Tag Archives: Elliott Pollack

E012850

Greater Phoenix Economic Forecast 2011: “Painfully Slow”

The economy may be better in 2011 than it was in 2010, but the road to full recovery will remain long and full of potholes. But hey, it could be worse. It could be 2009.

That’s according to economist Elliott D. Pollack, CEO of Elliot D. Pollack & Company. Pollack was speaking at the Greater Phoenix Chamber of Commerce’s Economic Outlook 2011 breakfast today at the Arizona Biltmore Resort & Spa.

Pollack said population growth in the Valley should settle at 1 percent this year and rise to 2 percent in 2011. Net job growth will contract by 1 percent in 2010 and climb by 2 percent in 2011. Retail sales will increase 1 percent this year and rise by 8 percent next year. Building permits will increase by 20 percent in 2010 before jumping 50 percent in 2011.

In summarizing his 2011 forecast for the Valley, Pollack read a laundry list of good news and bad news:

  • The housing market is at or past bottom, but there are many negatives still trumping a full recovery, most notably slower migration flows.
  • The commercial real estate market is at or past bottom, but recovery will be slow and “take a long time.”
  • Sales tax revenues are no longer falling, but they aren’t growing quickly enough to fix the state’s battered budget.
  • Retail sales have past bottom and there is pent-up demand among consumers, however, those same consumers are still so worried about personal debt that they will continue to curb spending, thus thwarting a big recovery.

While Pollack said the Valley’s economic recovery will be “painfully slow,” he points out that a recovery is indeed underway. For example, the state’s standing in employment growth compared to the rest of the nation is gradually improving — but only after a precipitous decline. In 2006, Arizona ranked second in the nation in job growth; that dropped to 22nd in 2007; 47th in 2008; and 49th in 2009. Up to July of this year, the state had moved up to 42nd in job growth.

Another indication that the Valley’s economy is showing improvement is in the number of economic sectors that have shown net job gains. Of the state’s 12 major economic sectors, five have shown net job gains so far this year (education and health services; trade; leisure and hospitality; professional and business services; other services). That compares to the same time last year, when no economic sectors reported net job gains.

But, Pollack pointed out again, the Valley and state can’t expect the robust and recoveries that have accompanied past recessions.

He says the Valley’s housing market continues to be weighed down by:

  • Weak job growth
  • Tough underwriting standards
  • Negative home equity
  • Loan modification failures
  • High foreclosures
  • Option ARMs (adjustable rate mortgages) peaking in 2011

In terms of equity, 51 percent of houses in the state have negative equity. The national average is 23 percent. Such negative equity severely curtails people’s ability to buy and sell homes. In addition, supply still outstrips demand in the single-family home market, with an excess inventory of houses somewhere between 40,000 to 50,000 units, Pollack said. A balance between supply and demand will not be fully achieved until about 2014, he added.

The picture is bleaker for the commercial real estate market, with delinquencies on loans still very high. In the office market, Pollack cited forecasts from CB Richard Ellis that said vacancy rates would peak at 25.6 percent in 2010 before dropping to 23.9 percent in 2011. As Pollack pointed out, there currently is no multi-tenant office space under construction in the Valley. In fact, he expects “no significant office building in Greater Phoenix for the next five years.”

Industrial space vacancy rates are faring only slightly better, with CB Richard Ellis predicting year-end vacancy rates of 16.4 percent for 2010 before falling to 15.2 percent in 2011. As for the retail market, the vacancy rate will rise to 12.3 percent in 2010 and hit 12.9 percent in 2011.

For office, industrial and retail commercial real estate, Pollack said he did not expect vacancy rates to reach normal levels until 2014-2015.

Still, Pollack maintained that the economic outlook for the Valley “remains favorable,” thanks to the recovering national economy, increased affordable housing in the Valley, a rise in single-family home building permits, unemployment bottoming out, consumer spending improving and continued problems in California.

Home Run

Playing The Economics Of Sports In The West Valley

Home Run

Playing the economics of sports in the West Valley

 

It’s not so much a case of “if you build it, they will come” that is turning the West Valley into a sports mecca. Rather, it’s the other way around. People have come to the West Valley in droves, setting the stage for an economic explosion and a sports megalopolis. The Arizona Cardinals stadium opens this month, the NHL Phoenix Coyotes play in adjacent Glendale Arena, five Major League Baseball teams conduct spring training at West Valley sites with two cities avidly seeking other teams to call their own and Phoenix International Raceway stages two major NASCAR races a year.

home_runEconomist Elliott Pollack says population growth came to the West Valley first. Contrary to the view of some, Pollack says, “The Phoenix area grows like a balloon in a very orderly manner, at its periphery. Growth got to the west side and the area was looking for an image.”

He calls Glendale Mayor Elaine Scruggs “a very smart lady,” who took advantage of the situation—a population explosion and an abundance of available land. The growth is happening not only in Glendale but in Peoria, Surprise, Goodyear, Avondale and Buckeye as well.

Cardinals Stadium and Glendale Arena essentially created a focal point for that area. “It gave the media something to focus on,” Pollack says. “The area would have grown anyway, but now with a much better image than before.”

Julie Frisoni, marketing and communication director for the city of Glendale, agrees. “Growth is driving the West Valley expansion,” she says. “Much of the East Valley is built up and developed. In the next 15 to 20 years, 40 percent of all growth will be west of the 101 (Agua Fria Freeway).”
People moving to the West Valley expect good housing, quality jobs, entertainment and sporting options, restaurants and shopping opportunities, Frisoni says. “Glendale always has been a bedroom community, a place where people lived and went somewhere else to work and for entertainment. Growth demands the amenities you’re seeing spring up.”

With growth comes soaring land prices. When the deal for the Glendale Arena was struck in 2001, agricultural land there was selling for $2 a square foot. Today, commercial land at the Westgate City Center in Glendale carries a price tag of as much as $25 a square foot. In seven to 10 years, Westgate will have 6 million square feet of retail and restaurants.

Jack Lunsford, president and CEO of WESTMARC, a West Valley economic development organization, says the sports explosion is having a huge dual impact—direct and indirect—on the West Valley economy. The direct impact is fairly easy to calculate. For example, Lunsford says, each of the two NASCAR races are worth $200 million to $250 million to the local economy, and the 2008 NFL Super Bowl, $250 million to $300 million. Add to the mix the Fiesta Bowl and the NCAA Bowl Championship games, plus the hundreds of events, concerts and meetings to be held in the Arizona Cardinals stadium and Glendale Arena and the economic impact is huge, he says.

Spring training is yet another economic engine. The Kansas City Royals and Texas Rangers train in Surprise, the Milwaukee Brewers are in the Maryvale area of Phoenix and the San Diego Padres and Seattle Mariners share a stadium in Peoria. Glendale and Goodyear are on the hunt for Major League teams and appear serious about building their own stadiums. “In two years we could end up with eight teams in the West Valley,” Lunsford says.

Frisoni says Glendale has entered into an exclusive agreement with teams to discuss a potential spring training site. She won’t say how many or which teams the city is targeting or where a stadium site would be. “We are continuing to move forward,” Frisoni says. “We expect a resolution very soon.”
Meanwhile, the Goodyear City Council in March approved a site for a new spring training complex and gave the City Manager’s Office authority to seek Major League teams. Goodyear Mayor Jim Cavanaugh says the complex would be located on the Woods’ Family property east of Estrella Parkway near Yuma Road. The ballpark complex would include commercial, office, hospitality and residential uses.

AZ Business MagazineLunsford notes the indirect impact of the West Valley’s sports explosion is the retail and service development that those kinds of activities spawn.
Economist Pollack sees a change overtaking the West Valley, particularly in the Westgate City Center complex. “There was a lot of economic development going on during construction of the stadium and arena, bringing in retail and more revenues,” he says. “Hopefully the concept will be that people will go there, eat, shop, go to a game or a concert and then go home. Now, they go to a Coyotes game, get out of their car, see the game, get back in their car, and go home. There are not a lot of places to eat on the west side, and that will change.

“It’s not that the arenas created the growth, they created a focal point for growth. It’s going to be a sports and retail mecca that people from other parts of the Valley will go to see games and concerts.”

www.westmarc.org

 

 

Arizona Business Magazine Aug/Sept 2006

 

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