AZRE January/February 2018

JANUARY-FEBRUARY 2018

2018 OUTLOOK

INSIDE:

Between the 7's p. 24 | Building Technology p. 60

2018 and beyond

O

verall, the Greater Phoenix commercial real estate market ended 2017 on a high note and many are hopeful for another couple good years before they forecast our next economic hiccup.

To get a better sense of what to expect in 2018 and beyond, check out the “Annual outlook,” which includes local expert analysis and predictions for the market’s different sectors as well as a list of 40 companies worth watching in the year ahead.

My favorite story from this issue is “Between the Sevens,” which will be a series of stories looking at noteworthy projects between Seventh Avenue and Seventh Street in Downtown, Midtown and Uptown Phoenix. This issue focuses on Midtown and Uptown along with several high-profile projects to keep an eye on such as the Park Central Mall’s revitalization and other mixed-use developments incorporating retail and multifamily.

This issue of AZRE also features: • The list of winners from BOMA Greater Phoenix’s The Outstanding Building of the Year (TOBY) Awards, recognizing excellence in building performance and management.

• Analysis of what the $80 million land deal by Bill Gates means for the far West Valley and future development.

• “20 in their 20s” – a list of 20 Millennials in commercial real estate already making a name for themselves throughout the industry.

• A closer look at how building technologies transform the way projects are designed, built and experienced.

• A breakdown of the retail’s evolution and the trends driving change in the years ahead.

President and CEO: Michael Atkinson Publisher: Cheryl Green Vice president of operations: Audrey Webb EDITORIAL Editor in chief: Michael Gossie Associate editors: David McGlothlin | Jesse A. Millard Interns: Erica Apodaca | Lauren Marshall | Nikole Tower Contributing writers: Alison Bailin Batz | Joyce Grossman Tim Lawless | Deb Sydenham ART Art director: Mike Mertes Graphic designer: Bruce Andersen MARKETING/EVENTS Marketing & events manager: Cristal Rodriguez Marketing designer: Jennifer Childres Marketing specialist: Vlad Madrosky OFFICE Special projects manager: Sara Fregapane Executive assistant: Mayra Rivera Database solutions manager: Amanda Bruno AZ BUSINESS MAGAZINE Senior account manager: David Harken Account managers: Cindy Kurtze | Stacie Lee AZRE | ARIZONA COMMERCIAL REAL ESTATE Director of sales: Ann McSherry AZ BUSINESS LEADERS Director of sales: Sheri Brown RANKING ARIZONA Director of sales: Sheri King EXPERIENCE ARIZONA | PLAY BALL Director of sales: Donna Roberts CREATIVE DESIGNER Director of sales: Joe Freedman

David McGlothlin Associate editor, AZRE david.mcglothlin@azbigmedia.com

AZ BUSINESS ANGELS Director of sales: Brit Kezar

AZRE: Arizona Commercial Real Estate is published bi-monthly by AZ BIG Media, 3101 N. Central Ave., Suite 1070, Phoenix, Arizona 85012, (602)277-6045. The publisher accepts no responsibility for unsolicited manuscripts, photographs or artwork. Submissions will not be returned unless accompanied by a SASE. Single copy price $3.95. Bulk rates available. ©2018 by AZ BIG Media. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without permission in writing from AZ BIG Media.

2 | January-February 2018

“ LIT.

GIFTED. ELEVATED.

– Ryan Hibbert, CEO of Riot Hospitality

LGE Design Build has been perfecting the conception and construction of the Valley's most iconic projects for more than 23 years. But don't take our word for it. Listen to how clients, influencers and officials define our work. And there's more to come as we plan out LGE's thrilling future.

Look to our next defining moment this spring.

CONTENTS

FEATURES 2 Editor’s Letter 6 Trendsetters 10 Executive Profile 12 After Hours 14 New to Market 16 Big Deals

20 Legislative Update

32

24 Between the 7's

32 Annual Outlook 52 20 in their 20's 60 Building Technology

24

66 Retail

66

On the cover:

CA Residential, Diamond Realty Investments Inc., broke ground in October on The LINK PHX, a 257-unit residential tower, designed

by Shepley Bullfinch and the general contractor is Urban Edge Builders.

4 | January-February 2018

GO TO store.azBIGmedia.com to purchase subscriptions, digital issues and plaques

60

TRENDSETTERS

And the

TOBY

goes to...

The Outstanding Building of the Year (TOBY) Awards, presented by BOMA Greater Phoenix, represent the most prestigious and comprehensive commercial real estate program recognizing outstanding performance in buildings and rewarding excellence in building management.

Buildings are evaluated on: life safety, security, risk management, training and education, energy, environmental sustainability, tenant relations and community involvement.

Here’s the list of winners from the 2017 TOBY Awards presented on Nov. 3.

Who is NAIOP-AZ’s new president?

NAIOP Arizona selected a new president in November - Suzanne Kinney, a native of Little Rock, Ark. with extensive local experience.

She joins NAIOP Arizona after a stint as interim manager for the Arizona Mining Association. Prior to that, she was CEO and founder of Southwest Business Policy, a public policy and communications consulting firm. From 2005-2013, she served in senior leadership positions with the Arizona Chamber of Commerce and Industry through her roles as both senior vice president of Public Policy as well as founder and executive director of the Arizona Chamber Foundation.

Kinney brings extensive experience in public policy, advocacy and communications to her new role with NAIOP Arizona in the areas of economic development, international trade, healthcare, education and natural resources.

She has served on the board of directors for several Arizona-based nonprofits, including the Institute for Mental Health Research, the Arizona Business and Education Coalition, and the World Affairs Council/Global Ties Arizona.

Kinney has also served on advisory committees for Expect More Arizona, the Flinn Foundation’s Arizona Bioscience Roadmap and the Arizona Technology Council.

500,000 – 1 Million Square Feet

100,000 – 249,999 Square Feet

Papago Buttes Corporate Plaza 1230, 1250 W. Washington St., Tempe; 1500 N. Priest Dr., Tempe Owner: Papago Buttes Corporate, LLC Managed by: Audra De Leon, Metro Commercial Properties, Inc.

Gainey Center I 8601 N. Scottsdale Rd., Scottsdale Owner: Principal Real Estate Investors, LLC Managed by: Katherine Slater, Metro Commercial Properties, Inc.

6 | January-February 2018

Corporate Facility Northern Trust 2160 E. Elliot Rd., Tempe Owner: Wentworth Property Company Managed by: Amy Roberts, Wentworth Management Company

Brokers+Engineers launch first NNN tech platform During the ICSC New York Deal Making Show in December, Brokers+Engineers (B+E) launched the first-ever tech-driven brokerage firm and trading platform for triple net lease (NNN) real estate.

“Brokers+Engineers is the first technology platform created specifically for trading NNN property, from origination to close,” said CEO and Co-founder Camille Renshaw. “B+E will maintain the largest NNN data set in the industry, with technology products that will leverage this data to provide a new standard of advisory to brokerage clients.”

The national NNN real estate market is estimated to have a total market value of $6.5 trillion, consisting of more than 1.3-million properties, with greater than $55 billion in average annual sales volume.

NNN property values are unique in that the pricing is not driven strictly by the underlying real estate but also by the lease terms and a single tenant’s credit rating.

4

workplace trends to watch in 2018

Driven by technology innovation and changing employee preferences, today’s office environment has evolved into more than just rows of cubicles, private offices and an employee break room. Craig Henig, senior managing director of CBRE’s Phoenix office, says we can expect these four workplace trends to continue to gain prominence in 2018.

The Smart Office: Simple technology upgrades include web-based storage solutions, messaging and meeting applications and plug-and-play technologies that allow employees to be mobile throughout the office and from anywhere in the world.

Free-address: Offer employees the opportunity to determine how and where they work, whether that is at an open workstation, an enclosed office for when privacy is needed, in a conference room

for quick huddles or meetings or on the road. Unassigned seating can inspire spontaneous collaboration.

Focus on Wellness: Offices that promote healthy workplaces result in healthier, happier employees. Providing sit/stand and treadmill desks reduces sedentary behavior while wellness rooms, healthy snacks and hydration stations throughout the space are also helpful in driving this effort. Some offices even offer weekly group fitness classes and challenges.

Paper No More: Cloud-based storage solutions make it possible for offices to go paperless. A paperless office can be implemented simply by scanning and saving all paper files to a cloud-based storage solution, giving employees access to their files anywhere, anytime, 24-hours per day.

Renovated Building

Suburban Office Low-Rise

Public Assembly

Historical

Biltmore Center 2390, 2394, 2398 E. Camelback Rd., Phoenix Owner: ViaWest Group Managed by: Michael Chadwick, ViaWest Group

Stapley Center Location: 1620, 1630, 1640 S. Stapley Dr., Mesa Owner: Invesco Real Estate Managed by: Alexis Matt, CBRE Inc

Health and Sciences Education Building Location: 435 N. 5th St., Phoenix Owner: University of Arizona Managed by: Marshall MacFarlane, University of Arizona

The Historics Location: 550, 600 E. Van Buren St., Phoenix; 475 N. 5th St., Phoenix Owner: University of Arizona Managed by: Marshall MacFarlane, University of Arizona

7

TRENDSETTERS Phoenix remains

hotspot for foreign industrial investment

Investment buzz:

Section 1031 Exchanges vs.

Deferred Sales Trust The real estate community was relieved to learn both of the tax reform plans going through Congress retain Section 1031 Like-Kind exchanges in its present form, but only for real estate assets, which has some in the industry looking at alternative investment strategies such as a deferred sales trust (DST).

Similar to 1031 exchanges, the DST defers capital gains tax on the sale of highly appreciated real estate assets.

It’s a trademarked strategy that was developed by tax attorneys and CPA’s with The Estate Planning Team over 20 years ago based on Section 453 of the IRS Code and Trust Law. “The DST is an attractive alternative to a 1031 exchange when a client wants or needs to cash out of real estate or cannot find a replacement property for the 1031 exchange, especially during this period of tax reform uncertainty,” explains Dillon Hall, DST consultant at The Estate Planning Team. “Unlike a 1031 Exchange, the DST does not require the taxpayer to reinvest in ‘like-kind’ property, thereby providing a wider variety of potential income producing investment options such as managed money, annuities and etcetera.”

According to CBRE research, foreign investors have acquired nearly $61 billion in U.S. industrial real estate since 2010, 48 percent of which has come from Asia-Pacific-based investors—largely from Singapore and China.

Strong fundamentals, the growing

sophistication of logistics facilities and e-commerce growth has led to the surge, with Phoenix coming in as a toptwo investment destination in 2016, and foreign buying remains elevated in the market in 2017 year-to-date.

Phoenix has attracted $508 million in foreign capital (in non-entity sales) since 2010, only trailing Greater Los Angeles with $1.4 billion.

“Phoenix now ranks among the toptier Western U.S. markets,” says Pat Feeney, senior vice president at CBRE in Phoenix. He predicts, “We’ll continue to see an uptick in foreign monies coming in via differing advisors.”

Investors from Canada also invested more than $17 billion in U.S. industrial real estate assets during this period.

Top 10 Countries for Cross-Border Industrial Investment into U.S., 2010-2017

Source: CBRE Research, RCA, Q2 2017

Phoenix hits late stages of investment expansion cycle The Greater Phoenix commercial for medical office condos and 25-percent real estate market has experienced an for non-condo medical office buildings. upswing of investment activity for the INDUSTRIAL: Transaction activity is past several years, but the expansion up 10-percent compared to 2016 but cap has shown signs of slowing during the rates are compressing as prices rise. third quarter.

SHOPPING CENTERS: Year-to-date According to a Colliers International’s sales velocity is about 10-percent behind Q3 2017 report, investment remains 2016 but cap rates have risen by an healthy but slower than 2016 with average of 50 basis points since then. activity rising in some segments and declining in others as a Phoenix Pricing Trends by Property Type result of mixed commercial property sales.

OFFICE: Year-to-date sales volume trails 2016 by 6-percent and the average cap rate in transactions is approximately 7.7-percent, which is nearly identical to 2016.

MEDICAL OFFICE: Compared to 2016, total transaction volume yearto-date is down 4-percent Source: Colliers International Greater Phoenix Q3 2017 Research Report

8 | January-February 2018

EXECUTIVE PROFILE

???????

Carrying on a family legacy Preservation, planning key to real estate leader’s practice

By ALISON BAILIN BATZ

J

ason Wood’s roots in Arizona run deep.

The story starts more than 100 years ago in Aravaipa Canyon, a wilderness preserve located about 50 miles northeast of Tucson.

“I come from a long line of cattlemen who settled in Arizona in the late 1800s,” says Wood. “They lived off of the land, and I think that is how the seeds of working with it – albeit in a much different way – were sewn within me.”

Wood, however, never got the chance to live on the ranch. His grandparents would sell it – and ensure it was preserved, in fact – in 1970, in what was then the largest purchase by the Nature Conservancy, which now owns and manages over 7,000 acres in the area commonly referred to as the Aravaipa Preserve.

“My father was born with a rare and incurable genetic disorder that affects the body’s ability to fight infection,” says Wood. “My grandparents didn’t sell the land squarely due to my father, but it was certainly part of the reason.”

Wood’s father didn’t let the disease

10 | January-February 2018

control his life – not by a longshot.

“He became a dentist, married my mother and had both me and my brother before passing away at 29,” adds Wood.

Inspired by both dad and mom, initially a homemaker who eventually got her MBA and became a financial advisor, Wood graduated high school and attended the University of Arizona, still interested in working with the land, but also inspired by daily discussions about the capital markets with mom.

“But a rancher, I was not. So, I decided to study finance and see about getting into real estate,” explains Wood, who graduated from UA and then, after working in Tucson for a law firm, entered law school at the University of Texas, with the goal of practicing real estate and corporate law in Arizona.

Wood moved to the Valley in 2007, just in time to get his start in real estate as the housing crash began.

Like his parents, Wood pressed on, focusing on helping clients restructure existing real estate portfolios and overcome other challenges. Today, he helps clients in a multitude of

industries acquire, finance, develop, lease and operate real estate of all types, including shopping centers, residential developments, automotive dealerships, hotels, office and industrial parks, apartment complexes and raw land.

By 2014, he was selected for inclusion in Southwest Super Lawyers’ annual list of rising stars and earned the coveted AV Preeminent rating by the Martindale-Hubbell Peer Review Ratings system.

Also eager to ensure the land in Arizona and beyond continues to be developed thoughtfully, Wood became involved in both the Arizona District Council of the Urban Land Institute and the Arizona and New Mexico Operations Committee of the International Council of Shopping Centers, while also taking on a board position at Habitat for Humanity Central Arizona.

By early 2016, Wood was ready for a new challenge, so he joined Quarles & Brady, LLP. Less than two years later, in late 2017, he was chosen as the Arizona chair of the firm’s Real Estate Practice Group.

AFTER HOURS

The Great 8

Local general contractors, subcontractors, vendors bring creativity to business through ping-pong tournaments

By DAVID MCGLOTHLIN

T

he construction industry in Arizona, especially Phoenix, is fraught with competition, and it doesn’t stop at project pursuits.

Through an creative way to network with peers and trade partners, a group of subcontractors and consultants formed a group to engage general contractors in an after-hours, yearlong ping-pong tournament.

The group, known as “The Great Eight,” decided to coordinate pingpong tournaments as a way for the busy general contractors to mingle with lots of different subcontractors at once and in a cost-effective way for the subcontractors to reach target clients.

Similar to being competitors in the field, vying for project contracts, these general contractors were also competing at table tennis in a bracket-style tournament format, which participants described as “a remarkable success.”

Since the inception of the games, each subcontractor has secured contracts with a majority of the general contracting companies involved and were able to add about 5-10 contacts at each event to their professional networks, depending on prior relationships with the firm.

The Golden Paddle Ping-Pong Tournament concluded in October after a championship playoff match at Aunt Chiladas in Phoenix. In an exciting finish, Sundt Construction edged out Okland Construction to earn first place and take the coveted, one-ofa-kind paddle-shaped trophy created by Buesing Corporation.

“So many of these general contractors have worked with one another at some

12 | January-February 2018

Denise Allen

Hannah Sanders

point in their careers that many of them know each other so it’s a neat way for them to reconnect,” explains Denise Allen, director of business development at True Metal Solutions.

The idea for the tournaments originated from Hannah Sanders, business development manager at AME Landscape Companies, who brought the Great Eight together to formulate a game plan about how it would work.

The team came up with the logistics and each used their contacts to set up the monthly tournament dates.

“We bring in the ping-pong tables, food, drinks and set up a bracket. Pretty much everything to create a fun happy hour environment,” explains Sanders.

“We wanted these companies to benefit in every way possible by making it easy for them to simply show up and have a great time, which also included doubles matches as a team building event.”

The nine participating general contracting companies would then show up to the designated place after work to compete and network.

Sanders says each company had at least one, if not two players, with table tennis skills that would rival Forest Gump, but

the “companies with their own in-house tables obviously had more highly skilled competitors, which included Chasse Building Team and Wespac Construction.”

Overall, each company brought its own element of fun to the monthly events from Hensel Phelps coordinating a version of the Mannequin Challenge to Wespac simultaneously playing beer pong at the neighboring ping-pong table.

“These events are a nice break and good excuse to get our people together for some fun,” says Stephanie Handley, business development director of Wespac Construction, which had over 30 people attend its offices when it hosted the matches in June.

From a business development perspective, Allen describes it as a great way to get in front of clients and “a side bonus is the great connections forged amongst the Great Eight.”

Sanders says, “Word has spread, and we have been approached by a good amount of new general contractors who want to throw their hat in the ring.”

More information and photos from the 2017 matches can be found online at thegreat8pingpong.com.

BUESING CORP “Simply the Best”

buesingcorp.com | 602.233.3339

THE GREAT 8

Hannah Sanders of AME Landscape Companies Kevin Summerville of Buesing Corporation Brad Hoeder of Climatec Lizzy Brooks of Immedia Christine Rhodes of Facings of America Rachel Reindl of RestorationHQ Alan Erickson of TPAC, An EnCon Company Denise Allen of True Metal Solutions

PARTICIPATING GENERAL CONTRACTORS

Chasse Building Team DPR Construction Hensel Phelps Kitchell Corporation McCarthy Building Companies Okland Construction (2nd Place) Ryan Companies Sundt Construction (1st Place) Wespac Construction Inc.

MASS EXCAVATION • SITE DEVELOPMENT GRADING • SHORING • SHOTCRETE TRUCKING • SOLAR GRADING FOUNDATION DRILLING • RESIDENTIAL GRADING CONCRETE AND ASPHALT RECYCLING

13

NEW TO MARKET A

D

E

MIXED-USE A THE LINK PHX DEVELOPER: CA Residential GENERAL CONTRACTOR: Urban Edge Builders ARCHITECT: Shepley Bulfinch LOCATION: 702 N. Third St., Phoenix SIZE: 400,000 SF VALUE: WND START/COMPLETION: Nov. 2017-Aug. 2019

14 | January-February 2018

SENIOR LIVING B CLARENDALE OF CHANDLER DEVELOPER: Ryan Companies US, Inc. GENERAL CONTRACTOR: Ryan Companies US, Inc. ARCHITECT: Ryan A + E LOCATION: Gilbert & Riggs roads, Chandler SIZE: 262,000 SF VALUE: WND START/COMPLETION: Nov. 2017Spring 2019

PUBLIC C GILBERT FIRE STATION NO. 9 DEVELOPER: Town of Gilbert GENERAL CONTRACTOR: Willmeng Construction, Inc. ARCHITECT: HDA Architects LOCATION: 3355 E. Ocotillo Rd., Gilbert SIZE: 12,137 SF VALUE: $4.9M START/COMPLETION: Nov. 2017-Aug. 2018

B

C

F

MULTIFAMILY D ALTA CENTRAL DEVELOPER: Wood Partners GENERAL CONTRACTOR: Wood Partners ARCHITECT: Biltform Architecture Group LOCATION: 4001 N. Central Ave., Phoenix SIZE: 201,000 SF; 223-units VALUE: $44M START/COMPLETION: March 2017Nov. 2018

INDUSTRIAL E LINCOLN LOGISTICS 40 DEVELOPER: Lincoln Property Company GENERAL CONTRACTOR: Layton Construction ARCHITECT: Butler Design Group BROKERAGE: CBRE LOCATION: 575 N. 143rd Ave., Goodyear SIZE: 901,700 SF VALUE: $47M START/COMPLETION: Dec. 2017Mid-2018

MULTIFAMILY PARC MIDTOWN F DEVELOPER: Evergreen Devco, Inc. GENERAL CONTRACTOR: MT Builders, LLC; Kland Civil Engineers ARCHITECT: Todd & Associates LOCATION: 4114 N. Third Ave., Phoenix SIZE: 275,000 SF; 306-units BROKERAGE: De Rito Partners VALUE: $52M START/COMPLETION: Nov. 2016-Q1 2018

15

He’s doing what?

Bill Gates invests $80 million in the far West Valley in hopes of building a Smart City

B

ill Gates is investing a lot of money into the Arizona desert, almost $80 million, as part of a land deal for 20,000 acres just off the Interstate 10 near 339th Avenue, according to reports.

In the deal, a division of Gates’s Cascade Investment bought a controlling interest of land known as Belmont. Reports of development plans mention the creation of a smart city, which could deploy a variety of Internet-connected sensors and devices into the area’s developments.

The purchased land could be home to tens of thousands of homes and over 3,000 acres of industrial and commercial space.

Kuldip Verma, founder and CEO of Vermaland, the largest holdings company of 50-1,200-acre parcels in the Metro Phoenix area, describes the deal as “huge for the West Valley.” His company originally looked at acquiring the land in 1999 when the price was approximately $600 per acre.

He says the property’s proximity to I-10 and the lack of large parcels available in the area both played a big role in the decision to acquire the nearly 20,000 acres. The area is also near the planned alignment for Interstate 11, an unfunded highway that could eventually stretch from Phoenix through Las Vegas to Canada.

Verma predicts the buzz around a big-name investor like Gates will help attract more outside investment and bring in additional capital for other

16 | January-February 2018

developments, which will be good for the census-designated place in Western Maricopa County known as Tonopah, which is approximately 50 miles west of Downtown Phoenix. The area has less than 2,000 people.

Verma says there are currently no parcels over 5,000 or 10,000 acres on the market and even 2,000-3,000 acre lots are difficult to find, which added to this property’s investment appeal.

There has been a bigger appetite for development in the West Valley lately, as groups like WESTMARC have worked to reveal the strong labor pool that lives in the West Valley in order to attract more business relocations to the region.

In 2016, developers purchased an 11,000-acre master-planned community in Buckeye called Tarteso for $80 million, which could support 40,000 homes. There’s also plans for an innovation campus in Peoria, which tapped Plaza Companies, the developers of South Scottsdale’s SkySong, for the development near 83rd Avenue and Bell Road.

In the past year, the Greater Phoenix Economic Council has been working to market the region as a hub for connected technologies, often known as the Internet of Things. These technologies allow various types of devices, from phones to stop signs, become smart, sensor-laden devices that are connected to the Internet or a cloud.

This deal could be the source of many jobs and oppurtunities for

Ashraf Gaffar

Kuldip Verma

local engineers and companies in the Internet of Things world.

The Gates deal builds on the momentum the area has been gaining as a smart region, says Ashraf Gaffar, assistant professor and honors faculty at ASU’s Ira A. Fulton Schools of Engineering. Gaffar is one of many researchers working on autonomous vehicles here.

He hopes to one day get in touch with Gates and the developers of this possible smart city to let them know that there are many students and workers in Arizona who are working on the very technologies that can be deployed in a smart city.

“You immediately sense the potential here by seeing that Bill Gates immediately decided on Tonopah and creating his own intelligent city here.

I think we have a really good potential [with finding local engineers jobs] there,” Gaffar says.

It’s the big deals and the brokers who close them that make the market an interesting one to watch. Here are the Top 5 notable sales for the months of October and November.

Sources: Cushman & Wakefield Research and Costar.

INDUSTRIAL/SALES

OFFICE/SALES

IMAGERY ©2017 GOOGLE

TEMPE LOGISTICS CENTER 1524 W. 14th St., Tempe 175,314 SF; $18.1M BUYER: The Allstate Corporation SELLER: LBA Realty BROKERAGE: Cushman & Wakefield

MCDOWELL MOUNTAIN BUSINESS PARK 16552 N. 90th St. & 16425 N. Pima Rd., Scottsdale 255,237 SF; $53.15M BUYER: Equs Capital Partners, Ltd. SELLER: RAIT Financial Trust BROKERAGE: CBRE

CENTRAL ARIZONA DISTRIBUTION CENTER 2592 E. Hanna Rd., Casa Grande 581,038 SF; $13.6M BUYER: Harrison Properties SELLER: Clarion Partners BROKERAGE: JLL

GRACE COURT III & IV 118 N. 7th Ave. & 250 N. 7th Ave., Phoenix 310,886 SF; $33.29M BUYER: KBS Strategic Opportunity REIT II, Inc. SELLER: Broadreach Capital Partners BROKERAGE: CBRE

3511 E. BROADWAY RD., PHOENIX 62,568 SF; $5.35M BUYER: R.E. Michel Company SELLER: Zodiac II, LLC BROKERAGE: CBRE

ORBITAL - GILBERT SPECTRUM 100 S. McQueen Rd., Gilbert 60,181 SF; $17,763,561 BUYER: Samuel & Co., Inc. SELLER: SunCap Property Group BROKERAGE: Stan Johnson Company

323 S. BRAKEN LN., CHANDLER 47,997 SF; $4.95M BUYER: Joshua S. Simonton SELLER: Jay & Gayla Sue Donkersloot BROKERAGE: Kidder Mathews 2210 S. ROOSEVELT ST., TEMPE 34,470 SF; $3.375M BUYER: N/A SELLER: N/A BROKERAGE: Commercial Properties, Inc.

PAPAGO TECHNOLOGY CENTER 1600 N. Desert Dr. & 1700 N. Desert Dr., Tempe 162,748 SF; $33.3M BUYER: City Office REIT, Inc. SELLER: WDP Partners, LLC BROKERAGE: CBRE CLOCKTOWER CORPORATE 7776 S. Pointe Pkwy., Phoenix 109,779 SF; $11.5M BUYER: Exeter 17319 DE, LLC SELLER: Reliance Management BROKERAGE: Cushman & Wakefield

17

LAND/SALES

MULTIFAMILY/SALES

IMAGERY ©2017 GOOGLE

339TH AVENUE, TONOPAH 868,194,360 SF; $82,521,407 BUYER: Cascade Investment, LLC SELLER: LKY Development Company, Inc. 4620-4640 N. 24TH ST., PHOENIX 221,285 SF; $30.595M BUYER: The Morgan Group, Inc. SELLER: Gray Development Group AZ 202 & ELLIOT ROAD, MESA 5,296,678 SF; $29,131,630 BUYER: EdgeConnex SELLER: NKS Group III, LP BROKERAGE: JLL N. BULLARD AVE. & W. WADDELL RD., SURPRISE 9,763 SF; $17,935,200 BUYER: Meritage Homes SELLER: DMB Associates, Inc. NORTH COPPER CANYON PHASE 1 17998 W. Deer Valley Rd., Surprise 5,227 SF; $16,324,350 BUYER: GWH NCC LLC SELLER: Courtland Homes, LC BROKERAGE: Nathan & Associates, Inc. W. JOMAX ROAD, PEORIA 4,486,680 SF; $13,461,850 BUYER: Shea Homes SELLER: David Allsop BROKERAGE: Nathan & Associates, Inc.

Lakeview at Superstition Springs: Originally built

in 1998, the 686-unit apartment commuity in Mesa offers one, two and three-bedroom townhomes with close proximity to Baseline Road and Highway 60.

18 | January-February 2018

RETAIL/SALES

IMAGERY ©2017 GOOGLE

TRADITION AT KIERLAND APARTMENTS & LEGEND AT KIERLAND 6633 E. Greenway Pkwy. & 6735 E. Greenway Pkwy., Scottsdale 770,882 SF; $148M BUYER: Bascom Arizona Ventures, LLC SELLER: TIAA-CREF Investment Management, LLC LAKEVIEW AT SUPERSTITION SPRINGS 1849 S. Power Rd., Mesa 680,718 SF; $101M BUYER: MG Properties Group SELLER: Fairfield Residential BROKERAGE: CBRE THE HIGHLAND 1601 E. Highland Ave., Phoenix 469,456 SF; $72.25M BUYER: Eaton Vance Real Estate Investment Group SELLER: Wood Partners BROKERAGE: CBRE ALTA FILLMORE 601 W. Fillmore St., Phoenix 354,772 SF; $59M BUYER: Pure Multi-Family REIT, LP SELLER: N/A BROKERAGE: ABI Multifamily INDIAN SPRINGS VILLAGE 1031 S. Stewart St., Mesa 376,408 SF; $49M BUYER: OpenPath Investments SELLER: Stratford Partners Real Estate, LLC BROKERAGE: Berkadia Real Estate Advisors

ARROWHEAD RETAIL SHOPS 16955 N. 75th Ave., Peoria 9,900 SF; $8.4M BUYER: Testamentary Trust of Edmund N. Richmond SELLER: Armstrong Development Properties, Inc. BROKERAGE: SRS Real Estate Partners POWER MARKETPLACE 7205 S. Power Rd. & 7507 S. Power Rd., Queen Creek 26,821 SF; $8.1M BUYER: Samit S. Patel SELLER: Ryan Companies US, Inc. BROKERAGE: Phoenix Commercial Advisors POWER & BASELINE 5035 W. Baseline Rd., Laveen 46,035 SF; $7.85M BUYER: South Coast Commercial, LLC SELLER: Paces Lodging Corporation BROKERAGE: Reliance Commercial Real Estate SAFEWAY 5137 E. Baseline Rd., Gilbert 68,000 SF; $7,651,727 BUYER: CF Albert PropCo, LLC SELLER: Evergreen Development Co. ANTHEM MARKETPLACE 3281 N. Hunt Hwy., Florence 134,476 SF; $7,366,129 BUYER: Cardinal Capital Partners, Inc. SELLER: Albertsons Companies BROKERAGE: Eastdil Secured, LLC

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LEGISLATIVE UPDATE

Ensuring a ??????? qualified labor force and workforce pipeline

For example, AAED-member GCON is partnering with Pendergast Elementary School District to introduce the next generation of trainees to the construction trades.

Nonprofit groups are also working on solutions. Goodwill of Central and Northern Arizona provides mentors and industry experts to guide mentees toward new careers. Year Up supports a unique urban program working with low-income young adults to assist in their professional development with education and work experience to launch a meaningful career. Career Connectors focuses on skillsets for success with introductions directly to employers.

LEGISLATION IS ALSO KEY

W

hen out-of-state companies consider locating to Arizona, they consider a number of factors – and an educated and skilled workforce is near the top of their list.

When in-state companies consider expanding, the availability of a ready workforce is a key factor. Once a decision is made either to locate or expand, buildings need to be built or refurbished, which also requires a trained workforce. In order to meet the needs of these groups, Arizona must be ready to supply needed workers if we are to grow our economy.

WHO SHOULD SUPPORT THE TRAINING? One of the key goals of the Arizona Association for Economic Development (AAED) is to support policies and funding for educational programs that result in a thriving and qualified Arizona workforce. Our support fosters a healthy innovation pipeline, as well as robust craft training; this is because we understand that a qualified workforce with a balance of post-secondary education and vocational training is required to keep Arizona competitive.

20 | January-February 2018

Joyce C. Grossman AAED

While the Arizona Legislature is a good place to start improving education, government alone will not be enough to ensure success in the development of a future workforce.

Private sector and nonprofit programs, as well as voters, will be critical partners in this endeavor.

WHO IS WORKING ON THIS? Visionary educators and organizations are meeting with industry leaders to better tailor curriculum in high schools and community colleges by creating diploma/certification degrees. The private sector is involved as well.

The Arizona Town Hall met this past November to take up the issue of funding Pre-K–12 education.

Participants from around the state, including AAED members, addressed issues impacting our ability to deliver quality education. Of immediate concern is Arizona teachers’ pay, which is approximately 75 percent of the national average; and the inadequate funding of education infrastructure.

However, the consensus was that the problems could not be solved by government alone.

The voters in Maricopa County are becoming more aware of their role in the issue. This past November, they overwhelmingly passed all 27-school district bond and override measures, and expressed their support for education through property-taxfunded measures.

NEXT STEPS? In 2018, AAED will seek legislative support for high-quality educational systems that will ensure our ability to attract and retain talent. We will also showcase best practices in workforce development at our annual Economic Development Workforce Symposium, which will be held on April 10 in Phoenix.

Joyce C. Grossman, AZED Pro, is the executive director of the Arizona Association for Economic Development.

Go to aaed.com for more information.

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LEGISLATIVE UPDATE

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Property tax reform with K-12 focus

BOMA of Greater Phoenix’s 2018 advocacy agenda

SUPPORT EFFORTS TO RESPONSIBLY RETAIN TOOLS IN THE ECONOMIC DEVELOPMENT TOOL BOX

B

elow is a synopsis of the 2018 BOMA of Greater Phoenix advocacy agenda at the state capitol. Much of the agenda is to pursue property tax reform in relation to more effective funding of K-12 education that gets more resources in the classroom.

SUPPORT AND RETAIN PROPERTY TAX REFORM TO MAKE OUR STATE MORE ECONOMICALLY COMPETITIVE - Support any measure to further cut the property tax burden on commercial property, especially if the measure is applied across all commercial properties such as lowering the assessment ratio from 18-15 percent or elimination/suspension of the state equalization rate.

- Support measures to make K-12 financing more equitable among school districts in the appropriate use of the property tax mechanism, which would include support for the elimination or phase-out of antiquated funding measures.

OPPOSE MANDATED COMMERCIAL REAL ESTATE COST INCREASES - Fight any measure that increases existing costs to the commercial real 22 | January-February 2018

to commercial properties, to further rifle-shot a 5-percent assessment ratio to selected taxpayers or expand existing property tax benefits that all favor some taxpayers over others while shifting property taxes to the rest of the commercial real estate community.

- Continue opposition to the imposition of environmental audit reporting for commercial buildings.

- Oppose any local regulatory ordinance that places an extreme burden on commercial real estate owners especially if advanced without appropriate stakeholder input. This would include municipal proposals to increase building retrofit costs such as compliance with the use of new pressurized fire hoses for high rises.

Tim Lawless BOMA

estate industry. This includes but is not limited to the imposition of new taxes, new fees or the loss of existing tax exemptions or credits.

- The imposition of a new statewide property tax is a concern, especially if it does not include a reduction in the assessment ratio or reductions in inequitable K-12 secondary taxes.

- The potential expansion of the sales tax to include currently exempt services from the state base such as commercial leases are also of concern.

- Fight any measure to reverse or un-do the 18-percent assessment ratio reduction savings for commercial property passed into law in 2011 (HB2001). This opposition includes measures to shift valuation increases

- Protect authority for and ensuring the responsible and appropriate use for vital economic development tools such as the Government Property Lease Excise Tax (GPLET) so long as the program remains tied to job creation/ strong public benefits test in urban and blighted areas. This includes involvement in stakeholder discussions surrounding responsible and appropriate “slum and blight” definitions.

- Support the creation of viable economic development tools lead by the Governor’s Office in conjunction with state legislative leadership.

SUPPORT EFFORTS TO IMPROVE OUR K-12 EDUCATION SYSTEM AND ENSURE MORE ACCOUNTABILITY - Support stronger performance standards and proposals that get more resources in the classroom and eliminate disparities among districts.

- Be open to a ballot referral from the Legislature to continue Prop 301 sales tax with accountability measures.

Tim Lawless is the director of the Building Owners and Managers Association (BOMA) of Greater Phoenix.

Building equitable cities

T

he widespread revitalization and growth of cities and neighborhoods has been giving rise to a new interest in equity and inclusion. As cities strive to attract new people by creating memorable and sustainable places – through reuse of historic places, new construction and thoughtful urban design – lower-income people are often left out of the boom.

Communities are exploring ways to expand opportunity for more citizens and boost economic expansion by identifying real world examples of both place-based and peoplebased strategies that are being used successfully to provide more equitable outcomes. Local government, business leaders and private development are working together to improve services in underserved neighborhoods, to add affordable housing to neighborhoods with high-quality services, and to strengthen education, workforce and financial outcomes for all. Nationwide, these efforts are paying off in terms of economic growth.

• Placed-based strategies are designed to overcome the spatial inequities that constrain residents’ opportunities due to the zip code in which they reside.

• People-based strategies focus on services not tied to a specific neighborhood, but which are instead delivered to anyone who needs assistance, regardless of where they live.

Recently, the National League of Cities (NLC), PolicyLink and the Urban Land Institute (ULI) announced the

Deb Sydenham

ULI Arizona District Council selection of six cities participating in the organizations’ jointly-supported Equitable Economic Development Fellowship: Austin, Baltimore, Louisville, Nashville, Phoenix and Sacramento.

“Now more than ever cities are focused on developing creative strategies to ensure economic policies and programs benefit all members of their communities,” says Clarence E. Anthony, CEO and executive director of National League of Cities. “The fellowship empowers cities to learn from each other and build a path toward a more equitable future.”

ULI has traditionally focused its mission through the lens of market-based capitalism guided by intelligent public policy. There is a strong business case for equitable growth and inclusive prosperity and ULI members are actively engaged in finding and advancing innovative, practical solutions that harness the power of entrepreneurs, in a framework of strategic public investment, to help break

the cycles of disadvantage that perpetuate inequality in many communities.

Prioritizing economic mobility — which is defined as the ability of an individual to move up the economic ladder — is in the best interest of cities, in that cities are more likely to be successful if their residents are able to realize their full economic potential.

“Engaging cities as leaders in a national strategy of combatting inequality is America’s best hope for ensuring that our historic experience of progressively building a fairer society continues, and that our ongoing quest for a more equitable society will drive our future,” says Henry Cisneros, chairman of CityView in San Antonio, Texas, and former secretary of the U.S. Department of Housing and Urban Development.

America today is a more fair, open and upwardly mobile society than ever before. But modern forces such as globalism, technology, demographics and financial and economic shifts constantly create new realities. In an era of notable city comebacks and breakthrough urban growth, the nation can harness the momentum of its cities, communities and regions to ensure that we stay the course toward a prosperous future.

Deb Sydenham, FAICP, is the executive director of ULI Arizona District Council.

Parts excerpted from “Building Equitable Cities: How to Drive Economic Mobility and Regional Growth,” a publication of the Urban Land Institute.

23

MIDTOWN/UPTOWN

Between the Sevens

Projects worth noting between 7th Avenue and 7th Street in Phoenix

By DAVID MCGLOTHLIN

S

ome of Phoenix’s most desirable neighborhoods to live can be found in an area that’s commonly referred to as “between the sevens,” which is the region between Seventh Avenue and Seventh Street throughout Downtown, Midtown and Uptown Phoenix.

24 | January-February 2018

Home to historical neighborhoods like “The Windsor,” prominent office buildings and iconic retail centers, the area between the sevens is also becoming an increasingly attractive place to work and play as new commercial real estate projects take shape, blending modern needs with the

area’s rich history.

The latest projects range from adaptive reuse transformations of a former grocery store and other businesses into multifamily communities or trendy bars and restaurants. It also includes the modernization of older office

MIXED-USE Park Central Mall revitalization DEVELOPER: Plaza Companies; Holualoa Companies GENERAL CONTRACTOR: DPR Construction ARCHITECT: richärd+bauer architecture LOCATION: 3121 N. Third Ave., Phoenix SIZE: 337,000 SF VALUE: $57M START/COMPLETION: Q4 2017 - Fall 2018

“Our goal is to transform Park Central into a truly innovative and exceptional work environment for companies in the ‘New Economy,’” says Sharon Harper, president and CEO of Plaza Companies, which also led the the successful transformation of the Los Arcos Mall in Scottsdale into the ASU Scottsdale Innovation Center - SkySong. As Phoenix’s first-ever mall, Park Central benefits from an exceptional location and unique retail history. In total, 337,000 square feet will be revitalized into several distinct districts, each with its own identity.

25

MIDTOWN/UPTOWN buildings to meet current standards with lots of natural light, high ceilings, large open floorplates and easy connection to amenities.

Whether its people or companies, everyone is looking for a connected place that’s walkable, vibrant and linked to other amenities and uses, says City of Phoenix Economic Development Director Christine Mackay.

In addition to providing great transit options such as light rail, buses and the

Grid Bike Share program to get around, Midtown and Uptown also boasts incredible dining and shopping options as well as prime office locations for major corporate companies.

Mackay says the rejuvenation of Midtown started in 2016 when Banner Health moved its corporate headquarters to the Banner Corporate Center on Thomas and Central avenues.

Banner retrofitted an old building, bringing it to the 21st century, explains Mackay, which signaled to

other large corporate tenants that the area and surrounding communities would support regional and/or national headquarters.

From there, the 2828 North Central building renovated its bottom floor to include a co-working shared space that’s currently occupied by Mod Phoenix. Meanwhile, the owners of the 2020 On Central building renovated all of its lobbies and shared spaces, which eventually led Facility Source to lease office space.

HOSPITALITY ARRIVE Phoenix DEVELOPER: Vintage Partners; Venue Projects GENERAL CONTRACTOR: Venue Projects ARCHITECT: Arrive Hotel & Restaurants LOCATION: 400 & 444 W. Camelback Rd., Phoenix SIZE: 45,000 SF; 79-rooms VALUE: $20M START/COMPLETION: Q1 2018 - Q4 2018 Located at what’s been called the Valley’s “hottest intersection” by the Urban Land Institute of Arizona, the project transforms a trio of mid-century gems into Uptown Phoenix’s newest dining, entertainment and urban hotel hub. The two-acre site will also host a boutique coffee shop, poolside taco bar, gourmet ice creamery, and nautical-themed rooftop craft cocktail bar featuring 360-degree city views. For the project, Vintage Partners teamed up with Venue Projects, the visionary developers behind The Newtown and other successful adaptive reuse projects like Windsor/Churn and The Orchard along Central Avenue.

MULTIFAMILY First Place-Phoenix DEVELOPER: First Place AZ GENERAL CONTRACTOR: hardison/downey construction ARCHITECT: RSP Architects LOCATION: 3001 N. Third St., Phoenix SIZE: 81,525 SF; 56-units VALUE: $15M START/COMPLETION: January 2017 - March 2018 The $15 million residential property for adults with autism and other neuro-diversities will be a first-of-itskind facility that First Place AZ plans to expand into a worldwide model. First Place AZ Founder, President and CEO Denise Resnik started the nonprofit to ensure that housing and community options are as bountiful for people with autism and other neuro-diversities as they are for everyone else. The project provides a one-of-akind approach that combines apartments, a residential training program and a national leadership institute to advance more independent and community integrated living options.

26 | January-February 2018

You Dream it. We build it.

We are honored to be a part of the First Place Phoenix team, helping adults with autism gain independence and transition into our community.

27

MIDTOWN/UPTOWN

MIXED-USE The Curve at Melrose DEVELOPER: P.B. Bell GENERAL CONTRACTOR: M.T. Builders ARCHITECT: Studio 15 Architecture Inc. LOCATION: 4333 N. Sixth Dr., Phoenix SIZE: 204-units; 308,618 SF START/COMPLETION: August 2016 - Early 2018 The Curve will consist of 204-luxury apartments in a vibrant and eclectic urban Melrose District neighborhood positioned within walking distance of Indian Steele Park, light rail as well as numerous locally owned shops and restaurants. Included in the property’s luxury amenities are several that were selected by public vote in 2015, which include a resort-style pool and spa along with an outdoor kitchen and gas grills. P.B. Bell also worked with the Seventh Avenue Merchants Association on plans to reserve three display windows at the property to spotlight community-curated work and displays.

MIXED-USE The Osborn DEVELOPER: Trammell Crow Company; High Street Residential GENERAL CONTRACTOR: Chasse Building Team ARCHITECT: ESG Architects LOCATION: SWC of Seventh Avenue & Osborn Road, Phoenix SIZE: 190-units; 45,000 SF (retail) START/COMPLETION: July 2017 - August 2019

28 | January-February 2018

The Osborn is a mixed-use grocery anchored retail shopping center and multifamily development. The project sits on a 5.96-acre site located in the heart of Midtown Phoenix where the city’s oldest Bashas’ grocey store, originally built in 1956, used to be located. The site benefits from immediate adjacency to many major employers, desirable affluent neighborhoods, abundance of social venues and high visibility with over 50,000 vehicles passing per day.

RETAIL Uptown Plaza DEVELOPER: Vintage Partners GENERAL CONTRACTOR: Kitchell ARCHITECT: Nelsen Partners LOCATION: 100 E. Camelback Rd., Phoenix SIZE: 116,787 SF START/COMPLETION: 2014 – June 2016 The Valley’s first retail center located outside of Downtown Phoenix is being restored to its former glory and street appeal as a result of wall-to-wall renovations over the last three years. The property’s renovation aims to restore this iconic shopping center — originally constructed in 1955 by the Del Webb Co. — to its stylish brick-lined, mid-century roots and appeal. The 11-acre renovation includes restoring the original brick façade, adding new landscaping and successfully securing a variety of local, regional and national tenants like Shake Shack, Lou Malnati’s Pizzeria, Huss Brewing Company’s flagship taproom, Creamistry, Flower Child and more. The latest phase included updates to the exterior of AJ’s Fine Foods.

29

MIDTOWN/UPTOWN

OFFICE The Grid DEVELOPER: ABI Multifamily GENERAL CONTRACTOR: Alexander Building Company ARCHITECT: Corgan LOCATION: 5227 N. Seventh St., Phoenix SIZE: 16,281 SF VALUE: $3M START/COMPLETION: Q4 2017 – Q2 2018 The two-story adaptive reuse project will transform the former Uptown Phoenix office building into a refreshed Class A office for ABI Multifamily on the top floor and co-working space on the first floor. A large multipurpose room will be used for entertaining, training and a yoga room open to the community. The design repurposed raw industrial materials, while still maintaining a sleek modern feel. In addition, a perforated metal canopy and second skin will be added to create new dynamic exterior spaces while protecting the building from the harsh summer sun of the desert.

PUBLIC Dignity Health Third Avenue Parking Garage Expansion DEVELOPER: Dignity Health GENERAL CONTRACTOR: JE Dunn Construction ARCHITECT: GLHN Architects & Engineers LOCATION: 2929 N. Third Ave., Phoenix SIZE: 177,000 SF VALUE: $11M START/COMPLETION: December 2017 – July 2018 While the area’s public transit options like buses, light rail and Grid bikes have made commutes easier, parking is often a top-concern for companies and tenants considering a move to the Central City. That’s why the Dignity Health’s St. Joseph’s Hospital and Medical Center in Phoenix is embarking on a campus-wide parking solution that will add approximately 500 new spaces.

30 | January-February 2018

“Those three things really set the stage for other building owners to come in and start making dramatic changes,” Mackay says.

Now, Midtown is experiencing office renovations across the board because so many of the existing buildings were constructed in the 1970s and 80s.

Mackay also describes an incredible and growing demand to live in Midtown and Uptown. “It’s cultured.

It has night life, distinctive dining and pretty much everything is local. It’s exactly what people are looking for today,” she says.

In addition to new office product and multifamily units, the area between the sevens has also seen a surge in new retail projects as it’s becoming more widely well-known as a foodie hotspot with an eclectic and tasty mix for restaurants and bars.

Mackay says, “The restaurants, culture and nightlife is really what’s drawing people into this Central City to live.” In fact, she says, there are not less than 100 restaurants in that area for people to choose from.

Mackay points to the success of projects like The Yard, along Seventh

Street and Missouri Avenue, as an example of the pent-up demand for restaurants nearby, which has spurred other retail and dining destinations to follow like The Colony, built by LGE Design Build in 2016.

Looking ahead throughout Midtown, Mackay says, the renovations of Park Central Mall is “the last missing piece before the area returns to full throttle.”

Meanwhile in Uptown, she predicts, the completion of Arrive Phoenix will “really prove the market and show what a destination hotel looks like in that area.”

31

ANNUAL OUTLOOK

ANNUAL OUTLOOK

By DAVID MCGLOTHLIN

A

n attractive market for real estate investment and development can start and end with the economy.

Hence, the woes felt during the Great Recession when the economy was down, unemployment was up and real estate activity was dramatically affected, but fast-forward to now. The stock market recently hit an all-time high, spending is up, unemployment is down and some experts are hopeful President Donald Trump’s proposed tax plan will give the economy another boost.

While many in the real estate industry remain cautiously optimistic about 2018, others are starting to think this expansion cycle is getting long in the tooth and starting to show signs for slowing.

Overall, the industry is optimistic for 1-2 more years of favorable conditions before the Arizona market reaches the ninth inning, barring any major macro-economic disruptions.

To better explain how it all breaks down in 2018, experts from their respective sectors peered into their crystal balls to provide this annual outlook. In addition, 40 companies were identified as worth watching this year based on what each accomplished the year before as well as projects and projections for the year ahead.

32 | January-February 2018

ONE HUNDRED MILL: The $190 million mixeduse creative office, retail and lifestyle-hotel development, located on the 2.51 acre parcel on the corner of Mill Avenue and Rio Salado Parkway in Tempe, will consist of two towers: a 15-story 260,000 SF Class A office building and a 15-story, 240-key boutique hotel along with 17,300 SF of retail space.

33

ANNUAL OUTLOOK COMPANIES TO WATCH THE TOP TEN ISSUES AFFECTING REAL ESTATE 2017-18  Political Polarization and Global Uncertainty  The Technology Boom  Generational Disruption  Retail Disruption  Infrastructure Investment  Housing: The Big Mismatch  Lost Decades of the Middle Class  Real Estate’s Emerging Role in Health Care  Immigration  Climate Change Source: The Counselors of Real Estate

HOUSING: MULTIFAMILY & SINGLE-FAMILY In 2017, rising home prices, mortgage accessibility, economic growth and more multifamily developments helped improve housing affordability and access, but the disparity between housing needs and housing supply will remain a concern in 2018.

On the multifamily side, 2017 concluded with more than 17,000-units under construction in Greater Phoenix and over 11,000 more units planned for 2018 across 56 properties.

Jim Pierson, senior vice president of Walker & Dunlop, says, people are for the most part still bullish on multifamily but new developments going forward will need to moderate on build-outs, amenities and price per square-foot. “The biggest issue is getting the deals financed,” he adds.

In terms of multifamily sales, Thomas Brophy, research director at ABI Multifamily, says, “Large institutional players are all back in the Valley looking for buys and, in my eyes, is a harbinger of what 2018 will be like.”

He predicts Downtown Phoenix and Tempe will continue to be the hottest multifamily submarkets, but also foresees more 34 | January-February 2018

boutique, garden-style apartment communities gaining traction in submarkets just outside of the urban cores like Queen Creek and Northwest Phoenix.

As for single-family homes, Craig Krumwiede, president and CEO of Harvard Investments, says, despite some labor and land issues, the housing market feels good and all the indicators are up year-over-year from 2016.

Lending has loosened, more permits and entitlements are being approved and a new singlefamily rental trend is catching the attention of the developers.

Krumwiede says, over 20 singlefamily rental projects are already being planned for the West Valley, which closed on 10-12-acre infill sites and are attracting capital.

“This is going to happen and it’s going to affect garden-style apartments that would otherwise go up in those more suburban areas,” he explains. “How it affects the single-family for sale market, I don’t know.”

Meanwhile, more traditional for rent single-family communities, or detached condo-type communities, are being built in Verrado and Eastmark, which rank as two of the top-selling masterplan communities in the country.

ALLIANCE RESIDENTIAL COMPANY: The seventh largest multifamily manager in the U.S. remains bullish on the multifamily market after 2017 when it built over 7,000 apartment homes across more than 20 communities nationwide within urban cores like Greater Phoenix, which is now home to seven luxury multifamily communities and includes the current construction of Broadstone Roosevelt Row and Broadstone Lakeside.

ARCHER WESTERN CONSTRUCTION: It’s part of The Walsh Group, a 119-year-old family-owned general contracting firm, specializing in the water, transportation, civil and building sectors. At a planned expansion and upgrade project of the White Tanks Regional Water Treatment Plant, Archer Western is installing a CoMag system for a drinking water facility – the first of its kind in the nation. It uses magnetite to settle chemical floc up to 30 times faster than conventional treatments while extending equipment service life.

ATMOSPHERE COMMERCIAL INTERIORS: Founded in Phoenix in 1919, the company opened a new showroom and worklab in the Roosevelt Row District of Downtown Phoenix in late 2016 and a West Elm Workspace showroom on the second floor in 2017. Housed in a former Packard showroom, the environment is designed to nurture physical, cognitive and emotional well-being, and is thoughtfully aligned with its organizational purpose to provide optimal climate for engagement.

BERRY RIDDELL, LLC: The zoning and land use firm is working on game-changing developments across the Valley, which most recently included securing multifamily entitlements at the base of South Mountain for Grayhawk and guiding Maracay through the site plan approval process in the same area. The firm is known for its success in zoning and staffs two urban planners for assisting with approval processes.

BLACK MOUNTAIN INVESTMENT COMPANY: The privately held investment firm, led by a group of executives and directors who are all investors in the company, exists to provide investors with reliable returns from a diversified portfolio of assets. Black Mountain has grown into an investment firm with a $18 billion portfolio, which includes national aerospace companies, commercial real estate centers, a construction company, various debt instruments, single-family residential holdings, land for future development and equity in a real-estate brokerage.

WINNING REAL ESTATE SOLUTIONS Serving the Greater Phoenix market and specializing in office, office medical, industrial, retail and multihousing, Newmark Knight Frank and ARA Newmark exceed the expectations of their clients anywhere their commercial real estate needs may take them.

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ANNUAL OUTLOOK COMPANIES TO WATCH

HUB 317

CALIBER - THE WEALTH DEVELOPMENT COMPANY: The access investors have to direct ownership opportunities in off-market, private equity CRE projects sets Caliber apart. During 2018, the full-service RE investment firm projects to top $500 million in assets under management. Projects include a new hotel in Downtown Tucson, various infill projects and the opening of two Net Zero Energy multifamily communities. Meanwhile, Caliber is gathering investor interest under Regulation A+ of the U.S. Jobs Act for going public in 2018.

PHOENIX INDUSTRIAL

Source: Cushman & Wakefield

Krumwiede predicts this trend to grow in popularity because it can be built for less per square-foot than apartments.

Also, keep an eye on the 20,000-acres of land bought by a Bill Gates owned real estate firm for $80 million in the far West Valley, which may eventually include a portion of the planned Interstate 11 highway and masterplanned community with as many as 80,000 homes.

INDUSTRIAL As 2017 was coming to a close, Arizona’s industrial market absorption rate was on pace to reach an all-time annual high of 7.9-million square feet, which was previously set in 2005.

As of Q3, the Phoenix industrial market recorded more than 6.1 million square feet of positive net absorption, making 2017 the fourth consecutive year of at least 6.0 million square feet of space absorbed, according to JLL’s Q3 industrial report.

JLL Managing Director Pat 36 | January-February 2018

Harlan credits the momentum to well-rounded market activity from sectors that include, but are not limited to, manufacturing, high-tech aerospace, e-commerce, food packaging, nutraceuticals and logistics and distribution.

While development activity has been strong throughout the Valley, almost all of the speculative development available is tailored to warehouse and distribution operations. Most notably, Niagra Bottling, Cardinal Glass and Turbo Resources have a combined 700,000 square feet of custom manufacturing space under construction.

Looking ahead, expect to see construction for build-to-suits become more common amongst manufacturing users as a result of manufacturing rates escalating in existing properties and no speculative manufacturing buildings under development.

Overall, the Phoenix industrial market is showing no signs of slowing down, with another 4.4-million square feet under construction as of Q4 2017 to meet

CCMC: From pre-development consulting to full-service community management, CCMC’s steadfast commitment to creating experiences that connect people has produced remarkable results. The company has grown to more than 800 employees, who serve more than 200 of the nation’s most successful master-planned communities including Desert Mountain, Grayhawk and Power Ranch. Indeed, half of Ranking Arizona’s top ten master-planned communities are managed by CCMC. CRESA: As one of the largest tenant representation firms in the world with 58 offices globally and over 1,200 employees, Cresa predicts the continued consolidation of full-service brokerage firms will push corporate clients to work with tenant rep firms, like itself, to avoid conflicts of interest. This year, Cresa celebrates its 25th anniversary.

CUSHMAN & WAKEFIELD: Last year, the brokerage firm consolidated its Phoenix operations into one location, focusing on connectivity to its clients and to each other. The firm’s year-overyear revenue growth was upward of 10 percent and the firm projects the same growth rate for 2018. This year, it will work on some of the Valley’s most notable upcoming projects such as The Watermark | Tempe, TCA Technology Park, Park Central Mall, One Scottsdale, One Hundred Mill and Arizona Center.

HOLLIDAY FENOGLIO & FOWLER: HFF has been active in the local Phoenix market for decades, and in July 2016 officially planted the HFF flag by opening an office to serve the greater Southwest region through its transaction expertise, including debt and equity placement as well as investment sales services and access to global capital.

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ANNUAL OUTLOOK COMPANIES TO WATCH

Camelback Collective

JLL: In 2017, JLL added key new service lines like healthcare and NNN lease investment brokerage, and expanded its Property Management and Project Development Services groups, which JLL will continue to grow in 2018 and beyond. It also enhanced its one-stop-shop sophistication with specialized expertise that clients often need to manage the full spectrum of their real estate transaction. Among these value-add service lines are: valuation and property tax, capital markets financing and financial analysis.

PHOENIX OFFICE

JOHNSTON PROPERTIES: The owners behind mixed-use developments Agritopia and Barnone have teamed up with IPA/Liv Communities in a joint venture to develop Epicenter on 19.7 acres in Gilbert. Epicenter will encompass 55,000 square feet of retail space and 287 residential units, totaling 300,000 square feet in four different fourstory buildings.

Source: Cushman & Wakefield

strong tenant demand.

Despite the Inland Empire market of California continuing to lead the nation in positive absorption, the strength of that market and cost advantages of Arizona will make Phoenix appealing to new industrial tenants in 2018 and beyond.

Will Strong, executive manageing director at Cushman and Wakefield describes the Phoenix industrial market as "exceptionally competative."

"This is thanks largely in part to our affordable housing, abundant labor pool and avilability of quality developments and sites to accomadate," explains Strong. "Also, Phoenix has been agrressive on tax credits and incentives, which resulted in our reputation for being a pro-business climate."

In addition to Phoenix's skilled workforce, avilable sites and business climate, Strong notes that the Pheonix market is able to service nearly 40 million customers within a one-day truck haul, which has already spurred some major 40 | January-February 2018

companies to take advantage such as Amazon, Huhtamaki North America, Lucid Motors and more.

OFFICE Heading into 2018, Arizona is nationally ranked as the best state for business, number one for job growth and one of the fastest-growing states in the country, according to the Arizona Commerce Authority.

Those indicators bode well for the state’s office market outlook, especially for Metro Phoenix, which saw double-digit tech sector growth within the local office market.

According to CBRE’s annual Tech30 report, Phoenix’s high-tech employment grew 25.4 percent over 2015 and 2016, with average office asking rents rising 13.4 percent to $25.01 from Q2 2015 to Q2 2017.

“Overall, Metro Phoenix’s office market is performing well, with tech being a major driver,” says Bryan Taute, executive vice president at CBRE. “Downtown Phoenix and Scottsdale continue to garner attention from tech

MACERICH: Its Arizona portfolio includes over nine-million SF of the most iconic retail properties, including Scottsdale Fashion Square, which is undergoing a multi-phased, multi-million-dollar renovation to its luxury wing. Additional plans call for the development of mixed-use elements such as high-end residential units, class A office space and a hotel, which has worked to further extend the customer base and sales potential for retailers within other shopping centers owned by Macerich in the U.S. MENLO GROUP COMMERCIAL REAL ESTATE: Tanner Milne founded Menlo Group CRE in 2008 as a full-service commercial real estate brokerage firm that services the industrial, retail, child care and general, medical and dental office markets in Metro Phoenix. As a leader in the East Valley office, medical office and office condo markets, Milne has helped many of the Valley’s top doctors and dentists locate space while negotiating favorable deals on their behalf.

NEIGHBORHOOD VENTURES: Arizona’s first crowdfunding real estate company exclusively for multifamily projects was launched in October by three local apartment real estate veterans.

The company allows all Arizona residents the opportunity to be shareholders in apartment projects in the Phoenix area for a starting investment as little as $1,000.

ANNUAL OUTLOOK COMPANIES TO WATCH

PHOENIX RETAIL

NEWMARK KNIGHT FRANK: In addition to dropping the “Grubb” from the company’s name last year, NKF is expanding its capital markets presence in Phoenix with the addition of CJ Osbrink as executive managing director. With overall office vacancy dropping to a 10-year low in Phoenix, NKF predicts a continued influx of capital to the market.

PHOENIX WEST COMMERCIAL: The Avondalebased commercial real estate brokerage firm is made up of agents that are all either CCIM Designees or working towards their CCIM Designation. As Certified Commercial Investment Members (CCIMs), its brokers are recognized as experts in the commercial and investment real estate industry that are proficient in both theory, but also in practice.

Source: Cushman & Wakefield

companies, but Tempe tops the charts in terms of tech rent growth. All of these areas have seen significant demand from tech companies looking to draw from a high concentration of Millennials.”

Looking ahead, Stanton Shafer, chief operation officer at Holualoa Companies, predicts upward pressure on rents for office projects that offer the right space in the right location over the next two years.

As tenants become pickier about what they lease and where, Shafer foresees a drop in speculative developments as renovations are becoming an increasingly popular way to modernize a property with open, collaborative spaces and new on-site amenities to attract creative office users and secure higher rents.

Expect to see continued positive absorption and demand in primary markets like Downtown Phoenix, Scottsdale and Tempe, but less in other submarkets.

Due to rising rent rates and occupancy, keep an eye on demand for modern office space in Downtown Phoenix, which may spill over into Midtown where numerous renovations have recently been completed or currently underway to attract new tenants.

Scott Maxwell, managing 42 | January-February 2018

principal at Cresa, says, “Average rental rates for office space [in Metro Phoenix] will surpass prerecession rates and vacancy rates will continue to decline toward pre-recession levels.”

RETAIL E-commerce and the proliferation of online shopping continues to be a challenge for the retail industry, which is currently undergoing major shifts to more closely align with consumer demands and create destinations that captivate shoppers beyond mere retail purchases.

At one point, the hot trend was a “shift from bricks to clicks” as traditional brick-and-mortar retailers tried to better compete with the rise of e-commerce. Then the trend switched as people started talking about a “shift from clicks to bricks” and online retailers’ efforts to open pop-up stores and establish more of a brickand-mortar presence.

Regardless of if the latest phase is “bricks to clicks,” or vice versa, everyone agrees the retail industry is undergoing dramatic and fundamental shifts, but small infill redevelopment projects remain the best opportunity for

SILVER FERN COMPANIES: The construction management, land development and real estate consulting firm was selected by Harvard Investments to manage the construction of Mesa’s newest 464-acre master-planned community, Cadence at Gateway, which when completed will include up to 3,500 residences, a charter school and other commercial space for retail and office.

STORE CAPITAL: The Scottsdale-based real estate investment trust (REIT) received a $377 million investment, representing 9.8 percent of total shares outstanding, from Berkshire Hathaway CEO Warren Buffett in October, which was interpreted as a big bet on retail, in particularly, service providers and experiential retail that aren’t negatively impacted by e-commerce as much as traditional merchandise-driven retail.

STUDIO MA: AIA-Arizona’s 2017 Architecture Firm of the Year is a national leader in architecture and environmental design, renowned for highly sustainable and award-winning buildings for college campuses, urban multifamily, civic and cultural projects, including Scottsdale’s Museum of the West and Yuma’s Heritage Library. With unique expertise in developing innovative housing, the firm created Phoenix’s acclaimed artHAUS condominiums and a major science center concept for Arizona State University.

ANNUAL OUTLOOK COMPANIES TO WATCH

Thomas Brophy

Pat Harlan

Heidi Kimball

SUNSTATE EQUIPMENT COMPANY: In 2017 the company celebrated its 40th year of doing business and announced Founder and Executive Chairman Mike Watts’s retirement. With this change, Sumitomo Corp. assumed full ownership of the company, which will continue to be led by the founder’s son, CEO Chris Watts. Since 1977, the company has expanded to 61 locations in nine states, becoming the 24th largest rental company in the world.

TAYLOR STREET: As advisors, the company uses a different lens with its innovative approach to clients’ needs through its specialists in disposition and acquisition services, financing, management, leasing, construction, marketing and design.

Craig Krumwiede

Stanton Shafer

Scott Maxwell

Will Strong

new retail developments.

The common theme among retail appears to be an emphasis on creating destinations and memorable experiences at shopping centers and malls that can draw people back to a place for more than just shopping.

For instance, in addition to renovating Scottsdale Fashion Square’s luxury wing, owners Macerich also plans to incorporate mixed-use elements such as luxury residential units, Class A office space and a hotel into the existing 1.9-million-square-foot property.

Meanwhile, Heidi Kimball, senior vice president and designated broker at Sunbelt Holdings, points to a recent rise in the redevelopment of defunct malls 44 | January-February 2018

Jim Pierson

Bryan Taute into medical centers and startup hubs for innovation and research like at the former Los Arcos Mall in Scottsdale, which was converted into the ASU Scottsdale Innovation Center known as SkySong.

That model is now being followed elsewhere including the former Fiesta Mall in Mesa that was recently sold and announced plans to be converted in to a mixeduse campus for healthcare and education uses.

Looking ahead, keep an eye on omni-channel retail too, which is a modern commerce strategy that emphasizes a unique user experience for customers at every touchpoint, which may be in a physical store, an online store, social media or a combination of each.

WESTERN WEALTH CAPITAL: The Canadabased real estate investment company is the second largest multifamily owner in Metro Phoenix by total number of units. Since 2011, WWC has acquired 34-mulitfamily buildings, representing almost 6,000 units, with a combined purchase value of $499.5 million.

WETTA VENTURES: Established in 2012 with a focus on small-scale real estate investments, renovation, adaptive reuse, infill development and third-party advisory services, Wetta Ventures is at the forefront of real estate development and investment, combining a passion for real estate investing with a defined vision for adaptive reuse, renovation and infill development.

WITHEY MORRIS, PLC: Arizona’s largest exclusive land-use law firm continues to be the go-to zoning firm for complex infill residential development and adaptive reuse projects like those along the resurgent Seventh Street food scene. In 2018, the firm will lead entitlements for a 55-acre high-tech development in Chandler, redevelop entitlements for the Camelback Corridor, a new ultra-luxury resort in Paradise Valley and fresh entitlements for the long-awaited Fiesta Village in Mesa.

MORE TO WATCH The landscape of Greater Phoenix is going to change dramatically in 2018. This list continues with 15 more innovative commercial real estate companies (pg. 48) that are working on high-profile, landmark projects that will add the the fabric of what makes Greater Phoenix a hot market.

ANNUAL OUTLOOK

15 COMPANIES TO WATCH

The architects, builders, developers transforming the Valley ARCHSOL: Last year, the architecture firm won the RED Award for Best Healthcare Project, ENR Southwest Best Healthcare Project and Excellence in Safety awards and AZASLA Landscape Honor Award.

The team also recently became the only fully-certified Lean Green Belt organization in the industry, according to the Institute of Industrial and System Engineers.

48 | January-February 2018

BUTLER DESIGN GROUP: Entering its 22nd year, BDG has received the NAIOP Architectural Firm of the Year award 12 times. Notable projects include the Rivulon campus, SkySong Innovation Center, 2100 Rio Salado, Freedom Financial, Benchmark Electronics HQ and PV303 with various industrial projects built, under construction and/or on the boards.

CA RESIDENTIAL: The multifamily investment and development division of CA Ventures, in a joint venture with Diamond Realty Investments, started construction on The LINK PHX, a 257-unit residential tower in Downtown Phoenix. Scheduled to open in August 2019, the 30-story tower represents the first phase of a three-phase mixed-use development that will include over 600 rental residences and 21,000 SF of retail space to the Roosevelt Row Arts District over the next 15 years.

DLR GROUP: Its design team is leading the massive adaptive reuse project for Maricopa County’s Madison Street Jail, turning it into modern Class A offices. Additionally, DLR’s designers and energy experts are innovating cooling and heating methods at Agua Fria Canyon View High School using phase-change materials in collaborative research and curriculum development with the school district and ASU. DPR CONSTRUCTION: Since opening its doors in the Valley in 1994, DPR Arizona has completed 315 projects spanning healthcare, advanced tech, higher education, commercial and life sciences, ranging from $5,000 to over $300 million. Its local office was the state’s first commercial net-zero building and is currently home to 351 employees.

2018 project starts include Park Central Mall renovations, ASU Health Solutions Innovation Center at the Mayo Campus and UA College of Pharmacy Skaggs Building.

GRAYCOR CONSTRUCTION COMPANY: In 2016, Graycor officially transitioned its Phoenix office from Nitti Graycor to the Southwest Regional Headquarters of Graycor Construction Company.

Since then, Graycor was named design-build lead for Camelback Collective, completed the new Orbital ATK building at Gilbert Spectrum and won two Best of NAIOP Major Industrial Awards for T.I. and Spec Project of the Year.

HINES: The privately-owned global real estate investment firm with roughly $100 billion of assets under management razed Elevation Chandler, an unfinished local eyesore in 2014, to make way for Chandler Viridian, a 25-acre mixed-use development that will include the Offices at Chandler Viridian, a new luxury Cambria hotel, luxury apartments at Broadstone Fashion Center and retail at Chandler Viridian PRIMEGATE.

HOLUALOA COMPANIES: The real estate investment firm, headquartered in Tucson, focuses on the successful acquisition, repositioning, redevelopment and disposition of real estate assets, which now includes Phoenix’s first mall.

It purchased a significant portion of the iconic Park Central Mall with Plaza Companies in October and announced a $57 million renovation.

JOKAKE CONSTRUCTION: Named the 2017 RED Contractor of the Year and a Best Place to Work, Jokake Construction celebrates 35 years of business in 2018. This year the company plans to expand its local and regional clientele and project portfolio to include a robust pipeline of healthcare, office and industrial opportunities. The company is on track to do $100 million in revenue, which is consistent with the average 33-percent annual increase it has seen since 2014.

LAYTON CONSTRUCTION: Layton celebrated its 30th anniversary in Arizona in 2017 with record-setting results. With a strong backlog and diverse set of projects across many segments of the market ranging from hospitality, healthcare, office, industrial and public works to tenant improvement, Layton is on track to significantly outperform those results in 2018.

LGE DESIGN BUILD: LGE will enhance and energize the way Arizonans and visitors alike spend their free time around the Valley in 2018 and beyond with the completion of four neighborhood-changing entertainment districts — Overstreet in Chandler, The Collective in Tempe, Chauncey Lane in Scottsdale and The Grove at McCormick Ranch — and two new buildings in Downtown Gilbert that will bring a combined 230,000 SF of mixed-use developments to Greater Phoenix.

LINCOLN PROPERTY COMPANY: Current landmark efforts include serving as the exclusive office developer for The Grand at Papago Park Center, renovating the historic Luhrs City Center in Downtown Phoenix, rapidly filling the last of four buildings at the LPC-built Waypoint office campus, and developing a 40-foot clear-height, fully-speculative Lincoln Logistics 40 industrial project – all while providing forward-thinking property management for a 6-millionsquare-foot regional office, industrial and retail portfolio.

RENAISSANCE COMPANIES: The full-service construction management firm continues to push leadingedge technology, including building information modeling, topography scanning drones and room scanning capabilities using cellphones. In addition to simplifying communication between the project team, the data mining helps subcontractors on site to compress the project's schedule and create significant cost savings for the client.

VINTAGE PARTNERS: The development and investment company teamed up with Venue Projects to build Arrive Phoenix, a stylish boutique hotel and dining destination, at Central Avenue and Camelback Road.

Expected to be completed in 2018, the $20 million adaptive reuse project spans over two-acres and 45,000 square feet.

WATT COMMUNITIES: Since entering the market, Watt Communities of Arizona mobilized $73 million worth of infill residential communities, providing upscale affordability in locations just off the Valley’s hottest corridors. Dorsey Lane townhomes in Tempe is built and sold out, and sales are robust at other multifamily projects including Biltmore Living, 32 North and 16 Ocotillo. Now under construction are 8th & Row, located in Downtown Phoenix, and View 32 luxury apartments within the North 32nd Street Corridor.

CAMELBACK COLLECTIVE: The redevelopment project at 28th Street and Camelback Road marks the first new development in the Camelback Corridor in more than eight years.

It will inlcude a four-story, 120,000 SF Class A office complex and a five-story, 160-room boutique hotel by Marriott’s AC Hotels line.

49

ANNUAL OUTLOOK

PROJECT NEWS

A closer look at some of the projects currently underway or proposed from the list of companies to watch.

ISTB-7 (below): Studio Ma created the concept for ASU’s Interdisciplinary Science & Technology Building, which, if approved, would be an interdisciplinary science and research complex.

50 | January-February 2018

Epicenter (bottom left): Johnston Properties and IPA/Liv Communities teamed up to create a mixed-use development in Gilbert on 19.7 acres that will include retail and multifamily space.

Watermark Tempe (bottom right): Cushman & Wakefield will serve as the exclusive office and retail leasing agents for The Watermark Tempe – a 1.9 million-squarefoot mixed-use development.

20 IN THEIR 20's

DEFINING MILLENNIALS The term is usually used to identify individuals who reached adulthood around the turn of the 21st century, but the exact dates vary depending on who you ask.  Iconoclast, a consumer research firm, stated the first Millennials were born in 1978.  Newsweek magazine defined Millennials as born between 1977 and 1994.  The New York Times identified Millennials as born between 1976-1990 and 1978-1998, in separate articles.  A Time magazine article classified Millennials at 1980-2000.

However, the 1991 book “Generations: The History of America’s Future, 1584 to 2069,” largely credited with coining the term, defined Millennials as being born between 1982-2004.

in their 20s The next generation of commercial real estate pros

By DAVID MCGLOTHLIN

I

n the last couple years, Millennials have surpassed Baby Boomers as the nation’s largest living generation and Generation X as the largest share of the American workforce.

With this comes a growing demand to replenish the labor talent pool with this next generation of workers – Millennials.

Whether it’s working long hours, joining a trade association, attending networking events or educational programs, each person featured on this list demonstrates a dedication to the industry.

While they may be young, these aspiring CRE professionals aren’t wasting any time in making a name for themselves in the industry and at their respective companies.

Hungry, motivated and eager to learn and produce, these aren’t your typical Millennials. Despite being the younger half of the Millennial generation, the sky looks to be the limit for their careers based on what they’ve already accomplished in such a short time in the industry.

52 | January-February 2018

Patrick Anthon Retail Associate at NAI Horizon Age: 26 As one of four brokers on NAI Horizon’s “G.O.A.T. Team,” Anthon has a major role with both landlord and tenant representation in deals for the team, which is also the exclusive brokers for Planet Fitness’ expansion, totaling over $20 million worth of deals across the Valley. The "GOAT team" has a total of $45 million worth of transactions in 2017, including a $2.9 million lease for a Texas-based sports bar along Mill Avenue in Downtown Tempe that Anthon repped the tenant on.

Justin Beall Superintendent at Layton Construction Age: 29 After joining Layton in 2012 as a project engineer, Beall was promoted to superintendent a year ago and selected as a member of NAIOP’s Developing Leaders program. During that time, he’s overseen construction on a public works project for Maricopa County Clerk of Courts, tenant improvements at Rivulon and two phases of a masterplan hospitality project at Cibola Vista in Peoria.

20 IN THEIR 20's James “Jimmy” Crawley Associate, Multifamily Investment Sales at Marcus & Millichap Age: 25 As a multi-faceted advisor and sales representative for multifamily communities in Southern Arizona, Crawley has transacted a total of 23 deals totaling $153 million since joining the firm in 2015. He’s also the pupil to Hamid Panahi, Cliff David and Steve Gebing at Marcus & Millichap, which as a collective team with Crawley, completed over $1.2 billion worth of deals in 2017.

Tim Hurley Associate, Retail Brokerage at JLL Age: 23 Hurley specializes in landlord and tenant representation for the Arizona retail market. He is responsible for developing and executing strategies, and assisting retailers in identifying and securing optimal locations to reach customers and drive value for their organization. In his first year at JLL, Hurley has successfully completed 11 retail deals, including the full lease-up of Hurley Plaza at the border of Downtown and Midtown. He is quickly growing a tenant representation client roster spanning requirements statewide.

Jaymee Geelan Real Estate Attorney at Quarles & Brady Age: 29 Geelan’s practice focuses on a variety of commercial real estate transactions, including acquisitions, dispositions, leasing and real estate secured lending. Since relocating from the Midwest to Arizona and starting an active role in ULI, she has worked with institutional investors, local and national homebuilders, publically traded REITs and local retail developers on several high-profile deals both locally and nationally, including a number of large portfolio transactions.

Nicole Hanson Associate Attorney, Real Estate, Financial Services, Debt Finance at Squire Patton Boggs Age: 28 Starting her career in New York City as a transactional commercial and corporate real estate attorney put Hanson at the forefront of the industry to help drive investments and ensure development ventures are able to come to fruition. She represents clients on all sides of real estate deals including acquisitions and dispositions, borrower and lender-side mortgage and mezzanine financing, refinancing, CMBS transactions, master-planned community and homebuilder developments, joint ventures and other transactions in Arizona and nationally.

54 | January-February 2018

Justin Kinsler Project Engineer at Alexander Building Company Age: 26 Assisting the project managers and superintendents on projects like a $7 million mixed-use project in Scottsdale called Main Street Place and The Vig at McDowell Mountain Ranch, Kinsler touches every part of a project from submittals to owner change orders and more. In addition to being selected to Valley Partnership’s Advocates program last year, Kinsler’s exemplarily work also earned him recognition from Owner Shane Alexander for helping expand the firm’s client base to include more than four school districts.

Jordan G. Kravitz Associate and Sustainability Champion at HKS Inc. Age: 28 A self-described “architectural explorer,” Kravitz holds certifications for AIA, NCARB, LEED Green Association and WELL AP, but still constantly challenges herself to discover new ideas, concepts and practices. With a focus on healthcare, sustainability and well-being, one of her recent noteworthy projects is the $418 million Banner-University Medical Center Phoenix emergency department and patient tower.

20 IN THEIR 20's Sean Lieb Associate at SRS Real Estate Partners Age: 28 Specializing in the leasing and selling of retail, multi-tenant, mixeduse properties and land throughout Greater Phoenix, Lieb has worked with many notable national retailers such as Advanced Auto Parts, Burger King, Edward Jones, Jackson Hewitt, H&R Block, Orange Theory Fitness, Subway, Cheba Hut and more. Prior to joining SRS, he worked at Cushman & Wakefield where he generated over $17 million in lease and sales transaction volume in less than a two-year span. He’s also a member of ICSC and ULI.

Cole Malham Business Development at SiteWorks Age: 26 From self-performing takeoffs to pricing out entire plan sets, Malham’s role is vital to ensuring both accuracy and profitability for several of the company’s high-profile landscaping contracts, including the Phoenix Rising FC Soccer Complex, ASU Sun Devil Stadium, UA Beardown Field in Tucson, various MLB Spring Training Facilities, West Valley Resort and Casino and several master-planned communities.

Chelsea McCaw Planning/Landscape Designer at EPS Group Inc. Age: 27 From entitlements to construction documentation, McCaw’s involvement on a project takes many forms, but her strength is creating compelling narratives and graphics to convey project information on an emotional and practical level to municipalities and the public. In addition to her landscape architecture degree, McCaw is a member of the American Society of Landscape Architects’ (ASLA) Arizona Chapter, 2017 Valley Partnership Advocates program and is working to earn her license as a Registered Landscape Architect and eventually a AICP licensed planner.

56 | January-February 2018

Cameron Miller Senior Development Manager at Evergreen Devco, Inc. Age: 28 With a focus on retail, Miller’s daily role involves interfacing with municipalities to entitle and permit new ground-up developments in Arizona and Southern California, including hard and soft cost budgeting, site due diligence and construction management for numerous projects like Raising Cane’s, Starbucks and Smashburger. He’s also heavily involved in the industry overall through groups such as the ICSC Next Gen Planning Committee, ULI’s Partnership Forum and Valley Partnership.

Matthew Pickering Associate at LevRose Commercial Real Estate Age: 24 The office broker traded in a promising career in the food and beverage industry for a passion in real estate, which led him to obtain his license from the Arizona School of Real Estate and Business. Since then, Pickering has learned from and worked with some of the brightest mentors in the industry, including Barry Gabel of CBRE and Jon Rosenberg, managing partner at LevRose. He has closed 24-transactions year-to-date, totaling over 60,000 SF along with 300,000 SF of landlord representation.

Matthew Reeg Traffic Engineer at Southwest Traffic Engineering Age: 29 After earning a civil engineering degree from ASU and working at the Arizona Department of Transportation, Reeg took what he learned about traffic engineering analysis and design services to the private sector. As a registered Professional Engineer in Arizona, member of the Institute of Transportation Engineers (ITE) and American Society of Civil Engineers (ASCE), he’s constantly expanding his understanding of how a high-quality transportation system impacts a thriving economy.

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20 IN THEIR 20's Hannah Sanders Age: 25 Business Development at AME Landscape Companies You’ll be hard-pressed to find anyone in the industry as fun and well-connected as Sanders, who is known for her bright and charismatic personality as well as her involvement with Valley Partnership, ULI, NAIOP and Arizona Builders Alliance. In addition to securing contracts for high-profile projects like Camelback Collective, Chauncey Lane Marketplace and Mesa Artspace Lofts, Sanders also coordinates and plans various events to connect others in the industry like the firstever Golden Paddle Ping-Pong Tournament.

Massimo “Max” Sommacampagna Founder of CIMA Holdings; CIMA Construction;DBA Sommacampagna Homes; Somma Realty Age: 25 By the age of 20, Sommacampagna discovered opportunities in small vacant parcels of land throughout the Valley and formed the companies: CIMA Holdings, Sommacampagna Homes, and Somma Realty, to execute on the full real estate cycle from acquisitions to construction to lease up. Since then, he already completed four successful ground-up developments in addition to graduating from the Arizona Small Business Association 2017 Emerging Leaders Program, co-chairing the ULI Young Leaders Group Programs Committee, and joining the City of Phoenix Rio Vista Village Planning Committee.

Robert Takahashi Project Engineer at Silver Fern Companies Age: 25 High-profile project opportunities, a great mentor and exposure to all phases of both commercial and residential projects, from bidding and entitlements to budgeting, scheduling and daily construction management, helped Takahashi quickly grow his understanding of the industry and personal recognition, which earned him a spot in the 2017 Valley Partnership Advocates class. In addition to recent work at the Mesa master-plan community known as Cadence at Gateway, he’s also managing construction budgets and schedules for the Garden Condominiums, Recker Point and Peralta Canyon.

58 | January-February 2018

Andrew Veatch Development Coordinator at SimonCRE Age: 25 As development coordinator, Veatch works with SimonCRE’s development team and its trade partners on multiple projects all across the U.S., from the entitlements through development, to ensure each project is delivered on time and on budget.

In less than a year since joining the firm, he’s helped facilitate the completion of 40-plus projects, totaling roughly 500,000 SF and $90 million in construction costs. Outside of the office, he’s active within Developing Commercial Real Estate Professionals or “DCREP.”

Sean Westfall Senior Associate, Investment Properties at Colliers International of Greater Phoenix Age: 26 A year ago, he joined the investment property sales team led by Mindy Korth after originally starting his career as a medical office leasing broker. In his short tenure, Westfall has landed various large, national assignments including a $170 million portfolio of seven post-acute care hospitals in three western states. He’s also the lead broker for a national dental services organization with more than 300 existing units and a strong pipeline planned for future growth.

Brian C. Zurek Associate at Transwestern Age: 23 Beginning in 2016, Zurek successfully completed multiple office building dispositions and acquisitions, as well as personally transacting multiple leases for clients.

Since joining the top-producing team of Jim Achen Jr. and Bill Zurek, he has also been involved in closing approximately $95 million worth of office transactions. Additionally, Zurek has made an impact on other young brokers by recently reinstating DCREP (Developing Commercial Real Estate Professionals) as its co-president, where he organizes sponsors for broker networking events.

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59

BUILDING TECHNOLOGY

The future of

60 | January-February 2018

building

New technologies improve the ways that projects are designed, built, experienced

By DAVID MCGLOTHLIN

W

ith great technologies comes great responsibility as well as great cost and time savings, which means a need for new modes of thinking and technological knowhow in order to achieve significant improvements in efficiency and cost control.

The advancements, implementation and more widespread use of technologies such as building information modeling (BIM), virtual reality (VR), drones and 3-D models continues to transform the way projects are designed, built and experienced.

For instance, the use of BIM is growing in total quantity of projects as well as breadth as there are increasingly more BIM-enabled endeavors like estimating, planning, scheduling, communication, visualization and constructability to apply the tech.

As a result, industry trade associations like the Associated General Contractors of America and Arizona Builders Alliance are working with leading BIM practitioners, technology firms and educators to prepare construction professionals at all experience levels to successfully implement BIM and other technologies on construction projects.

Layton Construction, a nationallyranked commercial contractor, has already invested heavily in the leadingedge of practical new applications and technologies such as VR and BIM. The process starts with VR during the pre-award phase when Layton is submitting proposals to clients in efforts to secure a project contract.

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BUILDING TECHNOLOGY

BUILDING INFORMATION MODELING: BIM is an intelligent model-based process that provides insight to help plan, design, construct, and manage buildings and infrastructure.

Then its visual team can build VR models for the project from scratch in a matter of days based on the drawings from the Request for Proposal (RFP).

Once the job is awarded, Layton shifts to utilizing BIM 360 Field and BIM 360 Glue, which are both AutoDesk products, for modeling and coordinating the actual construction and engineering components of the project.

BIM 360 Glue is a hub for design and trade models used for team communication during the BIM coordination of mechanical systems with structure and architecture models. This is shared with owners, designers and other stakeholders.

From there, everything is shared with the project’s field staff by publishing to BIM 360 Field, which is a field management platform that’s 62 | January-February 2018

a mobile source for the latest models in the field, but also all drawings and other project documents.

The next steps include creating, sharing and filling out checklists for safety and quality control. After that, various issues and tasks can be added to project drawings, documents, field photos and model views, and assigned to the right personnel and tracked.

In the past, Layton would need to create a physical mock-up of each space, which is time consuming, expensive and discovering problems during construction can jeopardize budgets and schedules even more.

Now with VR, those mock-ups are virtual, portable and easily updatable, allowing for Layton’s prospective clients, users and stakeholders of a project to virtually experience and interact with it via VR goggles before starting physical construction.

“It’s much faster and much more cost-effective than having to build a physical mock-up and adjusting that mock-up,” says Andrew Geier, executive vice president at Layton.

In fact, Layton has already been successful in totally eliminating physical mock-ups on two of its largescale, complex healthcare projects.

Moving ahead, Layton plans to implement VR on more of its smaller projects as well as throughout its interior construction division.

Geier explains, “It’s not that technology has become less expensive, but rather, it has become good enough to utilize in lieu of something physical and that’s where the cost savings really comes in.”

Before, general contractors needed to have a big project with a big budget to warrant spending money on physical mock-ups, which are common in largescale complex projects like skyscrapers and healthcare facilities.

For instance, while building a 485,000-square-foot, 280-bed medical center in Florence, Ala., Layton utilized VR instead of building 20 physical mock-ups in a rented warehouse for the owners and end users to experience, which would have costed about $250,000.

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63

BUILDING TECHNOLOGY MORE BUILDING TECHNOLOGIES

Renaissance Companies, a full-service construction management firm, continues to push leading-edge technology, including building information modeling, topography scanning drones and room scanning capabilities using cellphones. Here’s how it works.

CELLPHONE SCANNING: By using an Android-based cellphone called “Asus Zenfone AR with Tango

by Google” to scan 3-D point clouds of building interiors, the 3-D point cloud data can be imported into tools like Revit. While doing a site walk for a renovation project, crews can quickly create 3-D scans of highly complex areas and use the 3-D information back in its offices for measurements and verifications against construction documents for estimating. In essence it’s 3-D photography.

IMAGE COURTESY, ASUS

64 | January-February 2018

TOPOGRAPHY SCANNING DRONES: By using a DJI 210 RTK Industrial drone, the construction team captures the existing site topography as point cloud data.

Results collected from the point cloud data can then be used against designs to efficiently determine cut/fill rates to help eliminate/minimize importing or exporting dirt. It can also use the collected orthographic images in conjunction with CAD overlays to verify underground as-built conditions during construction.

As a result, Layton decreased its mock-up construction costs by 90 percent and feedback from the VR experience allowed for design changes and prefabrication opportunities, which ultimately improved the project’s timeline.

From there, BIM 360 Field is used for the duration of the project by all the different trade partners and awarded subcontractors. That includes everyone from the structural and mechanical sides of the project to plumbing, electric and HVAC. “The main reason you have BIM is the inherent problems with construction,” explains Geier. “The benefit of BIM is understanding where the issues are in a

conference room with everyone before it’s a bunch of guys on the job site trying to figure it out in the field.”

With these technologies, superintendents and subcontractors are able to use tablets on job sites to collaborate in real time with architects, engineers, owners and other team members unlike ever before.

Since BIM appears to be here to stay, an assessment-based certificate credential called the “AGC Certificate in Management—Building Information Modeling” (CM-BIM) was created to denote knowledge and understanding of concepts related to BIM adoption, practice and process transformation covered in the AGC BIM Education Program.

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RETAIL

RETAIL EVOLUTION 66 | January-February 2018

The trends driving change in 2018

By DAVID MCGLOTHLIN

SCOTTSDALE FASHION SQUARE: Macerich, the mall's owner, announced renovations plans in December 2016 that included renewing the interior and exterior areas of the mall, with the grand opening of the renovated luxury wing planned for Fall 2018.

L

ast year’s rise in bankruptcies and store closures of retailers had some people predicting a “retail apocalypse.” Meanwhile, others in the retail industry pushed back on that rhetoric and saw it more as an evolution of the industry to meet changing consumer demands.

Nine retailers announced bankruptcies during the first quarter of 2017, which matched the 2016 total, and Credit Suisse estimated 8,640 more stores could have closed by the

end of the year, which was higher than the historical peak of 6,200 stores during the Great Recession. However, experts say, retailers can avoid being another statistic by identifying emerging trends in retail and making the appropriate adjustments before it’s too late.

To better explain what the industry can expect during 2018 and beyond, local experts were asked to identify a couple ways that retail is evolving.

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THE UNION: Sephora moved into The Union's space at Biltmore Fashion Park in November of last year along with Wink 24 Wood Fired Kitchen & Bar.

One local mall that has remained a one-of-a-kind retail destination and a top-performing property for many reasons is Scottsdale Fashion Square, which is currently owned by Macerich along with nine other regional shopping centers in Arizona, including the Biltmore Fashion Park in Phoenix.

For Garrett Newland, vice president of development at Macerich, the latest exciting trend is how digitally native brands are occupying brick-and-mortar spaces to build closer ties with shoppers and create new relationships. “Across the Macerich portfolio, we now have physical stores for born-online brands including Warby Parker, Peloton, Blue Nile, b8ta, Ministry of Supply, UNTUCKit and others,” he explains.

Expecting the trend to continue, Todd Folger, first vice president with CBRE Retail Services, says, “Now, more than ever, consumers crave experiences that allow them to feel, touch, hold and 68 | January-February 2018

“Consumers are trending towards either high-end retail or low-end/discount retail. Luxury retailers like Burberry are seeing strong sales numbers, as are brands like Ross. However, this is resulting in a squeeze in the middle. That’s why stores like Macy’s, Sears and JCPenny have closed hundreds of stores.”

— Joshua Simon, founder and CEO of SimonCRE

in some cases, try on, products. Brands will continue to move toward providing creative and new experiences for their consumers to earn their loyalty.”

For example, Total Wine now hosts beer and wine tasting classes, which offer customers a different experience than anything they’ve traditionally seen in the past.

Other strategies may include adding new, trendy shops and amenities to enhance customers’ experiences, renovating or reinventing the traditional mall by adding miniboutiques into larger vacant floor plates.

For example, at Biltmore Fashion Park in Phoenix, Macerich transformed empty space into a retail incubator called “The Union.”

“The goal was to temporarily house smaller, local and independent businesses, and to give them each an opportunity to test the mall environment and find success,” Newland explains.

Tenants that did well, like Short Leash Hot Dogs, Citrine and Royal Coffee, decided to relocate to spaces outside of The Union but still within the shopping center.

On the grocery store front, Scott Ellsworth, vice president at SRS Real Estate Partners, says, “Kroger [known as Fry’s in Arizona] is staying ahead of the competition by its ‘ClickList’ online service, which allows customers to pick up groceries at a designated time from their stores.”

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Dave Cheatham E-commerce doesn’t suit all aspects of retail, explains Joshua Simon, founder and CEO at SimonCRE, but he predicts technology will greatly impact physical retailers. Also citing Fry’s as an example, Simon says, “They are committed to cutting physical store openings while investing more in ClickList, Express Lane and mobile app experiences.”

In addition, Ellsworth explains, “Fry’s has also added more to-go meal kits to compete with online only companies like Blue Apron as well as continuing to enhance its in-store bar and prepared meal offerings to capture business from other neighborhood restaurants.”

Many within the restaurant industry have coined this added competition segment as “grocerants,” and it can already be seen in the Valley at some Fry’s and Whole Foods locations.

Overall, more grocers are adopting onmi-channel strategies, giving customers options to order their groceries online and pick them up instore, curbside or via delivery.

“Whether you are retail or a restaurant, the consumer demand is driven by having what they want and when they want it - brought to their door,” says Dave Cheatham, president at Velocity Retail Group. “Retailers will continue to buy internet companies, and vice versa, to be able to accelerate their expertise in omni-channel.”

For example, Amazon bought brickand-mortar Whole Foods; Wal-Mart bought internet companies Jet.com and Bonobos; and PetsMart bought internet company Chewy.com.

Simon agrees, noting the successful retailers have adapted the right omni-channel approach. “They have better inventory, provide better mobile experiences, emphasize 70 | January-February 2018

Scott Ellsworth

personalization and simplicity, and engage consumers on consumers’ terms,” he adds.

In terms of new project developments, Kerry Linthicum, vice president at CBRE Retail Services, says, “Another trend we will likely see in 2018 is grocers offering a wider variety of store sizes, with smaller footprints designed for convenience and quick trips, and larger store sizes designed to support experiencecentered amenities like cooking classes and in-store dining.”

Meanwhile, new restaurant concepts are setting up shop in unconventional spaces.

“The concept ‘If you can vent it, you can rent it,’ is taking the food and beverage industry by storm,” explains Folger. “In Downtown Phoenix, we’ve seen projects like DeSoto Market transform a former automobile dealership into a multi-vendor market.

Todd Folger

Kerry Linthicum

BILTMORE FASHION PARK: Framed Eye, Short Lease Hot Dogs and Royal Coffee all moved into its own spaces within the center lawn area of Biltmore Fashion Park.

While The Churchill is a new urban market concept that will be housed in repurposed shipping containers.”

Restaurants and bars are still considered a popular way to provide shoppers with experiences and opportunities to spend their dollars outside of traditional apparel shopping.

However, regardless if it’s a national, regional or local restaurant, Ellsworth says, “more closures will be expected next year from oversaturation and too many ‘niche’ concepts that can’t produce what’s needed to stay relevant in the ultracompetitive restaurant industry.”

For Carol Schillne, first vice

Garrett Newland

Carol Schillne

SCOTTSDALE FASHION SQUARE RENOVATION: Many of the project's renovations will take place on the north side of the mall near the Dillard’s and Neiman Marcus. The current north entrance will be redesigned as the mall’s main, luxury entrance.

president at CBRE Retail Services, the lines between live, work and play are becoming increasingly blurred, with consumers wanting restaurants, shopping, services and entertainment at their fingertips. For this reason,

Joshua Simon

she says, “Retail space will continue to be added below office buildings and apartment communities.”

A similar strategy will be evident at Scottsdale Fashion Square where Macerich has already begun a multiphased, multi-million-dollar project to renovate the mall’s luxury wing followed by the addition of mixed-use elements such as high-end residences, class A office space and a new hotel.

“Certainly, adding complementary live, work and stay elements to a property will provide a built-in, new customer base for the retail components,” Newland

explains. “And vice versa, being in such close proximity to a world-class retail destination like Scottsdale Fashion Square provides a powerful draw for the project’s other mixed-use elements.”

It’s true retail is changing and those changing with it will do the best during this evolution of the industry, but the top-performing retail centers will continue to be magnets for people, ideas, great experiences and brands, as well as community gathering spaces.

Although the ways this gets accomplished will also evolve as the retail industry heads into 2018 and beyond.

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