In 2020, a study by J.D. Power ranked Phoenix Sky Harbor International Airport as the best major airport in the U.S. While many travelers coming to or departing from the Valley pass through Sky Harbor, it isn’t the only runway in town.
About 30 miles to the southeast is Phoenix-Mesa Gateway Airport, which originally was an Air Force base where more than 26,500 pilots trained over a 52-year period. Gateway Airport now offers non-stop flights to 60 cities and hosts more than 40 companies, with an annual economic impact of $1.3 billion to Arizona’s economy.
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The land surrounding the airport, known as Mesa Gateway, has become a magnet for industry, with developments including the 1 million-square-foot speculative industrial building Elliot 202 and an $800 million data center by Meta, the parent company of Facebook, in the works.
According to Mesa Council Member Kevin Thompson, who represents Mesa Gateway as part of District 6, the accessibility of the area is attracting more industrial users. “Just the fact that SR 24 is coming has accelerated projects that have been looming in the background for years. Developers are seeing the nexus of everything coming together and they want to be part of that,” he says.
Between the availability of land and growing connectedness of the region, development in Mesa Gateway is thriving.
A Limited Resource
The esteemed American author Mark Twain once quipped, “Buy land, they’re not making it anymore.” Indeed, even in a sprawling city such as Greater Phoenix, space is at a premium. The Southeast Valley is uniquely constrained due to surrounding state and tribal land. Despite the restrictions, industrial users are still scouting out the area.
“When I first got elected in 2015, I had developers telling me they wanted to build residential near Gateway saying, ‘You’ve got 200 years’ worth of land that you’ll never use,’” Thompson recalls. “Here we are seven years later, and even though there’s still land, it’s hard sometimes to parcel together enough of it when you have a big user that comes in and wants a million-square-foot facility.”
The appetite for larger space is something of a novelty for the Southeast Valley. Steve Larsen, managing director at JLL, notes that, historically, the Mesa Gateway area attracted smaller to mid-bay clients looking for 15,000 square feet to 50,000 square feet.
“Now, it’s closer to 150,000 square feet on average. There are some very large users — a million square feet or more — which we’ve never seen before in the past,” he says. “The market is maturing and evolving.
“What we’re seeing is that industrial users have become more sophisticated,” Larsen continues. “A lot of groups are looking to take advantage of the cubic feet, not just the square footage, so they can rack higher and be more efficient.”
Zoning and land use attorney Adam Baugh, partner at Withey Morris, agrees that development in the Mesa Gateway area has momentum. He describes the pandemic as an accelerator for industrial demand since more companies want to have logistics and manufacturing closer to the customer.
The City of Mesa has also done its part to attract businesses. A strip of land north of Gateway Airport that stretches from Hawes Road to Signal Butte Road has been designated the Elliot Road Technology Corridor. The corridor is a planned area development zone placed over an existing base zone, which streamlines the entitlement process for advanced manufacturing and technology related businesses, such as data centers, by granting light industrial zoning without requiring action from the Mesa City Council. Thompson estimates that the provisions in the overlay can reduce the time needed to start construction from one year down to eight weeks.
A similar overlay, the Pecos Advanced Manufacturing Zone, exists south of Gateway Airport. Baugh explains, “If people opt in, they avoid the zoning process and a public hearing on a site play. They also get to design review faster. Mesa is motivated to attract those types of jobs and has set up an easier regulatory path to make those projects more likely to happen.”
Labor and Access
While the ease of building is enticing for industry, it is not the only criterion used for evaluating possible locations. A world-class facility is useless if there aren’t enough employees to perform its desired function. Mesa Gateway, however, isn’t lacking qualified workers.
Josh Tracy, vice president of development at Ryan Companies, argues that the area is unique in that there’s a potent mixture of labor, available land and a supportive municipality.
“The Southeast Valley has a talented, educated labor pool that supports companies such as Intel, Honeywell and Boeing. That, in turn, attracts higher-end industrial products that are a bit more employment heavy, which provide quality jobs for the community,” he says.
New homes being built close to Mesa Gateway means that companies can tap into a pool of nearby workers. Thompson mentions that the Eastmark, Cadence and Bella Via housing developments represent a growing section of the city. “Southeast Mesa has a highly skilled, highly educated workforce. That includes everyone from attorneys to doctors, blue collar and white collar — you name it.”
Also spurring growth are a series of nearby transportation corridors. The proximity of the Loop 202 makes it easier for workers from Chandler and Gilbert to travel to Mesa Gateway. The recent expansion of the Loop 202 around South Mountain provides access to labor in the Southwest Valley. State Route 24 also serves as an efficient commuter funnel.
“Right now, you have a lot of vehicles that are moving in and out of San Tan Valley and Queen Creek as people go to work in the morning and come home in the afternoon. There are upwards of 80,000 vehicles per day traversing SR 24 to get out of San Tan Valley and that portion of Pinal County,” Thompson notes. “Businesses are wanting to take advantage of that and locate close to the labor force.”
Moreover, Thompson hopes that Union Pacific’s plans to construct a 5-mile-long rail spur, known as the Pecos Industrial Rail Access and Train Extension, near Pecos and Sossaman roads will come to fruition.
“Some of the nearby companies such as CMC Steel have been pushing for the rail line for quite some time. From their perspective, a rail spur coming in and out can help alleviate a lot of the truck traffic from shipping their rebar,” he says. “There’s also a lot of logistics and supply chain companies that are looking to be located next to the rail spur. It’s a nicety for some businesses and a must-have for others.”
Current Development
With the market ripe for more industrial users, there are ample opportunities to profit on the area’s attractiveness. For example, national real estate development and investment firm CRG is developing The Cubes at Mesa Gateway, which when complete will comprise approximately 4 million square feet of speculative and build-to-suit space.
Larsen explains that The Cubes sits on a 268-acre piece of land that had been on the market for some time.
“As investments in the Southeast Valley continue to grow, people have larger appetites. I mean, almost 300 acres is a very big pill to swallow. But you’ve got groups that are buying into what is going on in the Southeast Valley, and CRG capitalized on that,” he says.
So far, the investment thesis is working. “We already have multiple users looking for upwards of 500,000 square feet with offers being traded,” Larsen continues. “We have tremendous activity from Fortune 100 companies that are currently evaluating The Cubes. We think this is going to be the premier site for large box industrial in the region.”
The Cubes’ massive campus will lend itself to multiple users. Baugh believes its flexibility is a great asset. “The buildings can be single-or multi-tenant, depending on what the market wants and needs. Everything is in place to allow CRG to succeed, from the right design architecture to the proper parking ratios to adjacent roadway access — those kinds of things will propel this project forward.”
Nearby, Ryan Companies is building Confluence at Mesa Gateway. Positioned on 35 acres, the development will feature six speculative industrial buildings ranging from 32,000 square feet to 176,000 square feet.
“We have the opportunity to get a diverse mix of tenants with what we feel is best-in-quality space,” Tracy notes. “This includes 32-foot clear heights, 7-inch reinforced slab, 3,600 amps of power with room for more — we’re trying to hit the best standards we can in the market.”
The project is built to what Tracy calls the bread-and-butter of the Southeast Valley industrial space, from 30,000 to 100,000 square feet.
“There are some pioneers out in Mesa Gateway with million-square-foot buildings, and so far those have been successful,” he says. “But we wanted to focus more down the middle of the fairway and what has historically leased and done well — the single loaded, high-quality industrial buildings, with the ability to do high-end office suites in the front and warehousing or manufacturing space in the back.”
Ryan Companies is also pursuing LEED certification for Confluence, which is unique for speculative projects. “As we continue to see sustainability be an important factor to large companies, we wanted to further differentiate ourselves with a LEED certification on the buildings, making it so that we can accommodate solar panels on the roof in the future, along with provisions for putting conduit in the ground now for electric vehicle charging stations,” Larsen says. “We’re trying to create a long-term asset that will be successful for the community, investors and the environment.”
Mesa Gateway has changed greatly since it was home to the Air Force’s premier pilot training facility, but the area is shaping up to be an industrial powerhouse for decades to come.
