While many of the nation’s businesses have struggled throughout the pandemic, the economy of Metro Phoenix has been firing on all cylinders.
“Arizona has been the benefactor of many elements that have helped the economy, including attracting top tier e-commerce, in-migration from surrounding states and the fundamentals that are attracting businesses to Arizona,” says Derek Wright, president of Suntec.
Wright also points to the many mega-projects that have gone online over the past year that will set the Metro Phoenix region up for a ripple effect of companies following suit in choosing Arizona for additional operations. And many of those mega-projects would not be possible without the behind-the-scenes work of the Greater Phoenix Economic Council (GPEC).
“We can see the evidence of GPEC’s investment, relationships and hard work from east to west in the Valley,” says James Murphy, CEO of Willmeng Construction. “Buckeye was named the fastest-growing city, according to U.S. Census data, and we can see significant infrastructure growth that laid the groundwork for this commercial and residential development. Companies like ElectraMeccanica building a production plant in Mesa are spurring growth in the East Valley for similar plants. E-commerce is active across the Valley and prompting subsectors such as cold storage to grow at a faster pace than many cities in the nation as a result of the business attraction, labor pool and product demand.”
Az Business talked with Chris Camacho, president and CEO of GPEC, about the recent economic wins the organization has achieved and what he sees for the future of Metro Phoenix’s economy.
Az Business: Can you talk a little bit about how 2021 went for GPEC?
Chris Camacho: In the last 12 months, we’ve seen a massive shift in a couple different areas — one being that industrial technology momentum has been very strong. The industrial tech space is generally categorized by advanced electronics, semiconductors, and the supply chain that supports those sectors. We’ve had pretty robust activity in those areas, plus electric vehicles. We’re coming off the heels of Taiwan Semiconductor Manufacturing Company (TSMC) coming to Arizona — which is the biggest deal in the country — along with the expansion of Intel, which is a $20 billion investment. We’re on the map globally now for industrial technology. In a normalized market, you would see about 60% of GPEC’s deal flow in office and 40% in industrial. Today, we’re doing 70% in industrial and 30% office deals. So, it’s pretty graphic change.
AB: What makes Metro Phoenix so attractive for these industrial projects?
CC: Well, it starts with labor. We have the requisite labor with our history in semiconductors and aerospace and defense. It starts with a qualified labor force, having a P-20 education system that meets the needs of business — whether it’s precision manufacturing within the community college system or the engineering capacity at our universities. That’s been part of the reason why we’ve been so attractive to industrial users. We are also growing in biomedical, and a large part of that success is because of the University of Arizona, Creighton, our medical schools, and the partnership with Mayo Clinic and ASU. We’re just hitting our stride on that. That’s going to get even more intensified.
AB: Outside of the workforce, what are these industrial clients seeking?
CC: They look at the infrastructure and the power grid. Is the power grid stable? Are the rates competitive? Is the water and wastewater infrastructure already there or do they have to build it? Finally it’s quality of life and cost competitiveness. So you put together the quality of life, meaning affordability for families, and the cost competitiveness for company operations. They can attract people who want to move out of California or want to move from Chicago to Arizona. So all those ingredients are why we’ve done well.
AB: How did Metro Phoenix become such a hot spot for electric vehicles so quickly?
CC: I give Gov. Doug Ducey a lot of credit. Back in 2015, before electric vehicles and autonomous vehicles were really mainstream, he adopted an executive order that enabled Waymo and other companies to test in our market. At the time, it was kind of a frontier mindset to do that. But what happened, ultimately, was we garnered a lot of notoriety because of the testing of a lot of these nascent emerging automotive companies. That just builds over time, so success begets success. When you have that testing, the engineering capacity at ASU, and being next door to California, where a lot of innovation initially was created, all those initial ingredients help us become a destination for scaled manufacturing. But what put us on the map five or six years ago was the initial fortitude to create regulatory policy that was attractive for autonomous vehicle testing here. What have we done right to attract that investment?
AB: Attracting venture capital was a problem for Arizona in the past, but that seems to be changing. What have we done right to attact more investors?
CC: A decade ago, we were satisfied with being a place where people came and we took other people’s intellectual property (IP) and allowed them to get it to scale. About a decade ago, we set a chartered course to build our own IP. So we’ve created assets such as the Wearable Technology Center and the Blockchain Institute that were launched over the last five years. Now, we’re creating new Arizona-based IP. So, what’s been happening and what has really accelerated in the last two to three years is these out-of-state venture capital firms are looking at Arizona now, much like they are looking at Austin, Texas.
AB: How have things like the FinTech Sandbox and the Wearable Technology Center impacted Arizona in terms of becoming a hot spot for innovation?
CC: They’re all ingredients, right? There are a dozen companies in the Wearable Technology Center that I think are going to put Arizona on the map for biomedical instrumentation. The Wearable Technology Center and the sandboxes around PropTech and FinTech really put us on the global map because people look at them and say, “Hey, this is a place that’s very, pro-business and is going to enable global technologists to test their idea or concept in a state that will help to protect their IP.” And the difference between Arizona and California or any other Western market is you’re able to come here and test and validate your technology with such ease, as opposed to a lot of the regulatory burdens that exist in other places.
AB: We talked about semiconductors and electric vehicles. What are some of the other hot sectors that you’re seeing heading into 2022?
CC: All the way through this downturn, cybersecurity and software have been really strong, and they’ll continue to be strong. What also has occurred in the last 24 months is we’ve quietly become one of the top financial services hubs in the country. While there may not be a lot of fanfare about that, as the return to office occurs over the next 24 months in New York, Chicago, Boston or Los Angeles, we’re seeing and hearing about divisions being shifted out of those places and very quietly moving into existing space they already have in Phoenix. So I think financial service is going to be very exciting. We also lead the nation in percentage job growth in bioscience. If you add that to the healthcare segment, we’re going to have more than 300,000 people working in that sector alone in the Metro Phoenix region.
AB: One of the strengths that Metro Phoenix has always had has been affordable living costs, but housing prices are skyrocketing. How will that impact our ability to attract new business?
CC: Yes, and the projections are that we’re going to see pretty modest increases again. The good news, if there is any, is that our base was lower than the national average. For the first time we’ve creeped over on the index, instead of at the 100% index, we’re at 113% on the housing index. But our overarching affordability is still competitive. That’s what a lot of these hot markets are grappling with today. So when you’re in Austin or Seattle or Denver, or these other places where jobs are wanting to go, the only advantage we have is we have much more land to grow. Where we got caught a little bit flat is we’ve seen an overarching demand for our housing, but unlike 2006, we did not overbuild. We don’t have an oversupply today. I do think the housing market will level out as you see interest rates hike in 2022. I think you’ll see a much more normalized housing situation than what we’re seeing or what we saw in the last 12 months.
AB:Looking ahead to 2022 and beyond, what’s your outlook for GPEC and the Metro Phoenix economy?
CC: I think we’ve got another four quarters of pretty extensive growth. In our pipeline today, there are 252 companies evaluating the market. Like I said, about 70% of those are industrial technology related companies. My hope is that we strengthen or fortify our position of being a global leader in semiconductors. I think we’re going to continue to be an e-commerce hub. I also think you’re seeing a return to aviation, so commercial and business aviation activity around our airports. I think we’re very well-situated on many fronts in terms of cost competitiveness, labor supply, and quality communities. So that’s why I’m still very confident that we’re going to have a very strong 2022 calendar year.