Tempe

East Valley development shows results of market health

Evidence of a healthy commercial real estate market can be seen throughout East Valley cities where economic development directors expect continued activity as a result of recent success stories and other big plans in the works.

The cities of Chandler, Gilbert, Mesa, Scottsdale and Tempe share a common goal to progress their communities through economic development that attracts new companies, creates jobs and keeps its residents near home to work, play and live.

How each city’s economic development director accomplishes this varies based on the unique traits and advantages that their cities have to offer.

Each director notes common variables driving new economic development and companies to their cities are based on location, access to a quality workforce, an amenity rich environment, affordability and incentives by the city.

They explain the impact of recent developments and the companies calling them home as well as other projects in the pipeline seen as significant economic development opportunities.

Rendering of an upcoming Kimpton Hotel that will be near the famous Flour Mill on Mill Avenue.

Rendering of an upcoming Kimpton Hotel that will be near the famous Flour Mill on Mill Avenue.

TEMPE 

The city continues to be a hotbed for class A office and multifamily developments while remaining a go-to destination for new innovation and technology companies.

Donna Kennedy, City of Tempe economic development director, says the city’s innovation and tech district feel attracts a lot of companies to develop in Tempe, which also happens to be home of Arizona State University.

That’s fitting since ASU was recently ranked the top innovation and technology university in the nation according to U.S. World and News Report.

Kennedy explains the presence of 60,000 students at ASU, in addition to partnerships with the university on projects, help attract tech and innovation start-ups to Downtown Tempe that aim to tap into the highly educated workforce and be nearby other companies in the same industry.

As a result, she says, “the Class A office space in Downtown Tempe and Tempe Town Lake has lower vacancies among all regional submarkets and higher rents.”

Other factors bringing companies to Tempe include easy access to surrounding freeways and Sky Harbor Airport plus an amenity rich environment in what’s known as the “most walkable city in Arizona,” which is also exceedingly bike friendly, Kennedy adds.

Convenient commuting to and through Tempe will also evolve in time as the city was recently awarded federal funding to expand the light rail downtown through Mill Avenue to the Apache Corridor.

Adding to the progression of Downtown Tempe, Kennedy mentions a project called 100 Mill that aims to transform the former Monti’s steakhouse and the abandoned Flour Mill into a new gateway to Mill Avenue.

The project will consist of renovations to both historic properties as well as the development of new class A office space and two hotels.

Another project Kennedy says is “something to keep an eye on” will be a 300-acre development called The Grand.

The city also recently announced plans and a partnership with ASU for the redevelopment of 20 acres to be a biomedical technology campus at the Tempe Center for the Arts.

Kennedy says this project is a two-year mission to repurpose the arts center into a collaborative environment for six to ten or more businesses that all work within the same industry.

“It is a win, win situation all around,” she adds.

MESA 

Santander Consumer USA in Mesa

Santander Consumer USA in Mesa

Bill Jabjiniak, City of Mesa economic development director, says, “Mesa is experiencing steady economic growth with some great development success stories and more to come.”

He adds there’s an increased demand for existing spaces as well as more speculative and industrial developments coming to the market.

One example is the 117,000-square-foot adaptive reuse project for Santander Consumer USA in Mesa’s Fiesta District, which will create nearly 1,000 jobs in the next three years with salaries averaging $51,000.

Jabjiniak says other companies looking at Mesa include tech companies wanting big square footages and to be near existing tech companies like Apple’s $2 billion, 1.2-million-square-foot global command center near Gateway Airport along the US-60 highway, now dubbed the Elliot Road Technology Corridor.

In addition, other manufacturing companies specializing in medical devices are increasingly interested in Mesa’s industrial sites like Dexcom, Inc. It now occupies 180,000 square feet of new space at a recently built facility at the Broadway 101 Commerce Park on the northwest corner of Broadway and Dobson Roads.

Jabjiniak says the city’s locally controlled Foreign Trade Zone and being one of the two cities in the state with a military re-use zone makes Mesa attractive to companies in addition to having easy access to freeways, an educated pool of workers, lower rental rates than most Valley submarkets and a streamlined entitlement process.

He explains the FTZ is unique in its ability to create subzones in attracting international companies that want to be able to move product in and out of that trade zone.

He adds that the military re-use zone at the Mesa Gateway Airport offers major advantages to companies too such as tax credits, transaction privilege tax and property class reclassification.

In Northeast Mesa just west of the Falcon Field Airport, a 63-acre tech campus is being planned to attract new medical device and other technology focused companies to the city. Jabjiniak hopes to be approved to break ground on this project in a little more than a year from now and mentions it is something to keep an eye on.

This area has significant infrastructure assets including large power capacity, water and waste water, and dark and lit fiber that are perfect for technology campuses, large power users and data centers.

Other developments to watch out for include the repositioning and renovation of empty retail centers in West Mesa and a potential ASU campus in Downtown Mesa that is still awaiting approval.

CHANDLER 

The City of Chandler remains steadfast to its 50-plus year history of high-tech manufacturing and research development projects, which keep drawing new companies to the area.

“The market is very strong for light industrial manufacturing and office developments,” says Micah Miranda, Chandler’s economic development director.

For instance, The Rockefeller Group recently delivered 150,000 square feet of class A industrial flex space in the Chandler Airpark area. Another example is 600,000 square feet of Class A office space recently completed at Alma School Road and Loop 202 freeway.

Mach One Chandler

Mach One Chandler

Next will be the development of one million square feet of class A office space within the Price Corridor, the city’s leading employment corridor, which was recently approved.

Miranda says, “A demand for high quality corporate tenants is driving a lot of speculative development.”

He describes a spider web effect where a lot of innovation start-ups are flocking towards facilities anchored by brand name corporate tenants like Intel, which continues to be the largest private sector employer and innovator in Chandler.

Miranda adds the city’s partnership with the private sectors dates back more than 30 years and it is known for being a reliable and predictable place to conduct business. In addition, he notes the city’s AAA bond rating, “we are a low cost destination that’s providing how quality service.”

Thus, the city has been largely successful in targeting semiconductor related research and development, advance manufacturing, engineering related support and supply chain companies.

Miranda mentions the office for ARM, a microprocessor manufacturing company, as an example that opened in November of last year as part of Chandler’s technology incubator campus, which opened in 2010.

Mach One Chandler

Mach One Chandler

He adds in the last 18-24 months, a handful of new projects account for 2.5 million square feet of new product on the market generating $500 million in capital expenditures.

Although the city is 85 percent built out, it is saving most of the remaining lands for employment purposes.

 

In the near future, Miranda predicts to see “more vertical developments downtown for office and multifamily.”

GILBERT 

The City of Gilbert’s commercial real estate market is incredibly strong says Dan Henderson, economic development director.

He adds according to quarter two reports, “Vacancy rates for existing space across all commercial property types was just nine percent, the lowest it has been in five years.”

Numbers from August indicate Gilbert has a total of more than 26.6 million square feet of commercial space with another 3.9 million square feet under construction, planned or proposed, which are both indicators of market growth.

Gilbert Heritage District accounts for 11 percent of that total square footage and has experienced a boom in the last three years with a combination of retail, office and mixed-use developments.

LGE Design Build

Clever Koi is opening up within the mixed-use project, Heritage Marketplace, in the heart of Gilbert’s Heritage District (Photo courtesy of LGE Design Build)

“Heritage Marketplace has been a major catalyst for the continued growth of the Heritage District,” says Henderson. “The development is just completing Phase II, which adds 31,000 square feet to the development” in addition to the long list of big name restaurant tenants already open there.

Other major contributors to the city’s growth include large speculative and built-to-suit developments like Rivulon, Park Lucero, Gilbert Spectrum and Reserve, he adds.

Lately, the most active market in Gilbert is for light industrial development. Henderson explains new light industrial product has been absorbed quickly like developments such as Park Lucero.

He reports a total of 181,000 square feet of light industrial space was absorbed last quarter compared to 19,000 square feet of retail and 15,000 square feet of office.

Gilbert remains focused on growing and attracting businesses that have high concentrations of STEM and related occupations such as healthcare, Aerospace/Defense, Software/IT, Life Sciences and Financial services sectors, Henderson adds.

He attributes the growth of Gilbert’s commercial real estate market over the last five years to the community’s ability to attract, grow and retain high quality jobs.

Since 2009, projects that his department assisted with account for more than 11,000 new/retained jobs, $1.2 billion in capital investment and 6.3 million square feet of new or renovated space.

Henderson predicts in the next 10-20 years, “People will say this is the place they truly love to live, work and play because of the unique amenities, the family friendly atmosphere, the exceptional schools and the high quality jobs that are available near their home.”

SCOTTSDALE

Industrial, office and retail vacancy rates in Scottsdale remain lower than that of the Greater Phoenix area, according to Danielle Casey, City of Scottsdale economic development director.

She calls the Scottsdale market strong, which is currently in an infill phase with an increased demand for more quality retail and office developments in downtown and South Scottsdale.

Casey adds Downtown Scottsdale has become a hotspot for technology and innovation companies seeking class A office space near a rich environment with lots of amenities and entertainment options within walking distance.

New plans for developments downtown like the Marquee at the District reflect increased efforts to capitalize on tenant demands for class A office space in urban areas.

As a result, the city is working on changes to its policies to allow for greater heights and densities for projects in areas like downtown for redeveloping existing buildings and erecting new ones.

She says while attracting new companies to Scottsdale is still a priority so is offering next level services to companies already in Scottsdale who are looking to expand.

A recent victory for the city was its ability to retain JDA Software, a firm delivering nearly 350 jobs all with $100,000 average salaries or more, that was in the market for locations to facilitate its expansion efforts.

Casey explains her department really tries to be a holistic services team keeping the city’s great firms happy as we continue to bring new companies in.

She adds the city is primarily seeing the most growth in information, communication and technology companies as well as advance business service sectors like finance and insurance.

Areas like North Scottsdale are seeing a higher concentration of corporate headquarters like the plans for Scottsdale One, a mixed-used development along the Loop 101 and Scottsdale Road. It will offer 1.8 million square feet of space for commercial tenants alongside retail, restaurants, class A office and multifamily options.

Casey says tourism is still big for Scottsdale and the city continues to support resort, hospitality and amenities options while working with the office of tourism to revamp Downtown Scottsdale.

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