Tag Archives: Price Corridor

1800 S. Price, Lee Associates, WEB

Calif. investment firm takes Chandler Iridium facility for $12.7M

A 69,429 SF fl ex manufacturing facility and an adjacent 2.97 AC parcel at 1800 S. Price Rd. in Chandler has been sold for $12.65M. The building is fully-leased to Iridium Communications with an estimated 10 years remaining on their lease.

Cohen Asset Management, Inc., a California-based private real estate investment fi rm purchased the building from Abart Properties Corp. of Scottsdale. Lee & Associates Arizona Principals Rick Lee and Andy Ogan represented Cohen. Bret Angner with Nova Management represented Abart in the transaction.

The building is located in one of the Valley’s best commercial real estate areas. Chandler’s Price Corridor is home to notable companies such as Intel Corp., Motorola, PayPal, Orbital Sciences, eBay, Amkor Electronics, Charles Shwab and General Motors. The area is served by the Loop 101 and Loop 202 freeways with easy access to the entire Valley.

Iridium Communications, based in McLean, Virginia, is a mobile satellite communications company providing voice and data solutions worldwide. It is the only company of its kind that spans the entire globe.

Images Diverge, WEB

When Visions Diverge

When Visions Diverge: What Happens When Property Owners and Cities Want Different Land Use

The crack of the gavel thunders through the room over the buzz of hushed whispers. Alone at the podium, the property owner stands stunned by the city council action denying the vision for a property. The investment in preplanned designs, attorneys, consultants and engineering circles the drain.

Hanging above it all is the “vision.” A parcel of land, lines on a drawing, colors on a map and the ghost of a citywide vote. A document, called a general plan, presses down on the hope, the plan and the decision, “Motion to deny the development proposal passes. The council finds the project is not consistent with the general plan.”

Jordan Rose, founder of Rose Law Group

Jordan Rose, founder of Rose Law Group.

“During the recession, some investors looked at bargains and not zoning,” says Scottsdale land use attorney Jordan Rose, founder of Rose Law Group. “There was less diligence, and some acquired land without regard to what the general plan said about the property.”

Development plans have been stalled or blocked by recent Valley city zoning actions. Several cases―primarily in the East Valley―have brought the issue into greater focus. The recovery-driven interest in turning properties or resurrecting old plans causes some of the conflict.

In many ways, local governments are market-driven, but driven by a different market than commercial real estate. The Arizona legislature forces towns and cities to depend on sales tax for general fund revenues―the basic operating income for key community services. This in turn drives local governments to create retail and employment site opportunities through the general plan. Without revenue-generating undeveloped land, a city council is not going to have the wherewithal to fund future growth and the requisite public safety, parks and libraries.

The sales-tax dependence led to cities to be very protective of revenue-generating land set aside in the general plan. Retail business has significantly changed over the past decade, but local government funding mechanisms continue to use 20th century revenue models for a 21st century economy.

The General Plan
In Arizona, every city and county needs a general or comprehensive plan to provide a long-range blueprint of development patterns within current and future boundaries. Plans are supposed to be updated every decade and ratified by the voters. Several plans are slated for ratification this year―including Tempe, Scottsdale and Mesa.

“A general plan is a large and complex document, it carries a lot of implications that are not apparent when voting for ratification,” says Ralph Pew, member and manager, Pew & Lake, PLC, Mesa.

The comment “the plan can’t be changed because voters approved it” is often raised during a project hearing when there are proposals to amend the land use map. Pew says, “The plan itself contains the standards for approving major and minor amendments. Change is a planned part of the process.”

John Berry, founder of Berry Riddell & Rosensteel LLC, Scottsdale, says that preparation is the key, “When a client comes to us, we start with the staff, listen to neighbors and talk with elected officials to try to foresee any major issues. It’s incumbent on the developer to give the city the facts to support the project. Opinions and project economics alone are not going to gain an approval.”

Rose agrees, “We’ve seen clients with plans that just don’t fit with the general plan. This means a lot of work up front to move the project forward, but sometimes, we have to tell them, ‘it isn’t going to be approved.’”

Before the recession, development was moving so quickly that a zone change or general plan amendment denial just meant the developer moved on. “We don’t have a lot of land use litigation in Arizona,” says Pew. “Pre-recession, the pace of development and number of opportunities, made it possible for the developer to shrug off a denial and move on to the next project.”

It’s different in the planning pipeline now. “When the recession ended, we were tickled to get applications once again,” reminisces Mesa Planning Director John Wesley. “There was an appetite to make things happen, and most projects were approved. That’s different now.”

Developers are seeing the difference during the hearing process.

“Councils are busy and they don’t like controversy,” says Berry. “The key to success is to listen closely to any objections early in the process and eliminate as many issues up front. When I go before a city council, I want to be able to say we have many points of agreement and just a few points of disagreement, if any.”

Pew emphasizes that getting an approval requires more work on the facts up front, “The more information we can give a city with the application showing the need for change, the easier it is for the city council to ultimately say ‘yes.’”

All three attorneys say that they will provide economic analysis, traffic reports and other empirical facts to back up an application.

Wesley says that he’s seeing more of that too, “It used to be developers would come in and say the project doesn’t pencil without the changes being approved. That doesn’t show any benefit to the city, and today, the council is less likely to be persuaded.”

Converging Goals
Cities and developers are looking more closely at project and city objectives to see how the divergent goals can be brought closer together. “In Mesa, we had a pattern of putting commercial development on every major street corner. Recently, an owner showed us that the area was barely supporting existing commercial on two of the corners, and a third corner still had undeveloped commercial zoning. Their argument made sense and the city approved a residential rezone.”

Even with numbers and well-reasoned arguments, sometimes visions are irreconcilable. “There are some properties in cities where general plan amendments are just not going to be approved,” cautions Rose. “We see cities with long range plans for an area, and the council is not going to change their vision on a piece-by-piece basis.”

“In Mesa, we have some neighborhoods where there is flexibility, if an owner makes a case,” points out Wesley. “But there are some areas where we need to protect the city’s plans even if the land remains vacant for a while.”

A Need for Change
Some point to the success of the Price Corridor in Chandler where the city held firm on keeping land use for large corporate and single-tenant users. That is changing this year following a report by The Maguire Group the city commissioned. Changing economics and use patterns opened the door to maintaining the same corporate center feel, but now permitting smaller users and multi-tenant buildings. As soon as the amendment’s approval was imminent, the Douglas Allred Company filed plans for a hotel and mid-rise office on the Park Place campus.

Allred Park Place building five shell.

Allred Park Place building five shell.

“We’re starting to see cities, like Queen Creek, take a look at actual absorption rates and land use needs when considering general plan amendments,” says Pew. “Policy is starting to move away from the pre-recession rigidity that all commercial and employment lands needed to be preserved.”

Before the economy plunged, it was common for land owners to seek highest-and-best use zoning in order to better position the land for sale. The convergence of Internet shopping, the housing crisis and a push for infill development changed land use demand and affected patterns.

“Cities are becoming aware that we’re starting to run out of land area,” explains Wesley. “We’re looking more carefully at changes, because there is generally no going back.”

“As long as land remains undeveloped, it is possible and sometimes reasonable to change zoning again,” says Pew. “With the real estate market shift, owners start looking at what’s going to work. It’s possible cities are going to see requests to shift zoning to match market demand rather than market value.”

Finding Balance
Wesley talks about listening to developer ideas and goals, “Sometimes what’s wanted isn’t a perfect fit, but we’ve worked with owners to try and accomplish their objectives. We had a recent project where we mixed land uses so that both (Mesa) and developer goals were mostly achieved.”

“A lot of the time, the public is wed to the general plan,” reflects Rose. “The general plan is a vision for a community, it can’t just be simply dismissed. There are a lot of moving parts.”

In conversation with each of the three attorneys, one word is in their comments again and again: “understand.”

“Listen and understand what the neighborhood expects from a development,” Berry says.

Rose advises, “Understand what’s expected and be creative to bring ideas to the table.”

“Understanding the stakeholders and the project neighborhood is a big key to success,” counsels Pew.

Understanding city expectations can be the first step on the road to meeting an owner’s property objectives.

startup

Getting an angel to open the checkbook

Governor Jan Brewer touts her policies and business regulatory climate as the reason Arizona is growing new businesses. That may be a factor, but it’s not the major reason Arizona topped the Kaufman Foundation Index of Entrepreneurial Activity in 2012. If it were the case, Arizona would have been on top again in 2013—instead of plummeting to 20th nationally.

“Just because there are a lot of startups,” observes Barry Broome, CEO of the Greater Phoenix Economic Council, “doesn’t provide a measure of the economic growth in the Valley.” A startup can be someone opening a consultancy, a contractor or the next Apple. Self-employment is a form of startup. The challenge is nurturing a startup so it grows with high value jobs.

Local governments and the Arizona Commerce Authority see major value with growing Arizona startups into enterprises. Chris Mackay, economic development director in Chandler says, “There’s staying power when a business is local. It’s connected to the local community and if the economy falters, the owners are more willing to keep going locally as opposed to closing up shop.” That local staying power is one reason Mackay says Chandler makes big investments in growing future enterprises.

Planting the seeds

Arizona’s new economy needs startups to scale up into enterprises. Those growing small businesses become hiring employers offering high value jobs paying home-buying income. Government policy supporting businesses that can scale up is based on simple economics.

Businesses with more than 20 employees, says the Small Business Administration, generate two of three Arizona paychecks. Those same businesses cut checks for more than 70 percent of Arizona’s private payrolls. The value in 2012 was over $100 billion.

All new businesses are “startups,” but not all startup businesses will be entrepreneurial enterprises. “There is no relation between starting a business and starting a company,” says Dr. Daniel Isenberg, Professor of Entrepreneurship Practice and founding executive director of the Babson College Entrepreneurship Ecosystem Project in Boston. “Ninety percent of companies formed don’t grow high value jobs.”

Isenberg says that the difference between a start-up and enterprise is a matter of scale. He is an international advocate for scaling a business to grow as opposed to opening a business. An entrepreneur, he points out, is a business founder with a large company that just happens to be small right now.

Arizona State University, as the new American university, is at the cutting edge of helping turn ideas into enterprise. Recently, the college joined the elite ranks of schools offering a stand-alone degree in entrepreneurship. It’s on that list with Harvard Business School, Babson, and University of Texas. Its goal is getting new businesses that can grow into the market.

Locally grown

ASU says more than 70 percent of its W.P. Carey School of Business MBA graduates remain in Arizona. Keeping these graduates in state provides the human resources necessary to building new enterprises fueling the future economy.

“Starting a company — as opposed to just starting a business — is hard work,” says Isenberg. “An entrepreneur looks at the business and sees it growing. It’s a time of sleep deprivation, hard work, and endless pitches.” Few startups achieve quality growth—less than ten percent, he believes. “The golden triangle of a growing enterprise,” he continues, “is cash, customers and people.”

“An entrepreneurial endeavor isn’t limited to startups,” Isenberg emphasizes. “University research, family businesses, mature companies, all can be turned into a growing enterprise. Most startups tend to stay small.” The key to the economic contribution of startups in Arizona is scalability. He is adamant about it, “Ambition is not a dirty word. A business founder without ambition does not significantly contribute to overall economic growth.”

“There are a number of entrepreneurial success stories arising from a new direction for an existing, mature business,” Isenberg reports. Sometimes it takes a new owner with a vision; sometimes the existing management team finds a new direction. It can be a license from a university, a new product, or an innovative use of an existing product. Entrepreneurship can occur anywhere in a business’ lifecycle.”

Bringing ideas to market

Arizona colleges are on that licensing bandwagon. Entrepreneurs complain that it takes years to license patents or transfer technology from most universities. In ASU’s Office of Knowledge and Enterprise Development, the Arizona Furnace Technology Transfer Accelerator — first project of its type in the world — slashes technology transfer time from years to months. The AZ Furnace is a joint venture of ASU, University of Arizona, Northern Arizona University and Dignity Health. Funding partners include the Arizona Commerce Authority, BioAccel, and additional support from Thunderbird School of Global Management.

“There are hundreds of patents sitting on shelves at universities that could be in the market earning money for creators, colleges and businesses,” enthuses Gordon McConnell, assistant vice president, Entrepreneurship & Innovation Group in OKED. “We started a program to get patents into the market quickly.” The startups selected for incubation in AZ Furnace are either entrepreneurs in search of an idea to market or idea-creators ready to market through a business entity. The fledgling enterprises are capital-ready in 12 months or less.

Enterprise starts with a leader and a vision. The scale of the vision is what makes the difference, says Isenberg. The vast majority of business owners are thinking of a model that gets them to the point that they’re putting money in the bank. He says, “Entrepreneurs are thinking of a model that finds smart people, willing customers and puts the cash to back into the enterprise.”

“Angels invest in businesses they understand or CEOs they respect,” says Broome. “There’s a need for more of that in the Valley. We’re just not seeing the next Apple or Google evolving here.”

Gaining visibility

“The biggest challenge about getting angel and venture money is visibility,” says Brandon Clark, region coordinator for Startup Arizona.  “If you’re a promising digital startup locally, it’s a little harder to get noticed nationally being from a region not known for its digital startups.  That’s starting to slowly shift.” National publications, FastCompany and Entrepreneur Magazine, have eyed Arizona as an emerging technology region.

The development opportunity for the small business is capital. Combine the “Broome Factor”—known businesses; known leaders—with the large number of startups, and there are too many funding requests heading towards too few checkbooks.

What makes early investors open pocketbooks to startup businesses is scalability. Businesses with potential to grow create the greatest return on investment for the angels. “It’s also makes a difference to the local economy,” says Isenberg. “Local policymakers need to change their focus from ‘startup’ to a ‘high value growth business’.”

Cities like helping scalable startups — and provide resources that build success. There’s a loyalty factor when the business grows; it typically remains in the hometown that helped it succeed. This is important to Chandler, Mesa, Peoria, Phoenix, Scottsdale, and Surprise. These five cities have specifically invested in incubators and accelerators to nurture and graduate businesses achieving market traction. Chandler, Phoenix and Tucson have involvement with collaborative workspaces — Gangplank and Co+Hoots — as well.

While an employee or two in a collaborative workspace works well for a while, the time comes when a move up is needed. Clairvoyant, an enterprise and analytics startup now in Chandler Innovations started with Gangplank. “We grew from four employees in March to 12 in April,” smiles Amber Anderson, a firm partner and its business developer. “We needed a place to meet with clients and work with a growing team.” Still self-funded, the growing entity plans to hit 20 employees by January.

Mackay explains, “We help a company like this grow and hope that as it expands it continues to locate in Chandler.” To that end, the city is working with landlords in its Price Corridor to offer “teenage” space that lets a business move from the heavily subsidized rents and back office support of the incubator into its own place—without too much sticker shock.

Support from cities

The difference by which startup is accepted into a city’s incubator is the ability to scale up from the garage to commercial space; from one employee to more than 20. Chandler and Mesa are looking for businesses with this capacity. Innovations gives lab and office space to businesses that have formed entities — LLCs, corporations, partnerships — and a business plan. Mesa’s new Technology Accelerator is planned with a similar focus, but is looking for businesses at an earlier stage. Surprise’s Arizona TechCelerator wants to shepherd a business to the angel investor stage.

In Surprise, scalability is one of the criteria to be accepted into Arizona’s oldest incubator. The TechCelerator is looking for businesses offering something outside the box or creating a new niche. “The company has to be started before we’ll consider them,” says Julie Neal, the economic development coordinator for the city’s enterprise. “They need a mentor, a plan and have to know where they are going.”

“Scaling up is difficult,” says Isenberg, “but doing it right defines the difference between the successful entrepreneur with a growth business and a startup that just stays small. Marketplaces are competitive. The startup has to acquire customers. That means overcoming inertia or changing buyer behavior. While established companies are cruising on their business platforms, the startup has to hire people, start a company, raise money, and all the while, it’s competing in the marketplace. That’s tough work.”

After incubation, the business must gain market traction. At this phase, the fledgling enterprise has product going out and customers paying for it. The kinks are being smoothed, and it’s time to move up to the next stage and grow. Isenberg says that the high growth criterion is simply 20 percent annual increases in sales or staff for five years.

Getting capital

To make this leap requires high levels of capital — the checks venture capitalists cut. The biggest challenge in Phoenix is that there are few sources for local venture capital. The venturists hang out in places like Silicon Valley, Boston, San Diego and Seattle. “There are even a couple of funds with deep ties to the Valley,” worries Clark, “but they have very little involvement in local startups.”

Clate Mask, CEO of Infusionsoft, had to travel out of town for his venture capital. “At one time, I was told that a fund wouldn’t cut a check for a firm in Phoenix because we didn’t have the workforce for success,” he says. “That’s no longer true; venture funds are seeing that there is a real climate for success in the Valley.”

Another resource for a growing business is the Arizona Commerce Authority’s “Growing Your Arizona Business” services. The quasi-public agency provides mentorship, regulatory assistance, access to incentive programs and site selection. It also works as a liaison connecting the growing business with other business resources. The agency mentors businesses in accessing federal procurement and grant opportunities as well as serving as an entrée to international trade.

Overall, the major resource in Arizona for start-up businesses is the universities. Anemic legislative funding for the schools causes their efforts to help to face the same struggles growing businesses face. Their efforts to improve Arizona’s long-term economy are stymied by a declining source of capital.

“ASU is underfunded,” complains Barry Broome. “The school has done an amazing job despite being financially crippled by budget cuts. It’s suffering from a lack of resources to take its programs to scale.” “Scalability” is applicable to the business-development programs at the universities and other public agencies just as it is for growing enterprises.

“Getting money for those programs is the top job for the next governor,” predicts Broome.
Opportunity in Arizona will come from the core of businesses growing today. They will create the jobs for the new economy and drive economic success for the next generation.

JayTibshraeny_PriceCorridor

Tibshraeny Named Municipal Leader of the Year

American City & County magazine has selected Chandler Mayor Jay Tibshraeny as its Municipal Leader of the Year.

Mayor Tibshraeny will be featured in the November edition of American City & County, which has been the voice of state and local government since 1909. The magazine serves city, county and state officials who are charged with developing and implementing government policy, programs and projects.

“Mayor Tibshraeny proves that through foresight and endurance, America’s local leaders can help overcome their community’s problems,” said Bill Wolpin, Editor, American City & County Magazine. “His story is worth sharing in the hopes that others will become inspired.”

This honor is in large part due to Mayor Tibshraeny’s role in economic development and specifically, creating, protecting and preserving the Price Corridor.  The Price Corridor is Chandler’s major employment corridor and has been instrumental in attracting high wage technology jobs to the city.

Price Corridor is home to large corporations such as Intel, Bank of America, PayPal, Microchip Technologies, Orbital Sciences, Rogers Corporation and Wells Fargo. In the past year alone, General Motors, Infusionsoft and Nationstar opened in the Price Corridor.

“Chandler is a leader in the region in job creation and today the Price Corridor is home to an impressive roster of companies,” said Mayor Jay Tibshraeny. “This success validates our efforts to protect the area from residential encroachment. I am proud of what we have been able to accomplish in the area as Chandler is now recognized as a premier innovation and technology hub throughout the Southwest.”

In addition to his achievements with the Price Corridor, Mayor Tibshraeny is being recognized for a wide variety of accomplishments including; the Four Corner Initiative and Adaptive Reuse Program, creating a healthier community, neighborhood outreach, job creation and University partnerships and transparency through technology.

deal

OnTrac bringing 850 jobs to Chandler

OnTrac, the leader in regional overnight package delivery service in the eight Western States, is moving its corporate headquarters to Chandler.

The new offices are located in the Price Corridor at 2501 S. Price Road. The new building provides the company with additional space and the opportunity for future growth. It will also allow OnTrac to grow its company culture and continue raising the bar for OnTrac’s standard of excellence. The company will occupy 65,000 square feet of space in the building.

“We’ve begun construction and will spend in excess of $5 million on the relocation of our corporate headquarters,” said Rob Humphrey, President of OnTrac. “And, we expect to bring more than 850 jobs to the City of Chandler over the term of the lease.”

“Chandler’s central location and quick access to the interstate and freeways make it an excellent choice for businesses that have a diverse workforce,” said Jay Tibshraeny, Mayor of Chandler. “We are seeing the benefits of that as businesses such as OnTrac and other notable companies choose to locate in the Price Corridor.”

OnTrac joins other employers in the Price Corridor in key industries of Aerospace, Life Sciences, High Technology R&D/Manufacturing and Advanced Business Services.

OnTrac is currently occupying space in Phoenix until improvements are completed.

rsz_orbital_sciences_bldg

CBRE Completes $19.5M Sale of Orbital Sciences Building in Chandler

 

CBRE has completed the $19.5M sale of an 83,183 SF, 3-story office building and two-level parking garage located at 3377 S. Price Road in Chandler.

The property is 100% leased to Orbital Sciences, one of the world’s leading space technology companies.

Barry Gabel and Mindy Korth of CBRE’s Phoenix office represented the seller, Gilbane Development Company of Providence, R.I., in negotiating the sale. The buyer, Paramount International LLC of Edmonton, Alberta, Canada, was represented by Tivon Moffitt of Colliers International, also in Phoenix.

“Gilbane developed a high-tech, Class A office property for one of the world’s leading space technology companies.  Paramount International recognized the quality of the tenancy, the building as well as the location and believes in the long-term, intrinsic value of Chandler and the Price Corridor,” Gabel said.

Located within the Price Corridor, home to numerous research, technology and financial services firms, the Class A office building was built specifically for Orbital Sciences and sits directly across from its 40-acre regional manufacturing, research and development campus.

Its high-tech look features blue-tinted glass curtain walls with bright red accents and well-appointed interior finishes. The building was also designed to LEED Silver-level specifications, with the final certification pending.

 

AKO Engineering

Solar Engineering Firm, AKO Engineering, Expands To Chandler From Spain

AKO Engineering, Inc., headquartered in Barcelona, Spain, is expanding its operations to the Price Corridor in Chandler.

AKO is an engineering firm that designs, supplies, supervises and installs electrical heat tracing (EHT) in thermal solar power projects. AKO is making this move in order to expand its technology, AKOTRACE in the electrical heat-tracing sector in the US market. This opening complements the company’s already existing subsidiaries in Mexico, Portugal and Italy.

AKO signed a lease for a 10-office suite in the Mammoth Equities Building in the Price Corridor, with plans to hire eleven employees in year one, expanding to 15 employees by year three with average salaries of $80,000. AKO is a supplier to Abengoa Solar and is actively pursuing additional projects in Arizona and Southern California.

This business location was part of the long term relationship-building efforts of the City of Chandler in partnership with the Greater Phoenix Economic Council (GPEC) as they worked with the Trade Commission of Spain.

“Having the opportunity to meet face-to-face is key to developing successful business relationships that result in new business locates,” said Vice-Mayor Jeff Weninger, who participated in the GPEC trade mission to DC as a delegate to the Spanish Embassy.

“Sustainable energy companies such as AKO are going to be a business driver for the future, which is why recruiting them to Chandler is one of our top economic development goals.”

“The expansion of AKO to the region and the quality, high-skill jobs the company is bringing to Chandler is evidence that our market remains a preferred location for the solar industry,” said Barry Broome, GPEC president and CEO. “We are pleased with AKO’s decision, which marks our fourth investment from a Spanish solar firm in the last few years. Clearly, our growing industry presence, pursuit of foreign direct investment and unified commitment to advancing solar and renewable energy is an effective combination.”

AKO took a holistic approach to choosing its business location, and cites Chandler’s high impact schools and quality of life as driving factors in their decision in addition to the opportunity to locate in the Price Corridor.

“The Price Corridor in Chandler offers us all we can ask for in the development of our business in Electrical Heat Tracing (EHT) in the thermo solar power plant industry,” said Rafael Delgado Quevedo, CEO, AKO.

“That includes proximity to customers and plants, good communications, potential for recruitment, and personal attention from the City of Chandler and GPEC in the implementation process, which is why we chose Chandler as AKO operational basis in Arizona and the Southwest.”

AKO Engineering opened its offices this summer. For more information visit www.akotrace.com.

Supplying The Demand

Supplying The Demand

As vacancy rates shrink, new industrial and office developments could break ground in the Valley

Plans for a 600,000 SF spec industrial warehouse in Southwest Phoenix and a 92,000 SF, 2-story office building in Chandler’s Price Corridor are signs that those two property types are making a comeback in Metro Phoenix, some industry experts are cautiously predicting.

In January, California-based Doug Allred Company broke ground on Park Place, the Valley’s first post-recession spec office complex to be built since 2009. In October, The Alter Group breaks ground on a 605,700 SF spec warehouse at the Buckeye Logistics Center.

And according to those in the trenches, the reason could be as simple as supply and demand.

“Developers are responding to the lack of (industrial) supply available in the market by revving up activity, particularly in the Southwest Valley,” says Bob Mulhern, managing director for Colliers International. “By the end of this year, multiple developments totaling approximately 4 MSF are forecast to be under way, with other projects likely to enter the development pipeline in 2013.”

With regard to office, the market is still very weak for that property type, says Clay Wells, director of business for McShane Construction Company. However, he does add that news of the new office building in Chandler is encouraging.

“The street buzz is that they may already have a tenant who will take the entire building,” Wells says. That rumor, in fact, became reality in June when software maker Infusionsoft announced it would move its headquarters from Gilbert to Park Place in Chandler.

“The other real activity is in Tempe where the next tower at Hayden Ferry will come out of the ground when there are enough leases signed, and that could be a while,” Wells adds. “Downtown is the last submarket where both RED (Development) and Colliers (International) are making noises about new towers. A clue there could be the tower crane at CityScape is in the air and the hotel opens in two weeks.”

According to Cushman & Wakefield research, strong absorption levels driven by trailing 12-month job growth through March of 43,200 jobs are positively influencing both industrial and office vacancy and rent levels. Industrial vacancy levels crested in 2009 at 15.9% and currently are near 12%.

Industrial has been very hot over the past year, especially for users looking at 500,000 SF to 1 MSF buildings. While there is one building (it’s in the West Valley) remaining that fits that criteria, there are three to five developers talking about doing a “spec building in the 300,000 to 600,000 SF range that could be expanded to more than 1 MSF,” Wells says.

There is optimism from the brokers as well.

“The developers who have land holdings that we meet with are now busy with construction preparation and plans in response to an emerging warehouse demand, coupled with a thinned out inventory,” says Isy Sonabend, senior vice president at NAI Horizon. “When we see the first warehouse walls being tilted, it will be the leading indicator that our economy is recovering.”

Office vacancy levels spiked in 2010 at 25% and are more slowly inching their way down. Except for “one-off ” projects, it will be 3 to 5 years before the office market witnesses new development, says Chris Toci, executive director, Cushman & Wakefield of Arizona.

Uncertainty will cloud most business decisions for small- to medium-sized companies where 70+% of all jobs are created in this country, says Mark Singerman, Regional Director – Arizona for Rockefeller Group Development Corporation. This will restrain demand for office space until after the presidential and congressional elections, he adds.

“Larger companies will continue their efforts to consolidate or down size to become more efficient to reduce operating overhead,” Singerman says. “They will represent the majority of office demand until smaller companies feel that they can project their costs for at least the next 2-3 years.

“Hopefully, after the elections, enough uncertainty will be removed so businesses can plan and make strategic moves to grow their businesses, regardless of who or which political party wins in November. Business can adapt to almost any set of circumstances, except uncertainty. This freezes everything.”

On the industrial side, Singerman says, changes in consumer buying patterns that include more purchases via the Internet will continue to impact retailer’s capital investment plans.

“It makes sense for national retailers to allocate some of their investment capital to warehouse/distribution facilities to service their e-commerce business,” he says. “Th is has been driving a lot of the industrial demand in the Southwest Valley. I believe this will continue with national companies. But as with office space, the small- to medium-size users of industrial space are afraid to make real estate decisions until the future is less uncertain.”

A lot of what happens in the Valley depends on what happens to supply and demand for industrial buildings in the Inland Empire of California, namely Riverside and San Bernardino counties. If the spec buildings being developed in that market do well, which reports from brokers in that market indicate that they will, that will bode well for the Southwest Valley, which has traditionally been a viable yet less expensive alternative for users looking to service southern California, Arizona and other Southwestern states.

If, however, the Inland Empire struggles to find tenants for all of their spec buildings, that is a good indicator that demand is not strong enough to warrant spec inventory in the Southwest Valley.

“For the rest of this year, I see build-to-suit continuing to dominate industrial development activity in the Phoenix area,” Singerman says. “Long term, spec buildings will return as demand firms up.”

AZRE Magazine July/August 2012

data center to be built in price corridor in chandler

New Data Center Breaks Ground In Chandler's 'Price Corridor'

NextFort Ventures, a provider of energy-efficient modular data centers, broke ground on a new data center in Chandler. General contractor is Sunstate Builders and architect is Butler Design Group.

The 130,000SF NextFort Venture Data Center, designed with the environment in mind, will be a mix of office space and computing suites in a unique modular architecture. NextFort employs numerous innovations in power distribution, cooling and facilities architecture to achieve up to 40% better energy efficiency compared to other data centers. Additionally, NextFort has a goal of receiving up to 20% of its total energy usage from renewable sources in 2013.

The NextFort Chandler Data Center is the first facility of its kind designed exclusively for high-density applications, offering customers its NextFort High-Density Computing Suites (NextFort HCS). The NextFort HCS is a highly modular design that provides greater efficiency, rapid deployment, unrivaled security, total customer control, and lower operating costs.

“We couldn’t be more excited to be breaking ground on the NextFort Chandler Data Center after many months of planning and exceptional cooperation with the City of Chandler,” said Mark Towfiq, President and CEO of NextFort Ventures. “We believe our product is unique in the industry and we are confident that it will provide a powerful and highly cost effective solution for all types of customers, ranging from start-up ventures to Fortune 500 companies.”

Enormous increases in demand for data storage and computing created in part by the increased use of mobile apps, social networking sites, and the growth of the internet in emerging markets is creating an optimal environment for NextFort as it embarks on this project. The business-friendly environment in Chandler, the low cost of power, and the presence of robust fiber optic networks, makes Chandler an ideal location for NextFort. The company will employ approximately 25 people in Chandler, and will attract businesses of all types to the area.

This project on Germann Road will be Chandler’s second commercial development this year.

“The fact that companies are making this sort of capital investment in our community is a positive sign for the City of Chandler,” said Mayor Jay Tibshraeny. “I think it speaks volumes about the quality of Chandler’s business environment in the Price Corridor and throughout the city as well as the continued economic recovery.”

Both new construction projects are taking place in the Price Corridor, which has long been envisioned as Chandler’s technology hub.

“Price Corridor is a key economic play for Chandler, and our community’s commitment to the vision for that area is now paying dividends,” said Pete Wentis, a broker for CBRE and former member of the City’s Economic Development Advisory Board.

In cooperation with the University of Arizona, NextFort will continue to strive for improvements to the energy efficiency of its data center, making the company a leader in the industry.

“The East Valley, and Chandler in particular, have proven to be very attractive to data center operations,” said Barry Broome, president and CEO of the Greater Phoenix Economic Council. “NextFort is a world-class company and we couldn’t be more pleased to welcome them – and their passion for innovation – to the region.”

For more information on the new data center in Chandler’s Price Corridor, visit the City of Chandler’s website at chandleraz.gov/Default.aspx?pageid=641.