Tag Archives: Pat Feeney

Dick's Sporting Goods distribution warehouse, Goodyear

Industrial Evolution: West Valley poised for land grab

Dick’s Sporting Goods built a 720KSF distribution center in Goodyear to service its West Coast stores.

A California-based investor erected a 400KSF spec shell in Surprise’s Southwest Railplex business park.

Corporate giants, Macy’s, Amazon, Sub-Zero, Marshall’s/TJ Maxx, Southwest Products and WinCo have landed or expanded their vast West Valley industrial operations within the last two years.

Even more companies are eyeing potential stakes in the burgeoning industrial parks springing up in once sleepy bedroom communities west of Phoenix.

With the recession in their rear-view mirrors, local, national and international companies are revving up manufacturing and distribution operations, and the West Valley is poised to be a big beneficiary of their expansion plans.

Justin LeMaster, Cushman & Wakefield

Justin LeMaster, Cushman & Wakefield

Available and affordable land, a deep labor pool, business-friendly state and local governments and top-notch transportation corridors contribute to the West Valley’s desirability, said Justin LeMaster, Cushman & Wakefield’s director for industrial properties.

Farsighted developers are already master-planning vast spreads of land, setting up infrastructure and even building large-scale spec structures that can accommodate another industrial giant or get sliced and diced to accommodate several smaller operations.

The developers — along with city and state economic development specialists — want their properties primed to snag the business when the lookers become movers, LeMaster said.

“Smart, creative developers will make the West Valley a successful high-growth market for years to come,” he said.

The numbers confirm the trend.

An impressive 4.5 MSF — nearly 94 percent of the metro area industrial construction started or completed in 2013 — is in the West Valley, according to Jones Lang LaSalle’s Q4 Industrial Report.

Q4 absorption was 1.96 MSF, and only 15.3 MSF of the West Valley’s 90.7 MSF total industrial inventory was still available at year’s end.

Nevertheless, 4.5 MSF is a significant amount of new inventory for a post-recession market, and, in fact, it boosted Valleywide industrial vacancy rates above 12 percent.

Anthony Lydon, Jones Lang LaSalle

Anthony Lydon, Jones Lang LaSalle

Industry experts aren’t worried.

“The new, grown-up, industrial tenants coming to market right now are looking for 300KSF, 400KSF and above,” said Anthony Lydon, Jones Lang LaSalle managing director for Supply Chain & Logistics Solutions.

Less than half of the West Valley’s available space meets that criteria, and a few big employers could snatch that up in a flash, he said.

Like LeMaster, Lydon expects that to happen sooner rather than later.

“Over the next 24 to 36 months, the Valley, and the West Valley in particular, will see significant new job creation,” he said.

So what makes the West Valley suddenly so attractive to the industrial users?

“Economics and location,” said Pat Feeney, CBRE senior vice president for industrial services.

Cost is key
Of the metro area’s three major industrial hubs ­— the airport area, the Tempe/Chandler corridor and the West Valley — the first two are nearly out of developable land, Feeney said. And scarcity makes that land pricey, especially for a large user.

Pat Feeney, CBRE

Pat Feeney, CBRE

A skilled and diverse labor force that moved west when the home builders did is another major factor, he said.

“Nearly 70,000 people live in Goodyear, but only 14,000 or 15,000 work in Goodyear,” Feeney said.

When big employers like Sub-Zero, Amazon and Macy’s held job fairs for their new West Valley digs, they typically attracted eight to 10 qualified applicants for every position, he said.

“They all shared that they were so happy they could pick the cream of the crop,” Feeney said. “It’s a really big draw.”

David Krumwiede, Lincoln Property Company

David Krumwiede, Lincoln Property Company

Staffing a large warehouse is a major economic concern, especially for companies with labor-intensive, e-commerce picking systems, said David Krumwiede, executive vice president for Lincoln Property Company, which owns 6 MSF in its four-state Desert West Region, 2.4 MSF of that in the West Valley, including Goodyear AirPark and 10 Lincoln.

Arizona’s main competition for the big industrial users looking to establish or expand operations in the West is California’s Inland Empire, Krumwiede said.

While the Inland Empire’s construction costs are comparable to Arizona’s, labor costs in Arizona, a right-to-work state, are much lower, he said.

“We are extremely competitive with California’s Inland Empire if a user has more people than trucks,” Krumwiede said.

And big energy consumers, such as companies employing sophisticated e-commerce logistics technology, can save as much as 30 percent to 40 percent in operating costs by locating in Arizona instead of California, Lydon said.

But possibly the biggest economic incentive for many industrial users is Arizona’s much more favorable tax basis, Krumwiede said.

All of the West Valley’s large planned business hubs have designated areas that are Foreign Trade Zone capable, and that’s a big selling point for companies that do significant international business in parts or products, Krumwiede said.

“If a company qualifies, it can see a 72 percent reduction in property taxes,” Feeney said. “It’s a tremendous benefit.”

And a benefit none of the nearby states can offer, he said.

Such issues make Arizona, especially the West Valley, where land is available and affordable, a clear economic winner over California.

Location, location, location
Second only to the West Valley’s attractive economics, is its advantageous location, less than half-a-day’s drive from the southern California ports — a major consideration for retailers and e-commerce leaders like Amazon, as well as manufacturers like Sub-Zero, according to the experts.

Rob Martensen, Colliers International

Rob Martensen, Colliers International

“If you can get out of traffic and get closer to the ports in Los Angeles and Long Beach, you can make that in six hours,” said Rob Martensen, Colliers International vice president.

That means truck drivers can log a round trip and still stay within federal guidelines regarding length of time on the road, a feat not so easy to accomplish from the East Valley.

And for companies distributing products regionally — Macy’s or Dick’s Sporting Goods, for example — the completion of the Loop 303 will forge the final freeway link that can speed trucks to and around cities and states north and west of Phoenix.

“It will open the gateway,” LeMaster said. “Companies want to be in Phoenix, and the West Valley will be the industrial hub of Phoenix with the (Loop 303/I-10) interchange.”

Overall, the combo of favorable attributes will ensure the West Valley lands on the short list for large and small industrial users for the next decade or so, Krumwiede said.

“The companies that are already out there — Amazon, Target, Costco, PetSmart, Staples, Macy’s — are all household names. It’s a great start. We’ll see more of those,” he said.

“My vision is that a lot of that vacant land will be put into production in the next five to 10 years.”

rsz_cbre

Mountain Vista Commerce Center Sells for $11.36M

CBRE has completed the sale of Mountain Vista Commerce Center located at 14647 S. 50th St. in Phoenix. The three-building, 134,713 SF industrial complex commanded a sale price of $11.36M.

Dan Calihan, Pat Feeney, Joe Porter and Rusty Kennedy of CBRE’s Phoenix office negotiated on behalf both the buyer and seller in the transaction. The buyer was Aspen Capital Partners of Greenwood Village, Colo. The seller was BSP Mountain Vista LLC of Newport Beach, Cali.

This sale is a testament to the continued recovery of the industrial market in Phoenix,” said CBRE’s Calihan. “The Phoenix metro has become recognized as a mature industrial market and a large number of users are actively looking at available space across the Valley. This heightened activity coupled with the continued, steady absorption we’ve seen over the last several quarters make Phoenix a very attractive place for investors looking to buy industrial properties.”

Mountain Vista Commerce Center was last sold in in 2010 in an REO sale when BSP Mountain Vista LLC purchased the property from Bank of America.

Built in 1999, the industrial complex is comprised of three buildings that can be operated as warehouse/distribution and/or flex spaces. The property was 93 percent leased at time of sale. There is currently 10,473 SF of vacant, available space.

Mountain Vista Commerce Center sits on 10 acres along the I-10 freeway between the Chandler Road and Ray Road exits. It has excellent freeway access and features freeway-facing signage.

Loop 202 - AZ Business Magazine Oct/Nov 2006

Plannings Pays Off For 202 South Mountain Freeway

The New 202

Plannings pays off for 202 South Mountain Freeway

By David Schwartz

Tom Tait Jr. just chuckles when quizzed about the future of his family’s land holdings in the West Valley, a large expanse of property that has been in the portfolio since the 1970s. Are there any great plans for development? Are there plans to flip the property and pocket the proceeds?

 

The New 202Not even close. Indeed, the past few years have raised the property’s worth, but that’s apparently where it ends. At least, he claims, that’s the thinking for now. “We are long-term owners of properties and really don’t bother much with any short-term benefits that there might be,” Tait says. “At the present time, we’re just farming the property. That’s what we’ve been doing and I don’t see that changing much. No matter what happens.” And apparently no matter what transportation planners have in store for the acreage.

The Tait family are among the owners of property in the vicinity of the Loop 202 South Mountain Freeway, a long-charted, controversial thoroughfare that eventually will span 22 miles and link Interstate 10 in the southeast and West valleys.

But it’s the stretch of the freeway that cuts through the burgeoning southwest Valley that recently was brought into sharper focus by the Arizona Department of Transportation. In late June, officials ended any uncertainty and revealed that the freeway would connect at 55th Avenue in Laveen—an old favorite seen on the map for at least the last two decades.

The route was a popular choice of the three options presented for review. Better than 71st Avenue. Better than 99th Avenue, south of Loop 101. It was hailed as the right choice by officials in Phoenix and several area municipalities. It too was welcomed by several landowners in the area. But it was neither a surprise, nor unexpected.

Land experts say that the decision by the state was important because it serves to cement the value for the land in the area to be affected by the proposed freeway. There is now a line drawn in pen that can’t be easily erased and sent back to the drawing board.

But experts are quick to add that property in the area has been soaring in value anyway during the last two years, as the real estate market careened through its boom times and those familiar red tile rooftops became a more frequent sight with each passing day.

There likely will be no land rush, they predict, unlike what occurred when other segments of the Valley’s freeway system were put into place in years past. “They are putting it where I think most people thought it was going to be,” says Greg Vogel, chief executive of Land Advisors Organization, which has offices in Arizona, Texas and Colorado. “I don’t think there was a drop in values while they were considering other options. It’s already been priced into the market and it’s been a long time coming.”

Besides, Vogel says, there is not a huge amount of land to be had in the area that will be directly affected by proposed freeway as it sweeps its way through the area. He said land costs now in the fast-growing Laveen area already are between $175,000 to $350,000 an acre, a dramatic increase from more than a decade ago. “This isn’t a case where there are 25 pieces (of land) with 30 different buyers and all kinds of things going on,” he says. “It has been thought through and organized, so you’re not going to see anything like you may have with other freeways.”

Pat Feeney, senior vice president of CB Richard Ellis in Phoenix, says he has watched a surge in valuation of available industrial land that began in summer 2004 and pushed prices to about $4 per square feet. That’s more than a five-fold increase from the early 1990s. “The net result is that almost every piece of land in the submarket is owned by a developer who will be building on their property,” says Feeney, who has been tracking industrial properties for about 20 years. “No one out there is a seller right now.”

He says he sees no revaluing of land in wake of the transportation department putting its official stamp on the freeway alignment in the southwest Valley. Officials say that’s because the proposed freeway has been on the books since 1985, when Maricopa County voters approved a Regional Freeway System that was supposed to take care of the Valley’s transportation needs. But a funding shortfall meant that this segment fell down the priority list of projects. At one point, it was seen as a potential toll road.

AZ Business Magazine October November 2006Fast forward to 2004. Voters approved Proposition 400 that provides money to pay for a Regional Transportation Plan that includes the South Mountain Freeway. Transportation officials say plans call for the freeway to cost an estimated $1.7 billion, with construction expected to be completed and ready for motorists in 2015. “It’s the future for that part of the West Valley,” says Debra Stark, Phoenix planning director. “We think we have done a good job planning and making sure land has been set aside.”

She says one needs only to look at an aerial map as proof. In one picture, a clear path for the freeway already has been set aside along 59th Avenue and Broadway Road. Houses can be seen on both sides. “What has helped is that unlike other areas, we’re not seeing as much housing or commercial development,” Stark says. “And as we’ve done zoning there, we’ve asked developers to set aside land for the 55th Avenue alignment. So we’re more prepared for when the freeway is built.”

As for Tait, there are no great preparations just yet for his family’s property. Asked about his time frame for development now that the freeway route has been picked, he says, “What, so now instead of 30 years, it’s 20 years? That’s still a long way away.”

 

Arizona Business Magazine Oct/Nov 2006