokesperson for Arizona Corporation Commission commissioner Paul Newman.

Stable and well-thought-out energy policies would help the industry, Broome says, adding that the state has taken a “herky jerky” approach to renewable energy. A federal energy standard also would bring stability to the market, he adds.

The state also should discuss ways to export green energy, LaPlaca says. Currently, Arizona exports 30% of its electricity to California, but that is “brown” energy derived from coal, natural gas and nuclear.

For more information about GPEC and its efforts to bring solar companies to the Valley, visit gpec.org.

AZRE Magazine March/April 2011

Al O'Connor - AZRE Magazine November/December 2010

BOMA Instructor Al O'Connor A Go-To Man

BOMA Instructor Al O’Connor, Chief Engineer for The Great American Tower, a Go-To Man

Being a good chief engineer for an office building is a lot like being a good magician. Everybody loves what you do, but not everyone realizes how much hard work, practice and expertise goes into making your job look easy.

Take for example Al O’Connor, building engineer at The Great American Tower, 3200 N. Central Ave. Inside and out, visitors can see O’Connor’s handiwork: a clean, well-maintained, 24-story tower that houses a variety of professionals from attorneys and account payroll firms to various shops.

But what they don’t often see is the expertise required to keep a 25-year-old high-rise functioning well enough to make tenants feel comfortable, secure, and as if they want to stay put.

“If a tenant doesn’t feel content in a building, he won’t stay when the lease expires,” says Susan Engstrom, senior real estate manager for Tiarna Real Estate Services. O’Connor estimates he cut operating expenses by $1 PSF in the 335,000 SF building by automating the HVAC and lighting controls, and by raising the building’s Energy Star rating from 81 to 90. Updating inefficient mechanical and electrical systems helped save $45,000 in recurring annual maintenance, as well.

“The way the market is right now, if our building was operating the way it was five years ago, we wouldn’t be realizing the savings,” he says.

An engineer’s ability to maintain a building is an invaluable form of tenant relations. Poor air conditioning, broken elevators, dead landscaping, plumbing leaks — all sap energy from what should be a vibrant workplace.

O’Connor has overseen the building’s mechanical and operating systems for five years as part of Tiarna. In that time, tenants have faced no serious system failure of any kind, Engstrom says.

Typically, a chief engineer monitors and keeps all of the building systems working, including those for air conditioning, electricity and water. While they call in vendors as needed to do upkeep or repairs, engineers often perform day-to-day preventive maintenance and minor repairs.

Most important, they keep the property manager updated on the state of the building and what long-term work needs to be planned and budgeted.

“It helps if I can make an informed decision rather than allow someone to take advantage of me,” O’Connor says.

O’Connor has shared his expertise as an instructor with the Building Owners & Managers Association of Greater Phoenix, which promotes the interests of the commercial real estate industry in the Valley. One of its aims is to educate building management professionals about best practices.

O’Connor has taught BOMA’s Building Design courses, where participants can work toward the association’s Real Property Administrator (RPA) or Facilities Management Administrator (FMA) designations. The designations signify that a recipient is well-versed in all aspects of property management and building maintenance, respectively.

In fact, the U.S. Navy last year asked O’Connor to teach these subjects and Building Designs and Operations to its naval building administrators in Reston, Va.

For more information about BOMA and Al O’Connor, visit bomaphoenix.org.

AZRE Magazine November/December 2010

 

luxuryrealestate

Housing Crash is Hurting The Valley’s Luxury Real Estate Market

A meticulous five-bedroom, remodeled home sits nestled in one of Paradise Valley’s most beautiful neighborhoods. But the most remarkable thing about this home is not its one-acre lot, new flooring or up-to-date kitchen. It’s the “For Sale” sign that has graced the front yard for two years.

Two years, two different realty companies and several price reductions later, the home finally is generating some energy and a contract is in the works. But, according to information from Coldwell Banker’s luxury home experts with The Walt Danley Group, that never would have happened if the price hadn’t dropped 20 percent in one year and 40 percent from the time it first went on the market.

This scenario is playing out to varying degrees throughout the Valley’s high-end home submarkets, from the Biltmore area to Paradise Valley to North Scottsdale. Real estate professionals say that while wealthy clients clearly are insulated from some of the economic hardships that face production-home buyers, they are not completely immune from them.

Inventory is high, homes are sitting on the market longer and Realtors must convince sellers to lower their expectations on price.

“What’s happening in the marketplace,” says Sandra Wilken of Sandra Wilken Luxury Properties, “is we are trying to get our sellers to be extremely realistic on their list price. The ridiculous prices of three years ago are not going to happen.”

In 2007, Wilken says buyers in Paradise Valley purchased 133 properties worth $2 million or more. The most expensive home sold for $8.8 million. This year, 62 homes have been sold in that range, with the highest fetching $7.62 million.

Information from the Arizona Regional Multiple Listing Service in two high-end zip codes, Paradise Valley’s 85253 and North Scottsdale’s 85256, shows inventory climbing through 2007 and the first half of 2008 compared to accepted offers. The average price for a property sold in Paradise Valley in September 2006 was $2.328 million. This past August it was $1.606 million.

Break it down
It is important to understand that in the luxury home market, different segments are performing in different ways.

Buyers who can afford a $2 million to $4 million home, or higher, are more insulated from current market conditions.

Tom Fisher calls them “program buyers,” successful and affluent business people who are on track to build homes that some call “family resorts.”

Fisher, owner of Fisher Custom Homes, builds houses that start at $2 million. His clients’ income or cash flow often is tied to the stock market, and while that has bred caution in their spending, in his experience it hasn’t derailed many building plans.

Walt Danley agrees there still is activity in the high-end market, but poor economic conditions fostered by sub-prime lending have, in a sense, trickled up.

Credit crunch
Credit in the form of jumbo loans, or loans for more than $417,000, has dried up as well. Several years ago, buyers could purchase a $1 million home with as little as 5 percent down, says Dean Bloxom, president of iMortgage Services in Phoenix. Some banks asked for 10 percent on $2 million.

Today, loans are available but banks want at least 20 percent down, and clear, documented evidence of someone’s assets and income — a correction that should have happened earlier, Bloxom says.

There are indications the market may pick up some velocity, says Cionne McCarthy, an agent with Russ Lyon Sotheby’s International Realty.

The Luxury Home Tour, which showcases homes in Paradise Valley and the Arcadia and Biltmore districts, recently released figures that show homes in August spent less time on the market.

From Aug. 8 to Sept. 6, homes spent an average of 151 days on the market, compared to an average of 223 days between August 2007 and August 2008.

Luxury Home - AZ Business Magazine November 2008

Housing Crash Hurts The Valley’s Luxury Home Market

High-End Distress: The housing crash is now hurting the Valley’s luxury home market


A meticulous five-bedroom, remodeled home sits nestled in one of Paradise Valley’s most beautiful neighborhoods. But the most remarkable thing about this home is not its one-acre lot, new flooring or up-to-date kitchen. It’s the “For Sale” sign that has graced the front yard for two years.

Two years, two different realty companies and several price reductions later, the home finally is generating some energy and a contract is in the works. But, according to information from Coldwell Banker’s luxury home experts with The Walt Danley Group, that never would have happened if the price hadn’t dropped 20 percent in one year and 40 percent from the time it first went on the market.

This scenario is playing out to varying degrees throughout the Valley’s high-end home submarkets, from the Biltmore area to Paradise Valley to North Scottsdale. Real estate professionals say that while wealthy clients clearly are insulated from some of the economic hardships that face production-home buyers, they are not completely immune from them.

Inventory is high, homes are sitting on the market longer and Realtors must convince sellers to lower their expectations on price.

“What’s happening in the marketplace,” says Sandra Wilken of Sandra Wilken Luxury Properties, “is we are trying

to get our sellers to be extremely realistic on their list price. The ridiculous prices of three years ago are not going to happen.”

In 2007, Wilken says buyers in Paradise Valley purchased 133 properties worth $2 million or more. The most expensive ho

me sold for $8.8 million. This year, 62 homes have been sold in that range, with the highest fetching $7.62 million.

Information from the Arizona Regional Multiple Listing Service in two high-end zip codes, Paradise Valley’s 85253 and North Scottsdale’s 85256, shows inventory climbing through 2007 and the first half of 2008 compared to accepted offers. The average price for a property sold in Paradise Valley in September 2006 was $2.328 million. This past August it was $1.606 million.

Break it down
It is important to understand that in the luxury home market, different segments are performing in different ways.

Buyers who can afford a $2 million to $4 million home, or higher, are more insulated from current market conditions.

Tom Fisher calls them “program buyers,” successful and affluent business people who are on track to build homes that some call “family resorts.”

Fisher, owner of Fisher Custom Homes, builds houses that start at $2 million. His clients’ income or cash flow often is tied to the stock market, and while that has bred caution in their spending, in his experience it hasn’t derailed many building plans.

Walt Danley agrees there still is activity in the high-end market, but poor economic conditions fostered by sub-prime lending have, in a sense, trickled up.

Credit crunch
Credit in the form of jumbo loans, or loans for more than $417,000, has dried up as well. Several years ago, buyers could purchase a $1 million home with as little as 5 percent down, says Dean Bloxom, president of iMortgage Services in Phoenix. Some banks asked for 10 percent on $2 million.

Today, loans are available but banks want at least 20 percent down, and clear, documented evidence of someone’s assets and income — a correction that should have happened earlier, Bloxom says.

There are indications the market may pick up some velocity, says Cionne McCarthy, an agent with Russ Lyon Sotheby’s International Realty.

The Luxury Home Tour, which showcases homes in Paradise Valley and the Arcadia and Biltmore districts, recently released figures that show homes in August spent less time on the market.

From Aug. 8 to Sept. 6, homes spent an average of 151 days on the market, compared to an average of 223 days between August 2007 and August 2008.

Arizona Business Magazine November 2008

FutureShock

State Leaders Prepare The Copper State For Explosive Growth

An official letter from the state’s Lawn and Pool Use Enforcement Division says you must choose between taking out your green lawn or draining your swimming pool. You can’t have both, as the state has been severely restricting outdoor water use ever since the population of Central and Southern Arizona swelled to 10 million people around 2040.

You opt to keep the pool because urban sprawl and the heat-island effect have caused Arizona to break yet another record — the number of summer days when the temperature fails to drop below 100 degrees.

But time in the pool is getting rarer. Your daily commute from Pinal County to Phoenix is a grinding two hours. You’d like to work closer to home, but job centers and transportation routes haven’t reached your relatively new subdivision.

Welcome to the Sun Corridor, circa 2050.

With foresight, unified planning and a significant investment in the state’s infrastructure, the above scenario need not play out.

Without it, according to the author of a recent report on Arizona’s future, a part of the state risks becoming, not the next Los Angeles, but its bland sister — the San Fernando Valley.

“You’ll essentially get existing urban development patterns spread all over the place in a seamless, homogenous, urban fabric of chain stores, fast food restaurants and red stucco houses,” says Grady Gammage Jr., a principle author of “Megapolitan — Arizona’s Sun Corridor,” published by Arizona State University’s Morrison Institute for Public Policy.

The report predicts that land stretching from the middle of Yavapai County to western Cochise County to the Mexican border will someday merge into one integrated super metropolitan area — a “megapolitan” dubbed the Sun Corridor.

That doesn’t mean there will be uninterrupted development between Prescott and Tucson — there is too much Indian and federal land in the way. Instead, the corridor’s economies and commuting patterns will merge.

Imagine a series of overlapping circles emanating from Pima, Pinal and Maricopa counties. According to a measurement developed by scholars at the Metropolitan Institute at Virginia Tech, if at least 15 percent of workers from one area commute to another, those commuting patterns have merged.

Already, Pinal County sends 40 percent of its workers into other regions, most likely north to Maricopa County.

“That means Maricopa and Pinal are already merged,” Gammage says.

Some time between 2010 and 2020, Pinal is expected to send more than 15 percent of its workers south to Pima County, Gammage adds, creating an economic bridge between Phoenix and Tucson.

The U.S. Census designates these areas with cross-region commuting patterns as “combined statistical areas,” something the “Megapolitan” report says may happen by the 2020 decennial census.

The Sun Corridor will be one of 10 megapolitan areas in the United States. By 2030, it could be home to 10 million people and 4.5 million jobs, making it a potential hotbed of wealth and productivity. According to the report, the nation’s office market and high-tech clusters are in megapolitans.

However, as the Morrison Institute report asks, will Arizona be able to harness the staggering potential of such an area?

That would require a whole new level of dialogue and cooperation between the five councils of government, six counties, 57 municipalities and 300 other governmental units spanning the 30,000-square-mile area that would make up the Sun Corridor.

And the state is just at the beginning of that process, Gammage says, adding, “We’re behind the curve.”

Shannon Scutari, on the other hand, believes she sees progress every day.

As Gov. Janet Napolitano’s policy advisor for growth and infrastructure, Scutari is on the front lines of important growth initiatives, including the long-term planning exercise developed by the Urban Land Institute, AZ One – A Reality Check for Arizona, held last spring at the Phoenix Convention Center.

Statistics from the Morrison Institute

AZ One assembled more than 300 people from Maricopa and Pinal counties and guided them through alternative growth scenarios with the purpose of generating discussion and consensus.

“They’re talking to each other, there’s no doubt about it,” Scutari says of the disparate public and civic leaders she encounters in her job. “Some of them are actually even listening to each other.”

Scutari adds that the governor hopes to see the AZ One exercise duplicated in the Tucson and Flagstaff areas.

While her office is trying to bring several growth issues into sharp relief, Scutari says a pressing challenge is the state’s need to invest in transportation infrastructure.

That is why the Arizona Department of Transportation has begun a $7 million statewide study and is working with cities, tribal governments, land-use planners, regional transportation organizations and others to assess the state’s infrastructure.

One important feature of the Statewide Transportation Planning Framework, Scutari says, will be to connect land-use decisions with transportation infrastructure, some


thing that has never been done. The study already has outlined some of the most critical transportation needs.

Right now, the governor is backing an initiative campaign to put on the November ballot a one-cent increase in the state’s sales tax. The increase would raise $42 billion over 30 years to pay for transportation infrastructure.

The money is needed as Arizona’s roads and freeways are “only going to get worse in the next 25 years,” warns Tim James, director of research and consulting for ASU’s L. William Seidman Research Institute.

James headed a team that spent a year studying the state’s infrastructure and its ability to handle growth. The resulting report did not endorse the Napolitano-backed initiative, but it did say that without changes in funding mechanisms, the state cannot keep up with growth.

“There will be longer commutes, there will be more time spent in traffic, you’ll be traveling at lower speeds,” James says. “It’s going to be more congestion and less safe journeys. The road system is going to become unacceptably poor.”

The report, commissioned by the Arizona Investment Council, formerly known as the Arizona Utility Investors Association, concluded that accommodating growth is going to be “very, very costly” — probably $417 billion to $532 billion in the next 25 years.

In that time period:

  • Electricity demand will increase by about 85 percent, yet the state faces a funding gap in paying for new plants.
  • Just providing telecommunications services to the state’s current unserved population would cost up to $2 billion. Creating a state-of-the-art fiber network that would guarantee high quality telecommunications would cost about 10 times that.
  • Water delivery and treatment systems built decades ago will need to be replaced.

While it is impossible to predict exactly what the Sun Corridor will look like in 2040, planners do know generally where growth will occur.

Eric Anderson, transportation director for the Maricopa Association of Governments, says projections show most growth in Maricopa County will be in the West Valley as developable land in the east diminishes. Pinal County, where it meets the southeast corner of Maricopa County southeast of Queen Creek and the 275-acre state land parcel dubbed Superstition Vistas, will see a lot of growth as well. Finally, Anderson says, areas around Casa Grande and Maricopa will continue to expand.

According to MAG’s latest figures, there are about 1.8 million housing units already approved or entitled in various master-planned communities in Maricopa and Pinal counties.

Jay Hicks, co-chairman of the AZ One steering committee and a vice president at EDAW Inc., an architecture and environment consulting company, says people still can shape the character of future development, even in the face of all that entitled land.

Some parcels may need to be re-entitled as time passes and communities become more cognizant of the way land uses affect pollution levels and energy consumption.

Additionally, 40 to 50 percent of all commercial properties will need to be redeveloped in the next 15 to 20 years, Hick says.

Facing the challenges that come with growth seems daunting, but Scutari says there is “a sense ofoptimism” among the state’s stakeholders.

As Gammage put it: “There is an opportunity here, if we can seize it and get ahead of it, we can do something really special.”

Open Air Malls Continue To Gain in Popularity, 2008

Open Air Malls Continue To Gain in Popularity

Inside Out

Open air malls continue to gain in popularity

By Melissa Bordow

Open Air malls Continue to gain in popularity, 2008

On an unseasonably cool night in late May, shoppers meander the streetscapes of Scottsdale’s Kierland Commons, strolling among its upscale stores and restaurant patios. When it opened as part of a mixed-use development in 2000, Kierland heralded a new wave in outdoor shopping — the lifestyle center, also known as the urban village.

Sidewalks, curbside access to stores, landscaping and sit-down dining all combined to create an urban vibe, right smack in the middle of the suburbs, in this case, of North Scottsdale.

This scene — people shopping, dining, and relaxing al fresco — now is being played out across the Valley, from Tempe Marketplace at the confluence of the 101 and 202 freeways south to the new San Tan Village in Gilbert.

Open-air shopping, developers and analysts say, will continue to dominate the Valley’s retail landscape, shaping the way consumers shop, eat and spend their entertainment dollars.

“Everybody is wrestling with the exact formula,” says Robert Mayhew, vice president of commercial properties at DMB Associates Inc. “There’s Desert Ridge (Marketplace), the first of its kind with the big box power center and a lifestyle center. There’s Chandler Fashion Center, which is indoors but has an outdoor component. What is the right mix?”

In the past two years, developers have opened five high profile, open-air entertainment and dining retail centers: Vestar Development’s Tempe Marketplace, Westcor’s San Tan Village and the Promenade at Casa Grande, DeRito Partners’ Mesa Riverview, and The Ellman Companies’ The Village at Westgate City Center.

Westcor, a dominant force in Valley retail, is planning open-air environments for its next five developments, although that could change for those not already under construction if market conditions dictate, says Garrett Newland, vice president of development at Westcor.

Although it still embraces the enclosed-mall concept, Newland says Westcor has no plans on the drawing board for one. Westcor opened its last enclosed mall, Chandler Fashion Center, in 2001.

Meanwhile, conventional mall anchors such as Dillard’s, J.C. Penney and Macy’s are continuing to open in outdoor mall environments, typically in Westcor properties.

Some call it the “de-malling of America,” Mayhew says, adding, “Very few enclosed malls are being built any longer. Their days are almost gone.”

Ten years ago, enclosed regional malls represented about 15.5 million square feet of retail space in metro Phoenix, while outdoor power centers and lifestyle centers comprised about 15.1 million square feet, according to figures from Kammrath & Associates, a retail consulting firm in Phoenix. Since then, outdoor shopping mall space has more than doubled to 35.1 million square feet, while indoor space has remained relatively stagnant.

According to Kammrath & Associates, the trend started years ago with the advent of the power center, with its convenient vehicular access. Since then, the trend has only gained steam.

What is driving shoppers outdoors? Quite simply, many shoppers prefer the natural setting of an outdoor environment over the “sterility” of enclosed malls, says David Larcher, executive vice president of development for Vestar, which opened Desert Ridge Marketplace in 2001 and Tempe Marketplace last June.

“People are organic beings,” Larcher says. “They like, even in extreme climates like Arizona and Minnesota, to be outside. They like to see the flowers and smell the flowers, they like to feel the wind blow in their hair.”

Desert Ridge’s and Tempe Marketplace’s comfortable, often cozy gathering areas and their attention to detail create destination spots even for those with no plans to shop. For suburbanites who lack proximity to anything resembling a downtown or city center, this can be very appealing.

“A lot of indoor malls turned their back to the surrounding environment,” says Joe Murray, director of retail design for DAVIS. “Lifestyle centers gesture toward their environment and convey a sense of space and place.”

Outdoor configurations allow developers more flexibility to change a site or try something innovative, says Westcor’s Newland. It is easier and cheaper to add a building to an outdoor grid.

Building exteriors offer more diversity of architectural features, Mayhew says, which in turn provides more opportunity for branding or creating a singular identity.

Retailers like them because they pay 35 to 60 percent less to maintain common areas, Larcher says. These central area maintenance (CAM) costs climb when retailers pay to air condition mall interiors.

But it’s the air conditioning that many shoppers may miss during the Valley’s scorching summer months.

While sales at Westgate showed a slight decline in the summer, it was not a significant drop, says Tim Wright, Ellman’s senior vice president of real estate operations. Providing shoppers adequate protection with shade structures, wide awnings and landscaping seems to help them endure the heat. In addition, interactive water features, fountains and misting systems cool both the environment and shoppers.

“We can control the environment well enough in the summer to where it is comfortable to shop,” says Larcher, whose marketplace buildings are set apart to create maximum shade. He also notes that shopping revenues are seasonal and have their peaks and valleys anyway.

Cover July, 2008

Extensive market research shows that Valley shoppers still want that sense of community and pedestrian-friendly experience they find in outdoor settings, says Ken Himmel, president and CEO of Related Urban Development, which is developing CityNorth along with the Thomas J. Klutznick Company. CityNorth is a mixed-use project in the northeast Valley.

Himmel says “green space” with parks, courtyards and water features, along with covered parking, reduces the “heat island” effect produced in urban centers with vast parking lots and asphalt.

www.westcor.com
www.dmbinc.com
www.vestar.com
www.derito.com
www.ellmanco.com
www.kammrathandassociates.com
www.thedavisexperience.com
www.related.com
www.klutznickcompany.com

AZ Business Magazine July 2008 |