WEST VALLEY BUILDING UPDATE
The New West Valley All the ingredients are in place for the region to capitalize on a boom in development By ELINOR TUTORA
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t is no shock to know that the West Valley’s industries are booming. Large companies such as Taiwan Semiconductor Manufacturing Company, KORE Energy and countless logistics companies are all making investments as people continue to move to the area rapidly. What will the new west side look like? Greater Phoenix has attracted labor because of the historically low cost of living, a good job market and eternal sunshine. The development is going beyond a place to commute to work. It is creating a place to work and live. In Maricopa County, 40% of the residents live in the West Valley, and it is expected to be home to 2.1 million people by 2030. The median household income is $75,556 in the West Valley, which is $10,000 above the national average. The median home price sits about $10,000 below the national average at $229,579. It also has a strong labor force, with 63% of West Valley residents a part of the workforce age. Rent growth in the metro area saw 22.5% rent growth well outpacing the rest of the country, according to Thomas LaSalvia, senior economist at Moody Analytics. LaSalvia explains Phoenix is one of 14 out of 82 primary metros that have had employment rates fully recover after the initial decline in March 2020. Firms in all commercial real estate development sectors — industrial, office and retail — see the advantage that the West Valley has not only in comparison
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to the state but to the nation. The construction of Loop 303 certainly opened up new potential to the west by creating easy access to land that was previously cut off from the Phoenix metro. It has acted as a foundation for developing a new section of Metro Phoenix. WESTMARC President and CEO Sintra Hoffman says, “In the West Valley, we have the talent that lives here locally and nobody wants to drive anymore, especially after the last year and a half.”
INDUSTRIAL The industrial sector is booming, with more than 25 million square feet currently under construction. “It was a phenomenal year, and markets moved extremely fast in terms of land prices, rental rates and construction cost. Material availability is an issue. 2022 looks great, but it’s definitely moving very, very quickly,” says Steven Schwarz, founding partner of the ViaWest Group. Material delays are still affecting many markets, with development being no exception. This impacts project delivery dates for current and future complexes. “I would say the users these days are needing the building sooner rather than later. And we’re now unfortunate to have a delivery of later rather than sooner because of material delays,” says Jeff Foster, vice president and market officer at Prologis. “The silver lining is that having this material delay is putting a little bit of a headwind for us and could be a good thing. So we don’t
deliver too much at once, but users need it now. They can’t wait.” While Metro Phoenix is thought to have endless space to grow, that is not the case. Pat Feeney, executive vice president at CBRE, explains they are working with two site selection companies, and both are classifying Phoenix as a constrained market. “When you talk to people from out of town, they look at an aerial photo of Phoenix and see there’s land from here to Blythe. But you’ve got to get water, sewer and electricity to it,” Feeney says. The available, developable land in the West Valley is being snatched up fast. “We all didn’t realize how spoiled we were when we were going down the 303 and tying up all the sites that had water and sewer. All of a sudden it’s almost impossible to find a site in that corridor. Now at Ryan Companies, we’re looking around the Valley looking where else we can go, and a lot of the options have infrastructure challenges,” says Josh Tracy, vice principal of real estate development at Ryan Companies. “It is going to be years potentially before we can go somewhere and do this much expansion.” Tony Lydon, managing director at JLL, explains that the metropolitan area of Phoenix is around 400 million square feet, which is small compared with a city like Dallas, which is around 1.3 billion square feet. “We’re not going there. But we’re going to move from 400 million feet to 600 million feet here in the not too distant future, and that’s just our food group,” Lydon notes. “This is a market where people want to come and live for a lot of reasons.” With large industrial complexes come jobs that need to be filled. James Murphy, president and CEO
