The adage “timing is everything” is one way to describe the successful entrée of national general contractor ARCO into the Arizona market. Filling a void in the design-build market is another.
ARCO established the Mountain West office at the end of 2018. Its primary industry strengths are three property types that have buoyed a robust development pipeline in Arizona, and specifically in Metro Phoenix, the past five or so years.
“One of the big reasons we came to Phoenix is we saw growth in the market for industrial, multifamily, and senior living projects,” said Rob Kerch, who leads business development for ARCO Mountain West in its Phoenix office. “Our goal was to go out and find clients in these product types that align with our customer profile.
“Once we looked at the market and witnessed growth of projects in those specific industries, getting personnel on the ground and opening a permanent office in Phoenix made sense. We also didn’t see a lot of design-build companies in Phoenix. We saw that as an opportunity to fill a void as the most value driven and efficient way to deliver a project,” Kerch said.
The ARCO enterprise is the seventh largest design-build general contractor in the U.S., according to Engineering News Record (ENR). It utilizes offices in 31 major U.S. markets to serve its partners no matter where they need to build. ARCO has constructed more than 4,000 projects and prides itself on generating 75 percent of its revenue from repeat business each year.
ARCO partnered with two repeat clients, Five Below and Scannell Properties on an 858,000 SF, distribution and e-commerce center in Buckeye that was completed in 2021.
‘Go West (Valley), young man…’
It’s no secret why a major ARCO industrial project is in the West Valley. That market boasts more than 25 MSF of industrial product currently under construction, according in industry experts. In 2Q 2021, of the more than 18 MSF of new industrial projects being built in Metro Phoenix, 75 percent were in the West Valley.
“The West Valley’s ability to attract big companies is a huge advantage for the region,” Kerch said. “You have the TSMC (Taiwan Semiconductor Manufacturing Company) chip-making plant and recently there have been announcements of more industrial support facilities in that area.”
It is no coincidence that more ARCO projects are under construction in the West Valley – MDH Partners | Gateway 303. It comprises two buildings (buildings 5 & 6) on a 42.6-acre site. One is 363,000 SF and the other is 238,000 SF. Built as spec warehouses, one is already fully leased to a Fortune 50 Company.
“Similar to what Rob said, it was a two-prong approach that brought us here,” said BJ Keane, ARCO Mountain West Vice President of Operations. “We saw the growth in all the industries we serve. We also saw a lot of our existing customers targeting Phoenix. It was an obvious move to open the office down here to attract new relationship, but also to service our existing clients. A lot of folks in our ARCO family are building here.”
ARCO Mountain West is confident the Valley’s industrial market, especially in the West Valley, will remain strong. Arizona is poised to continue building a steady pipeline of industrial projects, Kerch said. He added that companies that in the past would have landed in California for their distribution and warehouse needs are now looking to Arizona and the West Valley.
“There are a lot of factors guiding those decisions,” Kerch said. “From a transportation perspective, there is a good highway system here. It is highly attractive to more of those groups; companies that will need distribution channels. Arizona is uniquely positioned to draw that business.”
Bringing the ARCO culture to Arizona
ARCO has grown its presence with tenured associates along with hiring established professionals in the market. Right from the start, the ARCO company culture takes root.
“We were up for the challenge to grow ARCO and the opportunity to be in Phoenix, all the while knowing we had the ability and the support to go into a new city and establish ARCO as the design-build experts in yet another market,” Kerch said. We were excited about being in the here and bringing ARCO to Arizona.”
For a company trying to get off the ground in a new city, it was much more effective to have a team on the ground, Kerch added. “It is challenging for clients to work with someone who is not local or have local relationships already in place. With ARCO being located in 31 markets and having done construction in more than 46 states, it sets us apart as a national general contractor. Our clients are our partners, and we want to make sure solving their problems with market and product type expertise is top of mind.”
A big part of company culture is that ARCO prides itself on hiring some of the best and brightest project managers in the country. That alone makes his job easier, Keane said. The culture at ARCO is inspiring, innovative, and welcoming of ideas no matter an associate’s tenure. We have an extensive college co-op program providing hands-on experience for six to nine months to introduce students to the ARCO way of doing business. Their college co-ops learn the ARCO design-build method of turn-key project managers from concept to completion.
“When our co-ops come back after graduation and work for us, they know what to expect,” Keane said. “They can hit the ground running. Their path forward for the next five years is really exciting. ARCO does a great job in that regard.”
The path forward for ARCO Mountain West?
Kerch and Keane both agree the future is bright for ARCO Mountain West, and also for the construction industry in Arizona.
“There is concern about some of the economic challenges happening now, but they’re not necessarily specific to Phoenix,” Kerch said, “continued delays in the supply chain and overall cost escalations. But I think the market will remain strong. There are a lot of factors why Arizona continues to be one of the strongest regions in the country.
It helps that all the product types of which ARCO builds are doing well and that there is demand for them. Phoenix still has a “ton of runway,” Kerch said. “There are a lot of opportunities to continue to prove ourselves in the marketplace. We’re excited about continuing to build relationships while demonstrating our expertise as design builders.”
Keane said he is excited that ARCO Mountain West has just scratched the surface.
“We look at last year as a success. The ceiling is so high here with developers, customers, and a robust project pipeline,” he said. “We’re getting our message out there. We’re a company willing and able to dedicate more horsepower and energy up front. We understand the importance of being accurate on the initial underwriting and preliminary budgets. This provides our clients with confidence to help them make informed decisions regarding their projects.”
Working with entrepreneurial people at ARCO will also aid in the success of the Mountain West office, Kerch and Keane agreed.
It wasn’t a directive to open an office in Phoenix either, Keane said.
“It was more, ‘Hey, we want to serve our customers in the Phoenix market. It makes sense. As an up-and-coming leader within ARCO, it was a great opportunity. It was, again, a part of the culture,” he added.
“We’re in the market now and we’re thrilled. We will continue to serve our clients – old and new – and grow.”