Built to Win 2016 AIA Design Awards p.52 2016 TOBY Awards p.14
CRE Gives Back p. 28
AAED p. 62
Education Development p. 46
POWERING YOUR PROSPERITY Jordan Kaplan Douglas Emmett (DEI:NYSE) Avid Skier Walker & Dunlop borrower since 2010
Commercial Real Estate Finance Commercial Real Estate Finance www.walkerdunlop.com www.walkerdunlop.com
California loans will be made pursuant to a Finance Lenders Law License from the Department of Business Oversight. California loans will be made pursuant to a Finance Lenders Law License from the Department of Business Oversight.
Tis the season…
his time of year brings with it a change in season, cooler temperatures, array of pumpkin spice products, lots of holiday fun and the spirit of giving. In this issue, you’ll read about ways professionals throughout the commercial real estate industry are doing their part to give back this holiday season from toy drives to Christmas parties and all year long with in-kind donations and big community projects for local charities (Page 28). As the last issue of 2016, it also highlights some of this year’s most notable new projects and the people responsible for them. BOMA recongized excellence in building design and management at its annual TOBY awards (Page 14). AIA Arizona's Design Awards (Page 52) honored the year’s best projects designed by its members that showcased the highest standards in design, planning and construction. In this issue, you’ll also read about: - Ways new developments are putting the living back in senior living communities (Page 40) - How ASU, UA, NAU and GCU are building better learning environments with new projects on campuses (Page 46) - The issues and solutions being addressed in the state to foster greater economic development opportunities (Page 62) As 2016 comes to a close so does my first six-months at AZ Big Media. It's amazing to see and hear about all the CRE activity happening across the Valley and state. I look forward to bringing you the latest and greatest in CRE news, trends and analysis for 2017. Happy holidays everyone!
President and CEO: Michael Atkinson Publisher: Cheryl Green Vice president of operations: Audrey Webb EDITORIAL Editor in chief: Michael Gossie Associate editor: David McGlothlin Interns: Alyssa Hesketh | Taylor Neigum Contributing writers: Melody Pierce | Erin Davis | Tim Lawless Cheryl Lombard | Jaye O'Donnell ART Art director: Mike Mertes Graphic designer: Anita Richey DIGITAL MEDIA Digital editor: Jesse A. Millard MARKETING/EVENTS Marketing & events manager: Heidi Maxwell Marketing coordinator: Kristina Venegas OFFICE Special projects manager: Sara Fregapane Executive assistant: Mayra Rivera Database solutions manager: Cindy Johnson AZRE | ARIZONA COMMERCIAL REAL ESTATE Director of sales: Ann McSherry AZ BUSINESS ANGELS Director of sales: Felix Mayo AZ BUSINESS MAGAZINE Senior account manager: David Harken Account managers: Jennifer Heberlein | Brit Kezar | Bailey Young AZ BUSINESS LEADERS Director of sales: Sheri Brown
David McGlothlin Associate editor, AZRE firstname.lastname@example.org
EXPERIENCE ARIZONA | PLAY BALL Director of sales: Jayne Hayden HOME & DESIGN Director of sales: Joe Freedman RANKING ARIZONA Director of sales: Sheri King
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. ©2016 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 | November-December 2016
FEATURES 2 Editor’s Letter 6 Up Front 10 Executive Profile 12 After Hours 14 TOBY Awards 16 New to Market
18 Big Deals
22 Legislative Update
28 CRE Gives 32 Medical Building Trends
46 Education Development
52 American Institute of Architects-Arizona
62 Arizona Association For Economic Development 76 Land Development
76 On the cover:
The University of Arizona’s Bryant Bannister TreeRing Laboratory was designed by richard+bauer architecture using metal tubes at the top of the building’s exterior to resemble leaves of the palo verde tree and other supporting columns at its base to evoke additional tree trunks.
4 | November-December 2016
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UP FRONT PROJECT NEWS
OPTIMA KIERLAND CONDOS GO VERTICAL After opening to a highly receptive market in April and surpassing sales goals, Optima Kierland, a luxury condominium rental community in North Scottsdale, is going vertical with construction of the project’s first 12-story condominium tower. “We’ve enjoyed great reception in the market, with high demand from local buyers,” says David Hovey Jr., president of Optima, the project developer. To date, more than 80 Optima Kierland residences have been sold, with home prices ranging from the low $300s to $4.5M+.
LGE COMPLETES HQ FOR MODERN FLAMES LGE Design Build has completed construction on a corporate headquarters, warehouse and distribution center in Phoenix for Modern Flames, a leading manufacturer of electric linear fireplaces distributed internationally for use in residential and commercial settings. Modern Flames occupies about 23,000 square feet of the 43,000-square-foot building, 3525 E. Atlanta Ave. A metal fabrication center for AF Steel Fabricators, a division of Arizona Fireplaces, occupies the other 20,000 square feet. 6 | November-December 2016
Reimagining Core Assets
New demands, trends redefine standards for core assets in the Valley
By DAVID MCGLOTHLIN
hile some criteria for classifying a building as a core asset a decade ago still remain, changing trends in the market and tenant demands are recalibrating the way we think about core assets in the Valley. Property value, land scarcity and an institutional component originally drove market demand for core assets. The same is true today for the most part, but now tenants also look for an urban environment, walkability, amenities and features to help attract and retain employees to the area through the experiences being offered. “A core asset is one whose value first-andforemost is retained over time, with the expectation of reliable appreciation,” says Gary Linhart, co-founder and principal at ViaWest Group. Adding to the property’s value is location and limited supply of available land for new developments. Older properties like the Esplanade and Biltmore Center, largely considered two of the Valley’s most prominent and wellrecognized core assets, are starting to show signs of its age and required interior and exterior tenant improvements to keep up with today’s standards. “When it [Biltmore Center, formerly Biltmore Financial Center] was built, it was designed for the long-term, with the highest quality finishes at the time, at the top intersection in Phoenix,” explains Linhart. “However, in order for a core asset to stay a core asset, reinvestment is
necessary to keep the building up-to-date with changing trends and tastes.” So when his company purchased the building last year, its task was to transform the aging structure with upgraded features and amenities to meet current tenant demands. Whereas, newer buildings like Hayden Ferry Lakeside in Downtown Tempe and CityScape in Downtown Phoenix, already have the needed state-of-the-art features built in. Linhart identifies Downtown Scottsdale, Downtown Tempe, Camelback Corridor and Downtown Phoenix as the markets with core assets, which all have nuances that make them different. “These core assets are in areas where the top companies want to and need to be,” he explains. “At any time, it has to offer to the top tenants in the marketplace the experience, technology and quality of space they demand.” Today’s core assets are unique in the ability to transform a building and its surroundings into a premiere destination by creating a first-class experience for those entering it. “You have to look at each project holistically; how it ties to its natural surroundings, flexibility, and how people emotionally connect with said place,” explains Rory Carder, president of DAVIS. “Any core asset, no matter what city, requires walkability; it’s the essence of urbanization,” she says. Although
Phoenix is still a young city, she thinks it’s making strides in the right direction. “A core asset flourishes on the people that inhabit them,” explains Carder. “It thrives on the energy you feel from that specific piece of real estate.” The old corporate environment of the 1980s and 90s is fading away. Instead, employees want options that fit their flex schedules and lifestyles. Linhart says, “The common areas, such as outdoor spaces with shaded seating areas, tenant lounges, fitness centers, on-site restaurants, coffee shops and lobbies are becoming vital components of a core asset.” Back in the day, a strong institutional corporate tenant and a few nearby restaurants were enough to attract highend tenants. State-of-the-art structural features were always expected and still are, but the delivery of a quality tenant experience is what sets these buildings apart from the others. Linhart explains, “In a wired-world in which people can work from anywhere, an office building that wants to attract paying tenants must provide an experience, particularly if the office building owners wish to command a premium rent.” Kevin Calihan, senior vice president of CBRE, echoes that point. Companies need to be in a good position to compete for a quality workforce with a site that will attract Millennials and the educated employees they want, he says. “Companies want to give their employees
high quality of life, a great work environment and that’s what locations like The Galleria and Hayden Ferry Lakeside provide,” Calihan adds. The Galleria Corporate Centre in Downtown Scottsdale, an old mall converted into class A office space, is largely considered a core asset by today’s standards. Calihan says the change in demand to be in close promiximity to retail, entertainment and hospiliatilty options thrusted the Galleria into its current core asset status, which wasn’t the case for the failed mall ten years ago. Carder refers to her offices at Hayden Ferry Lakeside as an example of a core asset in Downtown Tempe where employees can explore any of the nearby businesses or enjoy a yoga session in the park overlooking Tempe Town Lake. Downtown Phoenix’s CityScape is a prime example of a core asset for its location, proximity to nearby amenties, elegant finishes and sheer size, which contributes to its success and 95-percent lease rate. It has all the needed ingredients: amenities, growing urbanization, booming residential developments and entertainment venues. Location, prestige, supply and demand still remain important in securing highlevel tenants at core assets, but today’s standards also require an atmosphere for those entering to remember and want, which differentiates a core asset from any other ordinary building.
GILBERT GETS CLASS A INDUSTRIAL SPACE Conor Commercial Real Estate has completed construction on AZ|60, an industrial property within Gilbert that was designed and constructed to maximize efficiency and offer flexible configurations and modern amenities to meet the growing demand for Class A space within Gilbert’s robust industrial sector. The new two-building, 225,600-square-foot speculative industrial property is located within Fiesta Tech Center, just off the intersection of Arizona Avenue and Baseline Road.
PIMA CENTER GETTING AN EXPANSION MainSpring Capital Group, developer of the Pima Center at the Loop 101 and Via de Ventura in Scottsdale, has plans to speculatively develop “Mainspring Flex Phase III at Pima Center,” 150,660 square feet of light industrial space suitable for warehouse/assembly/distribution uses. MainSpring’s light industrial offering at Pima Center constitutes “best-in-class” product in the northeast Scottsdale market. The new project features R-38 roof insulation and all LED warehouse lighting to drive down occupancy expenses. 7
If you build it, will they come? In Buckeye, they say ‘yes’
BY MELODY PIERCE
he housing market is on the rise with a Buckeye development, Tartesso, creating new and exciting opportunities for residents and the Arizona real estate industry. Tartesso is an 11,000-acre masterplanned community in the Phoenix area’s westernmost suburb. In early September, Dolphin Partners of Irvine, Calif., paid $80 million for the land, making it the largest land purchase in the area since the housing market crash of 2008. The Tartesso community will have 41,000 homes at full build-out and currently includes 2,000 homes that were built before the Recession halted construction. Homes will be built north of Interstate 10 and on both sides of the San Valley Parkway, according to plans for the development. According to George Flores, Buckeye development services director, this is a long-term project, continuing until 2038. Flores says the project does not have a timeline, but he expects steady growth. Others in Arizona are watching Tartesso because it is one of the first big developments to end a long hiatus that began with the housing market crash, says Flores. Though the Tartesso development dates back to before the Great Recession of 2008, it is now regaining its momentum. No other commercial developers have expressed interest in the development, but that could quickly change as the Buckeye population
8 | November-December 2016
grows, Flores adds. Len Becker, Buckeye economic development director, says it is just a matter of time until retail, convenience businesses and professional services take notice of the Tartesso development and growth in the Buckeye area. Becker explains the Tartesso community expects to draw a “mix of families,” including active adults and multigenerational households. While some new residents will be commuters, employed all over the Valley, others will work in the area. Luke Air Force Base and the Palo Verde Nuclear Generating Station surround the Tartesso community, giving residents an abundant resource of jobs as well as providing other economic opportunities for the area, according to Becker. In addition, Buckeye is working on adding other large-scale employment ventures along the Rail Corridor, State Route 85, Verrado Way and Watson Road, with the addition of 1,000 jobs and hundreds more expected in the next 12 to 18 months, says Becker. “People are — and continue to be — attracted to Buckeye because of our natural attributes, excellent schools, low crime Len Becker rates, natural
beauty and wide array of housing choices and price points,” he says. While Tartesso is important to Buckeye, Flores points out that “home development has already been jumpstarted,” and the community welcomes the growth. The 2015 U.S. Census called Buckeye the 15th fastest-growing community. In 2014, the City of Buckeye voters changed the name of Buckeye from the “Town of Buckeye” to the “City of Buckeye.” Buckeye Mayor Jackie Meck notes that the community has been experiencing an increase in singlefamily home building permits over the past 18 months. “The city has reached the plateau in that monthly permit activity that the city was experiencing in mid-2008 before the housing construction downturn,” he says. Real estate is on the rise in Buckeye, and the mayor and others in that community believe that as Tartesso builds, people will come. They see Tartesso as kickstarting the city’s successful future.
Asset management with a twist
Fusion: the process
Vixxo CEO disrupts industry with new tech, analytics platform By TAYLOR NEIGUM
n less than a year since Vixxo opened in March, CEO and President Jim Reavey has transformed the way to approach facility and asset management services by using the latest technology, data analytics and employee networks. What powers Vixxo — a Scottsdalebased tech and analytics company — is a technology platform and support network that streamlines 15 years worth of facility management processes in order to provide next generation asset management services. With Reavey at the helm, Inc. 5000 recently ranked Vixxo as the No. 500 fastest growing private company in America putting it in the top 10 percent, known as the Inc. 500, which marks the eighth consecutive year that a company led by Reavey has made the prestigious list. The streak started with FM Facility Maintenance in 2009, where Reavey served as active president and CEO until it was acquired by First Service Networks earlier this year, spurring a major rebranding effort and the creation of Vixxo. He says, “[Vixxo] making the Inc. 500 list demonstrates our tenacity and will to continuously exceed our clients’ expectations over time.” Reavey says he learned the importance of accountability, resilience and work ethic while growing up on a farm as the eldest son of ten children. Those traits carried over into his eight years of service in the United States Marine Corps Reserve and helped develop him into the leader he is today. “Vision, direction and leadership
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Client submits service request
Optimal Service Provider is selected and dispatched
Work is performed by a Vixxo Service Provider
are all takeaways from the military that I try to implement in my business on a daily basis,” he explains. Today, Reavey works with many large, nationally-spread clients such as McDonald’s, Starbucks and Zumiez in more than 65,000 customer locations to reduce operations costs, increase efficiency and offer insight for better business decisions. He explains the focus is on helping customers utilize their assets in efficient ways, to “keep the world’s best-loved brands running smoothly.” Reavey says a major form of innovation at Vixxo is the installation and monitoring of sensors for clients’ equipment. Fusion is the software that powers Vixxo. Using data and analytics, the software identifies when and where the problem is occuring before it happens and provides the best solutions for its clients, combining speed with cost efficiency and longevity. Reavey compares it to equipment monitoring in modern Jim Reavey
The Service Provider uploads the invoice to Fusion; Vixxo verifies fair pricing for parts and labor using CAPS
Vixxo invoices client and logs data for future use
automobiles. “A sophisticated car will tell you when you need to go into the shop and what to get fixed,” he explains. Vixxo does this on a larger, more complex scale for its clients in the United States and Canada. “Now we’re talking about thousands of pieces of equipment located in different restaurants, different convenience stores,” he adds. “That’s the future of where this industry is going.” Fusion works as a cloud platform used alongside an interconnected network of technicians that receives service requests from clients and responds by finding and dispatching the optimal service providers from more than 100 different trades. With a 98 percent client retention rate, Reavey is successfully leading Vixxo in shaping the future for asset and facility management through his company’s disruptive strategies and technology. “I was taught early on that one could achieve anything if they believed in themselves, had clear goals and were willing to work hard for their dreams,” Reavey says. “Delivering advanced facility solutions to world-class clients and enabling service providers to grow their businesses in tandem gives me and my team professional and personal satisfaction.”
Guiding the next generation Kids at Hope and George Long share vision for youth’s future By ALYSSA HESKETH
hen George Long is not selling office buildings for Ross Property Advisors in Phoenix, or catching up on his world travels, he spends his time serving the community through local nonprofits and various charitable efforts. For more than 10 years now, Long has worked with Kids at Hope, a national organization that helps transform schools and other organizations that serve youth, where he’s also currently a board member. Long and Kids at Hope share a similar vision – creating an environment of encouragement and optimism for children through a course of action that helps them succeed in all aspects of life including recreational, professional, home and family life. “None of us transition in life without the help of other people,” Long says. He believes that everyone reaches a certain point in their lives through the guidance and influence of those around them. Through Kids at Hope, Long is able to connect children with mentors who can relate to them on a personal level. Long believes that every child deserves someone to help guide them through life, whether that person is a teacher, police officer or bus driver. Long’s desire to help the next generation stems from growing up with the Boys & Girls Club, after moving to the United States from Tokyo, Japan. He continued his relationship with the Boys & Girls Club organization in Phoenix for 25 years, serving as a volunteer and board member. He believes that working with children and teaching them about certain aspects of life, such as education and the economy, allows them to deal with challenges and give back to the
12 | November-December 2016
world, and become better citizens. “Kids are kids. You look at them, they look like you and I, and you could never tell that they are being raised by their grandmother, or their aunt or a single parent,” Long explains. “I think a lot of our social issues are going to be cured by changing the attitude of the next generation.” Long strives to change their perspective of the world and believes that Kids at Hope has done that for at least half a million children over the last 15 years. Aside from traveling and helping children, Long also enjoys scuba diving
and hiking: two hobbies that he has had the chance to partake in during his travels. So far, he has visited Germany, New Zealand, France, Canada and lots of places stateside, which are connected to his personal cultural interests. As far as his charitable work goes, being able to see the positive impact that Kids at Hope has made on children up close is what makes it all worthwhile for him. Hearing the stories of children involved with Kids at Hope, and being able to see where those children started from and where they end up, Long says, is the best part.
COMING NEXT ISSUE Annual Outlook Building Owners Management Association (BOMA) International Council of Shopping Centers (ICSC) Urban Land Institute (ULI)
602.277.6045 â€¢ azBIGmedia.com 13
TOBY 2016 The Outstanding Building of the Year Awards This year’s BOMA Greater Phoenix TOBY Awards were presented on Nov. 4 at the Arizona Biltmore, which are among the highest honors bestowed by the association. The annual association awards recognize quality of buildings and excellence in building management. Buildings are judged on all facets of building operations including community involvement, site management, “green” policies and management procedures.
14 | November-December 2016
a. 500,000 - 1 MILLION SQUARE FEET
250,000 - 499,999 SQUARE FEET
BUILDING NAME: Renaissance Square ADDRESS: 50 N. Central Ave., Phoenix, AZ 85004 OWNER: Hines ARCHITECT: Emery, Roth & Sons, Inc. MANAGEMENT COMPANY: Hines PROPERTY MANAGER: Steve Hamel
BUILDING NAME: Anchor Centre ADDRESS: 2201 E. Camelback Road, Phoenix AZ 85016 OWNER: KBS Anchor Centre III ARCHITECT: Phoenix Design One MANAGEMENT COMPANY: CBRE PROPERTY MANAGER: Julie Martens
100,000 - 249,000 SQUARE FEET BUILDING NAME: Raintree Corporate Center III ADDRESS: 8800 E. Raintree Drive, Scottsdale AZ 85260 OWNER: Raintree Venture Owner, LLC, an affliliate of Equus Capital Partners, LTD ARCHITECT: Patrick Hayes Architecture MANAGEMENT COMPANY: CBRE PROPERTY MANAGER: Logan Mather
b. UNDER 100,000 SQUARE FEET BUILDING NAME: Vintage Point ADDRESS: 2633 E. Indian School Road, Phoenix AZ 85016 OWNER: Vintage Point Condominium Assoc. MANAGEMENT COMPANY: Victoria Properties PROPERTY MANAGER: Traci Cheadle c. EARTH BUILDING NAME: Max at Kierland ADDRESS: 16220 N. Scottsdale Road, Scottsdale AZ 85254 OWNER: Artis REIT ARCHITECT: Keating Khang Architects MANAGEMENT COMPANY: Axus Management PROPERTY MANAGER: Meg Gibbons d. HISTORICAL BUILDING NAME: Luhrs City Center ADDRESS: 11-45 W. Jefferson St., Phoenix AZ 85003 OWNER: Invesco ARCHITECT: Trost & Trost MANAGEMENT COMPANY: Lincoln Property Company PROPERTY MANAGER: Jessica Allen
g. INDUSTRIAL OFFICE PARK
h. SUBURBAN OFFICE LOW-RISE
BUILDING NAME: Coldwater Depot Logistics Center ADDRESS: 1100 N. 127th Ave., Avondale AZ 85323 OWNER: J & J Coldwater - Lake Washington Partners ARCHITECT: Butler Design Group MANAGEMENT COMPANY: Cushman & Wakefield PROPERTY MANAGER: Patti Farina
BUILDING NAME: PetSmart HQ ADDRESS: 19601 N. 27th Ave., Phoenix AZ 85027 OWNER: Cole PM Phoenix AZ, LLC ARCHITECT: DFDG MANAGEMENT COMPANY: Vereit, Inc PROPERTY MANAGER: Sophia Tobar
NEW TO MARKET A
EDUCATION A WEST-MEC NORTHWEST CAMPUS
MULTIFAMILY B THE CURVE AT MELROSE
EDUCATION C BIODESIGN C RESEARCH BUILDING
DEVELOPER: Western Maricopa Education Center GENERAL CONTRACTOR: McCarthy Building Companies ARCHITECTS: SPS+ Architects and Architechnology LOCATION: Southwest corner of Dysart Road and Grand Avenue in Surprise SIZE: 42,000 square feet VALUE: $12.9 million START: October 2016 COMPLETION: Fall 2017
DEVELOPER: P.B. Bell GENERAL CONTRACTOR: M.T. Builders ARCHITECT: Studio 15 Architecture Inc. LOCATION: Northeast corner of Glenrosa Avenue and Sixth Drive SIZE: 204 apartment homes START: August 2016 COMPLETION: Early 2018 FINANCING: U.S. Bank
OWNER: Arizona State University DEVELOPER: Arizona State University GENERAL CONTRACTOR: McCarthy Building Companies ARCHITECTS: Zimmer Gunsul Frasca along with BWS Architects LOCATION: Adjacent to ASUâ€™s Biodesign Institute, 727 E. Tyler St., Tempe SIZE: 188,000 square feet VALUE: $120 million START: October 2016 COMPLETION: Spring 2018
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ADAPTIVE RE-USE D THE BLOCKS OF ROOSEVELT ROW
HOSPITALITY E TOWNEPLACE SUITES BY MARRIOTT
OFFICE-HOSPITALITY F CAMELBACK COLLECTIVE
DEVELOPER: Desert Viking Development GENERAL CONTRACTOR: Desert Viking Builders ARCHITECTS: AV3 Design Studios is leading the design of the Fifth Street and Roosevelt Street properties. Lightvox Studios heads the Sixth Street project. LOCATION: Located between Fifth and Sixth Streets along Roosevelt Street SIZE: More than 26,000 square feet START: October 2016 COMPLETION: Fall 2017 BROKERAGE: Venture REI
OWNERS: HCW Development and Statesman Group DEVELOPERS: HCW, LLC GENERAL CONTRACTOR: Layton Construction ARCHITECT: Butler Rosenbury and Partners LOCATION: Corner of Chandler Boulevard and Hearthstone Way SIZE: 58,000 square feet VALUE: $10M START: September 2016 COMPLETION: August 2017
OWNER: Camelback Collective Holding LLC DEVELOPERS: LaPour Partners Inc. and Holualoa Arizona Inc. GENERAL CONTRACTOR: TBA ARCHITECT: TBA LOCATION: Southeast corner of 28th Street and Camelback Road SIZE: 120,000 square feet of office space and a 160-room boutique hotel VALUE: $75 million BROKERAGE: CBRE
Moving into the Southwestern market Growth in Goodyear spurs Finnish company’s new location By TAYLOR NEIGUM
uhtamaki, a global food packaging specialist, plans to invest more than $100 million over the next two years and add up to 300 jobs after announcing an expansion to a newly purchased manufacturing and distribution center in the City of Goodyear. As part of the company’s expansion efforts, it purchased the Goodyear property from Cohen Asset Management, Inc. for $43 million, which included a 752,000-square-foot industrial facility where Webermade once operated. Huhtamaki plans to remodel the site, located at 4320 S. Cotton Ln., for more efficient production and distribution of its foodservice products. Michelle Lawrie, Goodyear’s director of economic development, thinks the Huhtamaki expansion will significantly benefit the city and surrounding region.“For the West Valley, it’s a really great win as well because that’s going to bring more daytime traffic and more quality jobs to our subregion,” she adds. Clay Dunn, executive vice president of Huhtamaki North America, looked at sites in California and Nevada but chose Arizona. He says, “We found the workforce and infrastructure in the building situation there in Goodyear as the best of the locations that we looked at, and we decided on it.” Huhtamaki’s facility will have quick access to Sky Harbor International Airport, Phoenix Goodyear Airport, Union Pacific Rail Lines, Loop 303, Interstate 8 and Interstate 10, which are all important
18 | November-December 2016
Imagery ©2016 Google
shipping routes for distributors. Dunn also mentioned workforce and according to Lawrie, Goodyear’s workforce has the highest amount of bachelor degrees for a city of 50,000 residents or more, with around 28 percent. “Since we don’t have as many employers as the East or Southeast Valley, many companies are worried that we won’t be able to provide the workforce,” Lawrie
explains. “This [announcement] really shows that we do.” According to the U.S. Census Bureau in 2014, Goodyear ranked as the sixth fastest growing city in the United States. The city is appropriately projected to grow to 241,400 residents by 2040. For comparison, the city’s population in 2010 was 68,000. Employment growth is also projected to be one of the Valley’s largest, with a 30-year growth rate of 74 percent. Construction of the Huhtamaki site’s infrastructure is expected to begin in the second quarter of 2017 and finish by 2019. Distribution operations will start early next year, with commercial production beginning late 2017. “We are having a lot of manufacturing look at us in Goodyear,” Lawrie says, “and that’s important because manufacturers usually pay higher wages and usually also invest heavily in communities.”
Itâ€™s the big deals and the brokers who make them, that make the market an interesting one to watch. Here are the Top 5 notable sales from August 1, 2016 to October 5, 2016. Source: Cushman & Wakefield research department, Colliers International and Costar.
GOODYEAR CROSSING INDUSTRIAL PARK 16920 W. Commerce Ln., Goodyear 820,384 SF: $56.2M BUYER: Hines Global REIT II SELLER: Gramercy Property Trust, Inc. LISTING BROKERAGE: JLL
LIBERTY COTTON CENTER 4550-4750 S. 44th Pl. & 4425-4500 E. Cotton Center Blvd., Phoenix 529,905 SF: $85,665,734 BUYER: SAFANAD SELLER: Liberty Property Trust
HOME DEPOT DISTRIBUTION 9081 W. Washington St., Tolleson 466,418 SF: $48M BUYER: Cohen Asset Management, Inc. SELLER: VEREIT, Inc. LISTING BROKERAGE: Cushman & Wakefield LIBERTY COTTON CENTER 4207-4415 E. Cotton Center Blvd., Phoenix 477,197 SF: $40,770,355 BUYER: SAFANAD SELLER: Liberty Property Trust 6111 W. WASHINGTON ST., PHOENIX 200,090 SF: $21,550,000 BUYER: Lineage Master RE LLC SELLER: Norges Bank Investment Management & Prologis W. CRAFCO WAY, CHANDLER 1,121 SF: $9,399,488 BUYER: BKEP Terminalling LLC SELLER: Ergon Asphalt & Emulsions Inc
FOUR GATEWAY 444 N. 44th St, Phoenix 138,240 SF: $40.4M BUYER: Crown Realty & Development, Inc. SELLER: VanTrust Real Estate, LLC LISTING BROKERAGE: CBRE SCOTTSDALE FINANCIAL CENTER III 7272 E. Indian School Rd., Scottsdale 155,459 SF: $40.05M BUYER: Goldman, Sachs & Co. SELLER: Lowe Enterprises Investment Management, LLC LISTING BROKERAGE: CBRE RAINTREE CORPORATE CENTER 15111 N. Pima Rd., Scottsdale 149,992 SF: $32.1M BUYER: N/A SELLER: ViaWest Properties LLC LISTING BROKERAGE: CBRE KIERLAND CORPORATE CENTER 7033 E. Greenway Pkwy., Scottsdale 81,522 SF: $20M BUYER: Parallel Capital Partners, Inc. SELLER: BATAA/Kierland II LLC
TARTESSO NE 300th Ave. & Whitton Ave., NW TonopahSalome Hwy, NE Verde Ln. & Lainey Ln., NE McDowell Rd. & Sun Valley Pkwy., Buckeye 9,211 acres: $80M BUYER: Dolphin Partners, Inc. SELLER: Stardust Companies LISTING BROKERAGE: Nathan& Associates
CRESCENT SCOTTSDALE QUARTER 15345 N. Scottsdale Rd., Scottsdale 265,000 SF: $87M BUYER: Invesco Advisors, Inc. SELLER: Oâ€™Connor Capital Partners LISTING BROKERAGE: CBRE
SONORA VILLAGE 15515 N. Northsight Blvd. & 15448-15704 N. Pima Rd., Scottsdale 258,290 SF: $72.5M BUYER: YAM Properties SELLER: Kaiser Investment LISTING BROKERAGE: Lee & Associates
BELLA VISTA & SKYLINE RD, QUEEN CREEK 1,099 acres: $38,453,653 BUYER: El Dorado Holdings, Inc. SELLER: N/A LISTING BROKERAGE: Nathan & Associates KIERLAND VILLAGE CENTER 6501 E. Greenway Pkwy., Scottsdale 7.74 acres: $20,786,925 BUYER: JLL Income Property Trust, Inc. SELLER: Emerald Interests Corp SW RAY RD. & RECKER RD., GILBERT 79.08 acres: $16M BUYER: Shea Homes SELLER: Atlas Development II, LLC LISTING BROKERAGE: Westland Properties CONTINUUM BUSINESS & TECHNOLOGY PARK NE Price Rd. & Mockingbird Dr., Chandler 30.21 acres: $10,428,000 BUYER: CyrusOne, Inc. SELLER: Southwest Value Partners Enterprises LISTING BROKERAGE: Cushman & Wakefield
ALMERIA AT OCOTILLO 2471 W. Edgewater Way, Chandler 400,000 SF: $79,784,000 BUYER: PASSCO Companies, LLC SELLER: P.B. Bell Asset Management, Inc. LISTING BROKERAGE: CBRE
SCOTTSDALE WATERFRONT 7135 E. Camelback Rd., Scottsdale 92,363 SF: $52M BUYER: Weingarten Realty Investors SELLER: Metzler North America
ARCHES AT HIDDEN CREEK 1586 W. Maggio Way, Chandler 461,904 SF: $55M BUYER: Security Properties, Inc. SELLER: Hamilton Zanze & Company LISTING BROKERAGE: CBRE
LA MIRADA 8816-8936 E. Pinnacle Peak Rd., Scottsdale 152,903 SF: $38.5M BUYER: Whitestone REIT SELLER: JB Matteson LISTING BROKERAGE: Lee & Associates
SOLARA AT MILL AVENUE 3730 S. Mill Ave., Tempe 548,798 SF: $47.5M BUYER: BH Equities, LLC SELLER: Holland Partner Residential LISTING BROKERAGE: Colliers International
SCOTTSDALE SEVILLE 7001 N. Scottsdale Rd., Scottsdale 90,042 SF: $34M BUYER: Whitestone REIT SELLER: JB Matteson LISTING BROKERAGE: Lee & Associates
CANTERA 2475 W. Pecos Rd., Chandler 257,351 SF: $46M BUYER: Aukum Management SELLER: Rockwood Capital LLC LISTING BROKERAGE: CBRE
CHANDLER HEIGHTS MARKETPLACE 4850 S. Gilbert Rd., Chandler 115,074 SF: $30M BUYER: Boardman, LLC SELLER: PASSCO Companies, LLC LISTING BROKERAGE: REZA Investment Group
BIG DEAL: Arches at Hidden Creek, a 432-unit multifamily complex spanning 461,904 square feet, sold in Chandler for $55 million. 20 | November-December 2016
Celebrating Arizona’s policy impacts and economic wins
fter living in Arizona for more than 20 years and working in the economic development profession for most of that time, I am acutely aware how difficult it is to compete for new investment from growing companies. Economic development has changed dramatically in the last two decades, and Arizona faces many challenges when competing on a national and international stage. The state economic development toolbox needs to be modernized with programs like tax increment financing (TIF), refundable tax credits and increased job training resources if we want to win a larger percentage of the deals. Current programs are limiting and narrowly focused, making it difficult to compete across all industries. Though the constraints can
22 | November-December 2016
Jaye O’Donnell AAED
sometimes be overwhelming, communities in Arizona are finding ways to perform at a high level and maximize the limited resources available to support the growth and attraction of business and industry. Several big “wins” have been announced just in the last few months, from Caterpillar in Tucson to Iris
International in Surprise. These projects, and many others, were successful because of cooperation between local, regional, state and private partners and the ability to use current economic development programs. The economic development industry will continue to shine a light on our “wins” during the Arizona Association for Economic Development Policy Impact Dinner at the Arizona Science Center on Tuesday, January 17, 2017. We will celebrate effective policies, best practices and champions of economic development in an evening that promises to be eventful with progressive dinner and dessert stations, legislative awards program, silent auction featuring items made in Arizona, and poster presentations showcasing how communities and companies from all corners of the State have positively benefited from economic policy in Arizona. Sponsorships are available. Jaye O’Donnell is the AAED vice chair of governmental affairs and economic development assistant director for the City of Mesa.
ADA drive-by lawsuits need to end
ince February of this year, about 1,850 lawsuits have been filed against Arizona businesses alleging violations of the Americans with Disabilities Act (ADA). Of these, more than 1,700 are for parking lot violations that involve improper accessible signage and space requirements. The vast majority of these violations are fairly technical often involving the placement of parking lot signs (especially in Mesa) that are lower than the minimum of 60 inches above ground. What the plaintiffs do is hire contractors off Craig’s List to conduct Google Map photo searches of commercial parking lots and then send a notice via e-mail informing a business owner they are in violation with a complaint and file summons. The lawsuits are designed for employers to settle out of court and the amount is often set just below what it would cost a business to hire a lawyer or what their insurance deductible would be. This amount usually averages about $4,000 per case. Because the ADA prohibits private plaintiffs from seeking damages, the settlements go straight towards attorney costs. In short, as the recent ABC Channel 15 investigative stories have reported, this is a scam designed more to enrich lawyers than an effort to seek greater compliance with the intent of the ADA. As a result, Arizona Attorney General Mark Brnovich has intervened on behalf of a defendant in a case and was granted his motion to consolidate all remaining 1,289 cases so he can determine which are frivolous and which should move forward. The AG’s Office has said that they are taking aggressive action to not only curb
Tim Lawless NAIOP
the number of these cases in Arizona but also look at other legal means of investigating the dubious actions of some of these attorneys who are just looking to enrich themselves. Recently, Rep. John Allen, R-Scottsdale, and Rep. Darin Mitchell, RLitchfield Park, convened a stakeholders meeting of affected parties to discuss potential legislation to be run at the State Legislature next session. NAIOPAZ will be supporting efforts to: 1) look at short circuiting in law the “sue and settle” process of the drive-by attorneys; 2) look at conforming the federal ADA law with the state AzDA statute that
has loopholes encouraging the filing in state court rather than the more onerous federal court system; 3) look at placing the AG in the middle of arbitrating complaints to promote a reasonable time to cure before a lawsuit can be filed (key reform); 4) look at tightening “standing” of a party where you just can’t get on Google maps and claim harm for parking lot violations It would appear that advocates for individuals who are disabled also will be supportive of reform as the drive-bys are giving the ADA a bad name, which may ultimately hinder broader acceptance and compliance to the intent of the ADA. There is also a bill in the U.S. House, HR 3765, co-sponsored by Arizona Congressmen David Schweikert and Paul Gosar. In a nutshell, NAIOP-AZ favors mechanisms that will enhance better compliance with the true intent of the ADA rather than insincere efforts to penalize employers who thought they were doing the right thing and which only enriches drive-by attorneys looking for a fast buck. Tim Lawless is the president of NAIOP-AZ. 23
Past, present and our future (again)
s we kick off 2017 with a new President, new Congress, and a new Arizona Legislature, the conversation about infrastructure needs and how to pay for them will start anew. My column a few months ago spoke of how infrastructure makes our lives better and our economy more efficient. Roads, highways, water pipes and much more make up the modern infrastructure we all use every day. Our state’s expansive infrastructure was constructed over many years, and our leaders are responsible for keeping it working for us today and keeping up with a growing population that uses more infrastructure. As we move forward, there is no one way to fund infrastructure needs because the challenge of funding is too big for any one method. Valley Partnership is happy to support and work with partners on steps we need to take now to move forward with critical infrastructure and how we can pay for it. With the new legislative session in Arizona, Valley Partnership is supporting a permanent solution to fund the Highway User Revenue Fund (HURF). Last year’s one-year fix was a great step, but almost $2 billion Highway User Revenue Fund
24 | November-December 2016
Valley Partnership monies have been diverted in recent years to fund state programs other than the primary purpose of HURF — construction and maintenance of streets and highways. There are also rumblings over amending the Government Property Lease Excise Tax, aka GPLET law. GPLET allows Arizona’s cities, towns, counties and county stadium districts to lease property that they own to private parties for nongovernmental uses, and to develop unused or underutilized property to help revitalize communities. Since this property is owned by the government, it is exempt from paying property taxes. Instead, GPLET is assessed and distributed to taxing
jurisdictions. In 2010, the Legislature amended the GPLET laws to increase the GPLET rates for new leases entered into on or after June 1, 2010, to limit lease terms, and eliminate the ability to reduce payments over time. As development is starting to come back in Arizona, and especially the Valley, this tool is being utilized by cities – also resulting in discussion about potential GPLET overuse. A December 2015 audit of GPLET by the Arizona Auditor General recommended that parties administering GPLET should develop and implement policies and procedures to help ensure that GPLET revenues are accurately calculated, collected, distributed and reported. Valley Partnership supports this recommendation and will work with key cities to refine policies and procedures to ensure proper and timely payments. This must take place before any attempt is made to amend or do away with GPLET. We hope you will join with us in supporting GPLET and ensuring our cities use this tool in the manner intended by the Legislature in 2010. Cheryl Lombard is the president & CEO at Valley Partnership.
THE 12 th ANNUAL RED AWARDS The Real Estate and Development Awards (RED) Arizona’s most comprehensive annual commercial real estate awards
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CRE GIVES BACK
Reason for the season
Companies, employers step up charitable efforts in time for the holidays By DAVID MCGLOTHLIN
he season for giving runs year-round for many in the commercial real estate industry. There are countless different ways that companies and employees give back to communities throughout the year from fundraisers and drives to inkind donations for local charities. This time of year brings with it, added seasonal efforts such as charity toy and food drives for the holiday season. Commercial real estate companies, associations and foundations are partnering with nonprofits across the Valley to get a better sense of how to utilize its own resources and skill set to serve charities' needs. On top of regularly planned drives, fundraisers and in-kind donation projects, these groups aim to provide others with some holiday cheer. Whether it’s a hot Thanksgiving meal, unwrapping presents on Christmas or simply some friendly
28 | November-December 2016
conversation, the holidays are a time to give back. CBRE — one of the largest commercial real estate firms in the world — organizes numerous charitable efforts through its Phoenix division each year. One of the firm’s signature events is Angel Tree, an annual Christmas toy drive for children at the Warner A. Gabel Branch of Boys & Girls Club. The Arizona Builders Alliance — association of Arizona builders and contractors with 280-plus member companies — coordinates four to five major events each year for charity, says Joshua Marriott, VDC engineer/ estimator at McCarthy Building Companies, Inc. ABA’s largest event is its annual Christmas Toy Drive. For the last four years, Marriott has served as the ABA community outreach committee chair overseeing entire drive from
outreach to gift-wrapping and delivery of the presents. For the past three years, Marriott says, the drive generated an average of $100,000 to buy toys, clothes and electronics. The gifts get loaded into semi-trucks and delivered to Sunshine Group Homes, which operates more than 40 group homes across Maricopa County for kids under the supervision of Child Protective Services. The toy drive is estimated to impact 1,000-plus kids through its efforts. “It’s a small thing that we can do to give that joy to them over the holidays and make them feel like they are part of a normal family and that they’re loved,” Marriott adds. In addition to the ABA Toy Drive, he participates in a smaller toy drive for Sunshine Acres with his company along with some of some other contracting companies in the Valley for Sunshine Acres, which is also organized by ABA.
ABA TOY DRIVE: Children at Sunshine Acres open the gifts they received from Santa Claus at the Christmas Party hosted by ABA.
It even throws the kids a Christmas party at Sunshine Acres in Mesa, which is a privately-owned Christian group home housing about 100 children in need. Santa Claus, the elves and even Mrs. Claus attend to deliver kids their presents, which are hand-selected by employees of the participating companies and wrapped with the intended new owner’s name on the label. In order to match the right gift for the right kid, Marriott says the participating companies set up a gift tree. Then employees select a child to buy gifts for from a list of 100 names with ages and interests for gifts ideas. Marriott says it’s really heart warming and a personal way to provide these kids the Christmas they deserve.
FRIENDLY COMPETITION FOR A GOOD CAUSE While they may be competing for business on weekdays from 9-5 o’clock, for the last 28 years, commercial real estate brokers and other industry professionals have rallied together in support of local charities for an event hosted by Scottsdale Active 20-30 Club, a philanthropic community service organization. Brokers for Kids is a year long
competition between teams of eight industry professionals to raise funds for a Valley-based charity before competing head-to-head in an Olympiad. Kelly Lannon, vice president of development at Del Pueblo Communities, LLC, is the 2017 chairman for the event. He says the team that sells the most raffle tickets throughout the year leading up to the Olympiad competition wins the Brokers’ Cup, which means the team can choose where a portion of the proceeds are donated. Then on the last day of the campaign, each team gathers to compete in a series of activities like bocce ball, corn-hole, football toss and
basketball. The day ends with the two teams that earned the most points, facing off in dodgeball to determine the winner of the Olympiad Cup. Lannon says when Brokers for Kids first started, less than ten teams participated in the drive and Olympiad, which was held at Chaparral Park in Scottsdale. Last year, 38 teams registered to participate in the Olympiad at Scottsdale Stadium where the San Francisco Giants play for spring training. Lannon says countless others participate through buying raffle tickets and sponsorships that all benefit Boys Hope Girls Hope, the event’s charity partner for the last ten years. He estimates nearly $600,000 was raised since then for the charity to support two group homes that the nonprofit runs and manages. Growing up around a lot of charity work, Lannon adds, he was really excited when presented the opportunity by the Scottsdale Active 20-30 Club's board to coordinate the event it hosts each year. Last year’s efforts raised $350,000 and Lannon has already started on the next drive. BROKERS FOR KIDS: An annual charity sporting competition where teams participate in an Olympiad with basketball free throws, football toss, corn-hole and bocce ball. PHOTO BY DANIEL SHANNON OF SHANNON PHOTOGRAPHY
CRE GIVES BACK COMMUNITY PROJECT GIVES BACK FOR YEARS TO COME Dena Jones, assistant vice president at Fidelity National Title Agency, was introduced to charity work through her mom when she was young. She attended her first Valley Partnership monthly breakfast about six years ago, which was also the first time she heard about the community project, and has played an active role in the effort ever since. The community project is selected each year from a list of submissions sent by local nonprofits ranging from renovation projects to building parks and playgrounds. After selecting a project, Valley Partnership and its members spend the year raising funds through raffle ticket sales and social events to facilitate the delivery of the project. On the last day of the community project, hundreds of volunteers and Valley Partnership members gather at the construction site and help put the finishing touches on the project. Dena served as co-chair of the community project committee for the last three years, and says this year she passed the torch to current co-chairs, Aaron Parencia, senior associate at Stantec, and Kim Kleski, senior landscape architect at Olsson Associates. This year’s community project is the construction of a central park and playground at Sunshine Acres, a group home in Mesa housing about 100 children in need. To use a sports analogy, Parencia and Kleski serve as the project’s general managers and head coaches. That means managing the budget, coordinating with the contractors and keeping ahead of the project’s construction timeline. Funds for the project are raised throughout the year ranging from monetary donations by companies to Valley Partnership members tapping into their social networks to see what materials are needed in addition to who can get them. The project is completed entirely on volunteered time, donations and resources. Parencia says, “People who sign up for this most of the time are people who enjoy it for more than getting paid 30 | November-December 2016
for what they do.” Case and point, look at Jones who still plays an active role in the project’s committee as the board liaison. “I love the opportunity that Valley Partnership affords us to get to know people that do care about giving back to the community," she says. “Together we can absolutely do bigger things.” The project’s heavy construction jobs, like pouring the concrete and installing the needed infrastructure, are completed before the community project's kick-off event. On event day, hundreds of volunteers join at the construction site of the project to complete the surface features. Professionals from entry-level employees to presidents and CEOs work together in groups to complete
BEFORE AND AFTER: Vally Partnership selected Florence Crittenton's Scottsdale Girls Ranch Campus for the 2015 community project.
tasks like landscaping, installing the playground, rolling out the sod and finishing the other amenities. The construction value of this year's project totals $200,000 and will function as Sunshine Acres’ central park for its 100-acre campus. “I feel that we have an amazing opportunity to make a difference in the lives of all the children who find themselves at Sunshine Acres,” says Kleski. “A unique and fun outdoor amenity area will provide space for relaxing, playing, and connecting with their Sunshine Acres family.”
In this season of giving, thank you for making AZRE the #1 commercial real estate magazine in Arizona!
ARIZONAâ€™S DEFINITIVE COMMERCIAL REAL ESTATE RESOURCE
MEDICAL BUILDING TRENDS
PROGNOSIS for healthcare What can we expect in the coming years from the medical sector in commercial real estate? By DAVID MCGLOTHLIN
ioscience and healthcare industries continue to thrive in Arizona with the facilitation of unique and collaborative ways to implement new products, innovations and improve overall care and treatment. According to the Arizona Commerce Authority, healthcare employers in the state are outpacing their national counterparts and other types of industries. The ACA reports, “In 2015,
32 | November-December 2016
healthcare employers in Arizona added more than 11,000 jobs, a rate of 3.4 percent. That’s faster than either healthcare employers nationwide (3.2 percent) or Arizona employers as a whole (2.5 percent).” Most recent data from 2015 shows the healthcare industry accounts for 320,028 jobs in the state, which produces a total of $21.4 billion in total annual earnings. Some of those jobs are held by healthcare professionals, experts and
industry leaders who shared their thoughts and insights on healthcare in Arizona in a virtual roundtable with AZRE. While expertise and areas of interest vary among them, a common thread shared by all is the the goal to improve the quality of healthcare for the more than 5.6 million people in Arizona. They discuss the latest trends, shifts in market demands, the hottest submarkets and what to expect in the future. Panelists are, in alphabetical order:
SHEILA BALE, managing director, Newmark Grubb Knight Frank: Bale has 16 years of experience in the marketing, sales and leasing of office and medical space and has facilitated more than 400 office and healthcare real estate transactions and projects. TIM BRICKER, president and CEO, Chandler Regional and Mercy Gilbert Medical Centers: Bricker has more than 20 years of healthcare experience and most recently served as a consultant helping hospitals around the country develop strategies and improve their operations. KIP EDWARDS, vice president of development and construction, Banner Health: Edwards has more than 30 years of experience in the planning, design, construction, management, and operation/maintenance of healthcare facilities, which includes more than 22-million square feet of new construction and renovations for medical facilities, totaling in excess of $12 billion in project expenditures. PATTI GENTRY, Keyser Healthcare:
Gentry has more than 30 years of experience representing clients in all aspects of office and medical space.
SHARON HARPER, president, CEO and co-founder, Plaza Companies: Harper oversees all facets of company operations, including the ownership, development, leasing or management
of nearly 10 million square feet of Arizona medical office properties, senior living facilities and bioscience/ biotechnology centers.
JULIE JOHNSON, principal, Avison Young: Johnson has 25-plus years of experience in the healthcare real estate industry for both medical office and senior-living clients, including leasing, sales for investors and owner/users and site selection. AZRE: What are the “must haves” for any new, top-tier healthcare development?
EDWARDS: Flexibility to evolve as healthcare transforms. Today’s needs that match our current “sick care” system (get sick or injured, we cure you and send a bill) is evolving rapidly to true healthcare or population health management (pay a flat rate and we assume the risk for your health). Today, we may need to invest in hospitals and clinics to provide care. While we will still need these in the future, we will need much more to extend care to a population such as urgent care, walkin clinics, virtual appointments, etc. Therefore, the number one “must have” is flexibility to evolve today’s facilities to the future configuration and needs. BRICKER: An integrated healthcare
network that offers top-level services at convenient locations for our patients.
That is why we are expanding into additional services and locations, such as freestanding emergency departments, a new rehabilitation hospital and an increasing number of physician clinics. When considering these facilities, we take in mind flexibility of space for continued change and adaptation, creating a healing environment in which physical space contributes to the well-being of our patients, and infrastructure for fast data movement and connectivity.
HARPER: Successful top tier healthcare developments require that the delivery of healthcare is convenient and accessible to the patient. It must be positioned effectively, efficiently, and recognize the importance of the provider, the surrounding community and insurance plans. The healthcare industry is changing rapidly and will continue to do so, making it critical to continue to add innovations and take advantage of technology. BALE: The most important factor is location. It must be located near many residential houses, and near or adjacent to a major freeway or road. Many specialists will want to be within five miles of a hospital. Interest in leasing is much higher when doctors/providers know their patients can easily find them. JOHNSON: Technology – digital
radiology, electronic health records 33
MEDICAL BUILDING TRENDS
BIOSCIENCE BOOM: The City of Tempe is developing the city’s first biomedical and technology campus on 18 acres of Tempe land west of the Tempe Center for the Arts. The development team is made up of The Boyer Company, SmithGroupJJR and Okland Construction. When completed, the five-to eight-story buildings will total approximately 1 million square feet.
and many other electronic forms of communicating healthcare diagnostics and data take state-of-the-art technology in buildings and high parking ratios. Signage and visibility – these retail type factors play a large extent for a new Class A medical office development. Proximity to major transportation corridors – important so healthcare providers can offer care easily to patients in all parts of the valley and also is easier for their doctors/providers to travel from one facility to another.
GENTRY: Traditionally MOB’s (medical
office building) have consisted of clinical suites for private physicians, ranging in size from 1,000-20,000 square feet. The MOB’s of today are being designed in a larger footprint with more flexible exam spaces, so that multiple healthcare providers can utilize a single space, since many of the service lines are being delivered by these large groups in one location. Flexibility is the key to the financial success of future MOB’s. 36 | November-December 2016
AZRE: What are the biggest challenges to consider when developing new healthcare projects?
HARPER: Plaza Companies creates a
cohesive development and construction team that plans and designs buildings with a premium on flexibility in access, signage, entry points and parking. It cannot be underestimated the importance of getting all of these factors right. Expectations for preleasing are critical in most commercial office buildings, and that includes medical office buildings as well. It is more complicated for medical groups to commit 18-plus months out for new space. Medical practices also need the ability to be flexible and responsive to new federal regulations, insurance requirements and relationships with healthcare institutions.
EDWARDS: The facilities we need
to support healthcare today are not what we will need in the future. We need to continue to invest in today’s care to keep the enterprise going and
financially successful but also need to invest in the future needs. These don’t necessarily have a good payback today. This is taxing a shrinking capital pool and making project investment decisions very difficult.
JOHNSON: If not zoned correctly,
going through the rezoning and neighborhood “feedback”. No. 2, a developer with a new MOB typically needs to get the building 50-75 percent preleased before they can get financing to start construction. Many healthcare providers don’t want to commit their business by signing a lease when they don’t know when the threshold will be reached for construction to start and a firm occupancy date.
BALE: The biggest problem is what limitations exist that inhibits who you lease to. The pool of available physicians and service providers drops significantly when a developer builds on leased land from a hospital. Also typically they can only lease to physicians who are on staff at the local hospital. The ideal situation is on privately owned land halfway between two or three different hospital systems. Tenants will lease there because there are no restricted uses and providers can serve more than one hospital system too.
MEDICAL BUILDING TRENDS COMING TO ASU: McCarthy Building Companies recently broke ground on the new $120 million Biodesign C Research Building, the third building in ASU’s Biodesign Institute complex at Arizona State University. RENDERING COURTESY OF MCCARTHY BUILDINGS COMPANIES
GENTRY: Location is the biggest challenge to overcome when planning a new healthcare development. New MOB’s need to be located on or near hospital campuses, where the providers can benefit from proximity to multiple service lines, and perhaps more important, provide a consistent stream of referrals to the hospitals. Also of note, the other challenge today’s developers are facing is that, although financing for new developments has loosened up, most lenders will not finance a development that does not have significant tenant commitment of at least 50 percent. BRICKER: I think it is safe to say that
the biggest challenges are capital and the risk of unknown change in the market or industry. We are a not-for-profit organization and we don’t always have the funds we would like for expansion. That said, the care we provide at Dignity Health is outstanding.
AZRE: How have market demands and healthcare needs shifted and why?
BALE: The largest shift was in the last five years with the Affordable Care Act. The typical physician office of 2-3,000 square feet is now 5-7,000 square feet since the physicians either joined hospitals or they joined other groups of similar specialty so they can financially bear the burden and handle
the risk as a group. The overhead costs are shared among a larger group of physicians; hence the space is larger for the practices.
BRICKER: Many medical procedures
that once had to be undertaken in an acute care hospital are now conducted in outpatient facilities. This shift, along with a desire to make health care more convenient and demands for speed and easier access, has created the growth of new clinics, urgent cares and
other outpatient facilities. In addition to providing specialized inpatient care, we are also focusing on wellness and prevention, which leads to the creation of more outpatient medical settings.
EDWARDS: They have shifted dramatically. Technology, new drugs, and medical management have greatly reduced hospital stays (number and length). Reimbursement changes have also had a big impact, as there has been ongoing pressure for many years to lower the cost of healthcare (or reduce the rate of increase). As a result, there has been a continuous shift of care to the outpatient setting. The advances in technology, drugs, etc. have facilitated this. JOHNSON: There’s the shift towards
Source: SRS Phoenix 38 | November-December 2016
medical providers in retail malls/ centers. There’s a shift toward outpatient settings rather than
MEDICAL BUILDING TRENDS inpatient, which creates less expensive surgeries, more outpatient surgery centers and fewer hospital stays and the need for fewer hospital beds. There has been a lot of urgent care facilities popping up since Affordable Care Act (Obamacare) to guide ill but not critically ill patient there. Dignity has partnered with Adeptus Health, which has urgent care facilities and even small hospitals. Banner last month bought over 30 urgent care facilities.
GENTRY: Over the years, the market demands for healthcare have shifted 180 degrees, and this evolution continues on an almost daily basis. Considering the 2012 Supreme Court ruling on the ACA, and the certainty that millions of people now have some form of insurance, the healthcare climate is one that requires more medical care to be delivered, in a less expensive and more consistent manner. This pressure has empowered healthcare providers (and patients alike) to become more reliant upon technological innovations as an aspect of patient care, and shifting their practice models to “coach” patients back to a state of wellness by utilizing these tools.
FOLLOWING TRENDS: Plaza Companies’ Estrella Medical Plaza II, which will break ground this fall near the growing Banner Estrella Campus, will serve the evolving needs of the healthcare industry.
40 | November-December 2016
“We will need much more to extend care to a population such as urgent care, walk-in clinics, virtual appointments, etc.” - Kip Edwards
HARPER: The healthcare real estate
sector has been nothing short of dramatic in terms of change. The healthcare industry needs to factor in end users, innovation, vacancy and occupancy rates, affiliations, mergers, acquisitions, federal and legislative mandates, and pricing. There are abundant tail winds that are driving demand and dramatically and rapidly changing the healthcare industry, starting with the Affordable Care Act. Plus, healthcare innovations and technology are changing the very way care is provided to patients across the spectrum, as well as the real estate needs of physician groups and hospital groups.
AZRE: Where do you see the most
significant healthcare development in the Valley?
GENTRY: Healthcare development is currently taking place at a very active rate throughout the entire Valley. The largest healthcare providers are focused on capturing patients from all socio economic levels, despite the location of
the parent hospital campuses or parent networks. Large amounts of additional MOB space will be needed during the next decade to accommodate for increasing patient demand for health care, across all service lines.
BRICKER: The key hotspots are
locations within the East and West Valley, where there has been an abundance of population growth. In the East Valley we certainly have seen a significant expansion of healthcare, which includes our new freestanding ERs, our new rehabilitation hospital, a new cancer clinic and a number of new physician offices.
HARPER: We anticipate healthcare
being delivered in more of a “retail” setting, with more providers focusing on quick, efficient interactions with patients that allow for easy access to medical care. Developers of medical office properties must plan for this moving forward to ensure patients are receiving the kind of care they want. We also see accessibility to care as a major factor, and anticipate more development around hospital campuses
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MEDICAL BUILDING TRENDS
FUTURE OF CARE: Construction is underway on the 400 million Banner University Medical Center in Tucson. It will take the place of the current hospital that's nearly 50 years old. Banner Health is also spending another $100 million on a new outpatient clinic next door to University of Arizona Cancer Center. RENDERING COURTESY OF BANNER HEALTH
with freeway access and a broad variety of practices in the same setting.
BALE: The most significant medical office projects are in the West Valley now. Westgate Healthcare Campus is planning to build 230,000 SF of office adjacent to St. Joseph’s Westgate campus. Also coming out of the ground there is 60,000 SF of medical office as part of the St. Joseph’s Westgate campus. Also on the west side is a mixed-use project of retail and medical. Pre-leasing is going on for a 90,000 SF medical office building, Park 10 Medical Center, which will provide Class A office space for providers without restrictions on specialties and provide a new amenity for healthcare, signage on the electronic billboard along the I-10 freeway. JOHNSON: With medical being a
areas of greatest population growth, usually marked by homebuilding. The bulk of the development activity will be spread throughout the Valley as care facilities such as clinics, urgent care centers, and others are extended closer to the communities they serve.
AZRE: What should we keep an eye on
for the healthcare market over the next five years?
EDWARDS: There will be a continued decrease in demand for the small, private practice offices and a growing demand for larger clinic spaces, 20,000 SF and greater, that can accommodate group practices. BRICKER: Healthcare providers are
starting to focus on well care rather than sick care. As a result, I predict we’ll see more wellness, prevention and lifestyle management settings to keep people well and manage chronic disease.
service industry, it has grown with the population. It’s driven mostly by a gap where healthcare isn’t provided sufficiently based on demographics or providing community wellness care easily to residents in a community again focused on easy access, very visibly, creating branding and name recognition for the provider.
JOHNSON: With cost pressures to
EDWARDS: No one place in particular,
BALE: I think we will see a huge
although it will continue to grow in the
42 | November-December 2016
reduce healthcare costs any way to make it more efficient and still provide good quality care so the patient is kept well and happy. demand for physicians to be located in
Central Phoenix. With all the urban development for housing within the city, the needs for physicians will increase to level that the current practices will not be able to handle. People inside the urban core do not want to drive to the suburbs or go to the ER to see a doctor. These are all in the high traffic areas of Phoenix, Scottsdale, Tempe and Chandler.
HARPER: The industry will undoubtedly see more of a focus on collaboration over the next few years. Plaza Companies understands the distinctive advantages associated with strategic partnerships and collaborations, whether it is hospital system, municipality, a university or a large medical practice. GENTRY: Looking forward, healthcare
providers must keep an eye on quality of care when treating higher acuity cases and move the lower acuity cases out of the hospitals, into more cost effective ambulatory settings. A shift toward treating patients more commonly in an ambulatory setting coupled with increasing demand from the consumer (patients) will result in the need for large amounts of additional MOB space, as vacancy rates remain low and rental rates continue on a slow but steady increase. Medical space will continue to evolve to embody a more flexible concept, with larger floor plates, to combine primary care, specialty clinics, imaging, labs, social services, pharmacy, rehab and even ambulatory surgery, all under one efficient roof.
MEDICAL BUILDING TRENDS SENIOR LIVING: Weitz Company completed Encore on First Mesa, a 44,000-square-foot senior living community in June.
Putting the living back in senior living By DAVID MCGLOTHLIN
hether it’s a 92-year-old flying in a glider plane for the first time or built-in movie theatres and Starbucks, today’s senior living communities are putting the living back in senior living. Many of the same features showcased at the latest luxury multifamily developments like resortstyle pools, spas, upgraded common areas and things to do can be found at newer senior living communities too. Developers and senior living providers are planning and designing new projects with enhanced amenities, features and programs to lower to average age of entrance, which is currently 82 years old. “All these things are in an effort to try to attract a younger, active lifestyle that’s focused on wellness and doing fun things,” says Chris Harrison, executive vice president and general manager at Weitz Company. “Our providers are trying to deliver something that appeals to younger adults to get that entrance age down.” He oversees the company’s national senior living and housing product line and builds projects from $4-55 million in value for senior living providers like Sun
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Health Senior Living, the largest locallyowned and operated nonprofit provider of retirement communities in Arizona. Joe La Rue, executive vice president of Sun Health Senior Living, says creating social, physical, intellectual and spiritual activities are the cornerstones for healthy living. For instance, at Grandview Terrance, located in Sun City West, he tells a story about its bucket list program, which helped a 92-year-old gentleman’s dream to fly in a glider for the first time become a reality. In addition to entertaining things to do, seniors also want to age in place, says La Rue. He tries to take away the angst, emotion and anxiety sometimes caused by transitions to a community. One way is by offering residents customizable floorplans and finishes so new residents can replicate their old homes whether it’s the same refrigerator, floors Chris Harrison
and Lazy-boy recliner chair. In addition, more Continuing Care Retirement Communities are building facilities to provide every level of care in one community from assisted or independent living to memory care. Julie Johnson, principal at Avison Young with 25-years of experience representing senior-living clients, points to Maravilla in Scottsdale as an example of a top-tier luxury retirement community. She says the tour she took of the community reminded her of a Four Seasons resort. “Someone who moves there doesn’t need to move again because it provides every service they will ever need,” she adds. Residents are able to increase their level of care and service based on the need. Facilities also remove the burdens of playing multiple utility bills as well as house and landscape maintenance. “People say after they move in, ‘we are so much more in charge of our lives. Now all we have to focus in on is living our lives to the fullest,'" explains La Rue. New senior living communities aren’t the stereotypical 400-squarefoot cracker box with terrazzo floors and only shuffleboard and puzzle for entertainment. “Baby boomers see how attractive the lock-and-leave lifestyle and the amenities these new complexes offer to residents and they want that too,” says Johnson. “Baby Boomers demands in the apartment market are carrying over to senior CCRC.” Reports estimate about 10,000 Baby Boomers will be retiring every day between now and 2030.
Joe La Rue
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Building better learning environments Higher education facilities take construction to a new grade level
he design and construction of projects at universities play a critical role in improving learning and teaching environments. Arizona universities are raising the bar for higher education environments with more creative architectural designs and collaborative areas that incorporate new technologies and sustainability features. Newer projects show an increased emphasis on interactivity and creating collaborative environments for academic and social reasons, inside and outside of the classroom. Designs behind new collaborative areas make it easier for students and teachers to connect, while new technologies and learning options empower students to utilize what works best for them. From the state’s largest university — Arizona State University — to the upand-coming Grand Canyon University, campuses across the state are creating living and learning communities that immerse and engage students in their fields of study. The goal is to prepare students with the needed tools, knowledge and critical thinking skills it takes to to be successful in the real world. ASU spans five campuses in Arizona serving 72,000 students, making it the largest university in terms of student population in the country. The second largest in the state is the University of Arizona in Tucson, followed by Northern Arizona University in Flagstaff. The newest name in the mix is GCU, which has seen tremendous growth and development. In the last six years,
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By DAVID MCGLOTHLIN
GCU has gone from 900 students on 95 acres to 17,500 students on a 300acre campus. Regardless of where your allegiance lies, new and planned projects on these campuses share a common goal: to help students understand and navigate the real world and business world related to their field of study.
ARIZONA STATE UNIVERSITY In addition to state-of-the-art buildings and facilities, the learning environments at ASU are ever evolving to ensure students are equipped with the skills necessary for success upon graduation.
“Adaptive learning courses redesign traditional courses to deliver content digitally and to promote interactive learning,” says Dr. Arthur Blakemore, ASU vice provost. “The goal of adaptive learning classes and classrooms is to promote critical thinking and problem solving, skills essential in the current job market.” At ASU, students can customize their educational experience, which includes more than 300 undergraduate programs, multiple interdisciplinary study options
and limitless ways to learn. New residential halls continue to go up on campus, with the next one slated for completion by the fall of 2017 in Tempe, which will house 1,600 students enrolled at the Ira A. Fulton School of Engineering. The facility will also feature the campus’ fifth “eSpace,” a 3,500-squarefoot lab outfitted with high-end computers, engineering applications and writable glass panels, all designed to encourage collaboration. Enhanced learning environments such as the Ira A. Fulton School of Engineering’s Generator Labs help students advance their entrepreneurial ideas through innovation courses, workshops and expert mentoring. In Downtown Phoenix, the Beus Center of Law and Society is home to the Sandra Day O’Connor College of Law, which occupies the third through six floors. The bottom two floors are occupied by various organizations in the legal industry to
enhance educational and mentorship opportunities in a real world setting. The building’s design incorporates state-of-the-art technology like a new mobile app that helps students conveniently form and join groups, view and attend events, access realtime news aligned with their interests, book meeting space and connect with others in the building. The $129 million project includes 17 classrooms designed in different styles and sizes from a general university classroom on the bottom floor for up to 250 people to smaller classrooms that can hold 70, 50, 25 or fewer students. Next fall, ASU will open its first net zero building on campus, which will utilize no more energy annually than can be produced on site. The new Student Pavilion will house ASU’s undergraduate student government, student activity board and student coalitions, and will have classroom and event spaces.
ASU: The Student Pavillion will be the first net zero building on any of the ASU campuses, and will only operate on the energy produced on-site.
EDUCATION DEVELOPMENT UA: The 100,000-squarefoot Bioscience Research Laboratories building will support interdisciplinary research in many health science disciplines.
UNIVERSITY OF ARIZONA The University of Arizona opened its doors in 1891 with one building known as Old Main that was still under construction at the time. Only 32 students were enrolled at UA when it opened, but since has grown to include a total of 211 buildings on its main campus that serve 43,000 students with 800 more added annually. “Part of meeting the need of a growing student population is the mission to renovate existing buildings and construct new facilities,” says Peter Dourlein, assistant vice president of planning, design and construction at UA. In 2014, UA completed a $13.5 million project to restore the historical character of UA’s first original building – Old Main. It also earned LEED silver certification from the U.S. Green Building Council, making the 123-yearold building the oldest in Arizona to ever receive the certification. With buildings that have 100-plusyear lifespans, Dourlein explains,
energy efficiency and sustainability design features really add up for tremendous long-term savings. “Projects focus a lot on energy and sustainability,” he says. “It might cost a little bit more up front but it pays itself back quickly.” UA has three buildings with LEED platinum certification — the most prestigious Leadership in Energy and Environmental Design level — including the Environment and Natural Resources 2 building, which was completed last September. In addition to eco-friendly designs, Dourlein says, most new projects are designed to facilitate a multidisciplinary environment that
creates synergy and collaboration. The state-of-the-art clinical labs at the Health Sciences Innovation Building facilitates programs and technology like robotic mannequins to simulate real-life emergency room situations as a way to provide hands-on learning and teaching opportunities. Dourlein says the goal is to provide students with practical hands-on experience to help them be employable.
NORTHERN ARIZONA UNIVERSITY Founded in 1899, NAU’s campus in Flagstaff spans 740 acres, consists of 118 buildings and includes more than 22,000 students. Projects focus on energy efficiency, maintainability and universal design, says Agnes Drogi, director of planning, design and construction at NAU. This year, NAU expanded its 100,000-square-foot Student and Academic Services Building, which is a one-stop shop for students and visitors with student support, admissions and a multifaceted academic center. It recently opened its latest addition, the Lumberjack Mathematics Center, which consists of classrooms, group study rooms, testing and tutoring space. Drogi says, “The environment is more open in an effort to enhance student/professor interactions and
NAU: The Student and Academic Services building opened in 2016 and houses the new Lumberjack Mathematics Center, faculty offices and a 154-seat auditorium. 48 | November-December 2016
GCU: The College of Science, Engineering and Technology building is expected to be fully operational by January 2017.
promote collaboration in both lecture and informal settings.” On the third and fourth floors of the Student and Academic Services Building, there are offices for faculty and staff along with lab space for social science research. The building also devotes four floors to general chemistry labs and lecture halls, offices, interactive spaces and more labs for research. Drogi says students also have the opportunity to gather for academic and social reasons at “touchdown” spaces scattered across campus, which are designed with more circulation space that encourages interaction between students and faculty. She adds, “Students feel a sense of belonging when they are on campus and our goal is to create a positive environment for them to learn and enjoy.”
being spent over the next four years. “What we set out to do is to invest this money into this location in order for it to be an economic stimulus that could create the momentum to turn this into a middle-class community again,” he explains. The plan is working. Home values in the neighborhood have risen 40 percent in some parts. At GCU, the campus has tripled its size to include 300 acres with 17,500 students using its facilities on a daily basis. “Seventy percent of students on campus study in science, technology, engineering, math or business,” says Mueller, which prompted GCU to build a 170,000-square-foot College of Science, Engineering and Technology building. Currently still under construction, it will facilitate the latest in learning and teaching techniques for students in
STEM programs. In addition to learning environments, Mueller says, “GCU also tries to teach students entrepreneurial skills by giving them opportunities in programs like the Grand Canyon Beverage Company.” GCBC opened its first coffee shop on campus with two more locations planned, including one off-campus site. The stores are student-run and managed by GCU alumni. Other entrepreneurial opportunities facilitated on campus include Canyon Promotions, which will create and sell GCU merchandise and apparel. Mueller says, “GCU is proof of what could happen when you invest in a community and create partnerships in conjunction with how a rapidly expanding university can transform an area.”
GRAND CANYON UNIVERSITY In a 10-year timespan, GCU President Brian Mueller, says the university will have invested approximately $1 billion in educational infrastructure, with $400 million 50 | November-December 2016
AMERICAN INSTITUTE OF ARCHITECTS ARIZONA
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The American Institute of Architects
Arizona Design Awards 2016
ach year at the AIA Design Award Gala, the American Institute of Architects Arizona recognizes excellence in design, planning and construction of project's across the globe that are designed by AIA Arizona architects. The program recognizes excellence in architectural projects and practices under five categories: design, leadership, practice, performance and education. Each entry is individually judged regardless of size or classification and
the awards are given three categories of distinction: honor, merit, and citation (in order of importance). These winners represent the highest standards of design in response to user requirements, site, context, climate and environment as well as nurturing new values and activities that contribute to design and design appreciation. Awards for this year’s winners were presented at the 2016 AIA Arizona Design Awards Gala on Oct. 14 at the Phoenix Art Museum.
SALT RIVER PROJECT: SUSTAINABLE AWARD College Avenue Commons
Architect: Gensler | Architekton Owner: Arizona State University Contractor: Okland Construction
ARIZONA PUBLIC SERVICE ENERGY AWARD Northern Arizona University
International Pavillion Architect: RSP Architects Owner: Northern Arizona University Contractor: Kinney Construction Services, Inc. 53
COMPONENT DESIGN AWARD CITATION AWARD
Shade Structure @ the Post Office Architect: Architekton Owner: City of Phoenix Contractor: ForeSite Design & Construction
COMPONENT DESIGN AWARD CITATION AWARD Bryant Bannister Tree Ring
Laboratory Architect: richard+bauer architecture Owner: The University of Arizona Contractor: Lang Wyatt
COMPONENT DESIGN AWARD HONOR AWARD
Rosen Entry Door Architect: Chen + Suchart Studio Owner: Josh & Margaux Rosen Contractor: studioRoeder + 180 degrees
INTERIOR ARCHITECTURE - MERIT AWARD
NYPD Tempe Gateway Architect: Lightvox Studio Owner: New York Pizza Department Contractor: Symmetry Construction
INTERIOR ARCHITECTURE - MERIT AWARD the DEPARTMENT
Architect: MARK RYAN STUDIO Owner: MarketplaceONE Contractor: 180 degrees
INTERIOR ARCHITECTURE - MERIT AWARD
Ermanos Craft Beer and Wine Bar Architect: Rob Paulus Architects Owner: Mark Erman Contractor: McManus Construction
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UNBUILT AWARD - MERIT AWARD Desert Botanical Garden
Horticulture Center Architect: coLAB studio + 180 degrees Owner: Desert Botanical Gardens Contractor: coLAB studio + 180 degrees
DISTINGUISHED BUILDING - CITATION AWARD
Monte Vista School Campus Replacement Architect: Orcutt | Winslow Owner: Creighton School District Contractor: CORE Construction
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DISTINGUISHED BUILDING - CITATION AWARD Cornell Cookson Industrial Door
Manufacturing and Offices Architect: Jones Studio, Inc. Owner: Cornell Cookson Contractor: Layton Construction
DISTINGUISHED BUILDING - CITATION AWARD
Sciences & Health Building Architect: GLHN joint venture with richard+bauer architecture Owner: Northern Arizona University Contractor: Mortensen
DISTINGUISHED BUILDING - MERIT AWARD Vertex Student Apartments
Architect: Ayers Saint Gross Owner: Peak Campus Contractor: hardison/downey construction
DISTINGUISHED BUILDING - MERIT AWARD Faye Gray Recreation Center
Architect: Holly Street Studio Owner: City of Phoenix Parks and Recreation Department Contractor: Brycon Construction, Valley Rain Construction
DISTINGUISHED BUILDING - MERIT AWARD
Billings Public Library Architect: Will Bruder+Partners with o2 Architects Owner: City of Billings Montana
DISTINGUISHED BUILDING - HONOR AWARD Redemption Arcadia
Architect: DeBartolo Architects Owner: Redemption Church Contractor: Robert E. Porter Contruction
DISTINGUISHED BUILDING - HONOR AWARD Escobar Renovation
Architect: Chen + Suchart Studio Owner: Kari & Charlie Escobar Contractor: Verge design:build
LEADERSHIP AWARDS ARIZONA ARCHITECTS MEDAL
Diane Reicher Jacobs, AIA CN Dino Sakellar, AIA
FIRM OF THE YEAR
Studio Ma, Inc.
AWARD OF DISTINCTION Alexander Malatesta Zach Rawling
ALLIED AWARD Greg Kilroy
CONTRACTOR AWARD 180 degrees
CONSULTANT AWARD Floor Associates
Grand Canyon University Masterplan Architect: suoLL architects Owner: Grand Canyon University Contractor: Pono Construction
Mike Anglin, AIA, LEED AP
Carlos Murrieta, AIA 58 | November-December 2016
Michael Kothke, AIA
University of Arizona Net Zero Energy + Water District
University of Arizona ARC321 | Materials & Methods II
University of Arizona ARC401 | Design Studio V
COMMUNITY EDUCATION Arizona Residential Architects
COMMUNITY EDUCATION Arizona Kids Build
Northern designs Buildings balance sustainability and historical preservation
ill Otwell, an Arizona native, born and raised in Phoenix, moved to Prescott in 1973 and began his career working for a local architect after graduating from Arizona State University with an architecture degree. He still works and lives in Prescott where he’s the principal of Otwell Associates Architects, a firm specializing in historic preservation, solar and energy efficient design and preservation of natural site features. “An understanding of local climate is important for occupant comfort and energy efficient performance,” he says. “Just as important is the long term effect the climate will have on the fabric of the building.” He’s most well known for integrating sustainability features into Bill Otwell historical preservation projects such as the Milagro Arts Center project that he completed in 2015. Originally a church built in 1935, the new arts center maintains its historic look and features like grid-tied photovoltaic panels, water harvesting techniques, daylighting and heat recovery from exhaust hoods.
AS AN ARIZONA NATIVE, WHAT DIFFERENCES DO YOU SEE IN ARCHITECTURE TRENDS/ DEMANDS BETWEEN THE VALLEY AND NORTHERN AZ? In Northern Arizona, we have local access to most materials used by Southern Arizona architects. Our main differences are climatic factors. Most of our sites have more of a heating load than a cooling load, and 60 | November-December 2016
OTWELL PROJECT: The Sam Hill Warehouse, built in 1903, was turned into a gallery for Prescott College.
higher elevations incur more intense UV radiation. So I like to use exterior materials that can reflect or absorb that radiation without suffering damage. Freeze protection, super insulation, thermal mass and maximum winter solar input are all top priorities.
HOW ARE YOU INTEGRATING SUSTAINABILITY FEATURES TO IMPROVE THINGS LIKE ENERGY EFFICIENCY? My first project was a passive solar home that Mike Frerking and I [both ASU architecture graduates, class of ‘73], designed and built using on-site adobe, a recycled billboard for timber, metal roof and a recycled greenhouse for heat. That was 1975. Today, I am still using adobe and many high tech solutions including photovoltaic systems, heat recovery from building exhaust, and CO2 based HVAC controls that turn systems off when people leave the building. Daylighting solutions have radically improved, and water harvesting is part of most projects.
WHAT MUST YOU CONSIDER DURING HISTORICAL PRESERVATION OR BUILDING RENOVATIONS PROJECTS? Historic preservation is an ongoing effort in Prescott. We have restored most of the significant downtown buildings and they are very popular for a wide variety of uses. Bringing them up to code, ADA, etc. is always a challenge. The other big challenge is new additions or interior modifications. These we design to be compatible with the old yet obviously new, and reversible without damaging the original historic fabric.
DO YOU SEE A CONNECTION BETWEEN SUSTAINABILITY AND HISTORICAL PRESERVATION? Rehabilitation of historic properties is turning out to be one of the best approaches to sustainable design. The “embodied” energy of historic buildings is saved when they are reused. Increased thermal performance with upgraded glazing and insulation can allow for similar performance and energy savings compared to new construction.
ARIZONA ASSOCIATION FOR ECONOMIC DEVELOPMENT
Many hands make light work Joint efforts help create and capitalize on economic development opportunities By DAVID MCGLOTHLIN
hen a company relocates to a region, it creates a lot of benefits that spin off to the entire broader region, county and
state as a whole. Mayors, city officials, economic development teams and groups are working together to facilitate more economic development opportunities throughout the state by finding the
Eric Anderson 62 | November-December 2016
right locations that best serve the needs for new businesses. “A lot of things make the economy tick,” says Jim Rounds, president of Rounds Consulting Group. “We are doing a great job of storytelling on the marketing side — on the front end — with why Arizona is a great state to do business in.” Arizona is largely considered a business-friendly environment with favorable tax rates, regulatory policies and operating costs. Areas like Foreign Trade Zones create significant tax advantages for companies serving international markets. Cheap land and energy aids in delivering the needed transportation and utility infrastructure for businesses and more economic development. Throughout his career, Rounds has delivered hundreds
“We are doing a great job of storytelling on the marketing side — on the front end — with why Arizona is a great state to do business in.” – Jim Rounds of presentations to policymakers, government officials and public and private business leaders in metro and rural communities across the state about economic development and public policy. But economic development is not a one-size-fits-all model. Some communities are still better suited to meet the needs of a particular company based on its industry or the market it serves. Rounds says overall, Arizona is doing a terrific job in working together to market the advantages it provides businesses to niche industries. Once economic developers understand the economic data and dynamics within a community, then they can leverage the surrounding assets to attract companies to the area and advance the community.
AEROSPACE AND DEFENSE For instance, Arizona has established itself as a hot spot for the aerospace and defense industry, which is home to 1,200 companies, including Raytheon, Honeywell, Boeing and
Lockheed Martin. According to the Arizona Commerce Authority, A&D contributes 5.91 percent to Arizona’s gross domestic product, the third-largest contribution by any state in the nation. Mignonne Hollis, the executive director of the Arizona Regional Economic Development Foundation in Sierra Vista, says this region doesn’t have as much air traffic as larger metro areas, making it an excellent climate for flying and testing. That makes sense that the country’s largest provider of guided missiles, Raytheon, which has a major presence in Southern Arizona. “Each community needs to figure out what data is relevant to them, how to tell their story,” says Rounds. “It’s not rocket science, but you need people working on solutions for economic development issues without egos and with collaboration.”
COLLABORATION John Lewis, former mayor of Gilbert and current president and CEO of East Valley Partnership, points to
Downtown Gilbert and Heritage Marketplace as a great success story of public/private partnerships that created a thriving mixed-use development with retail, restaurants, bars and entertainment options. Although Heritage Marketplace seems like an overnight success story, it was actually 30 years in the making, Lewis says. During his tenure as mayor, Lewis says he learned, “The best way to sell my local community was to sell Arizona, sell Greater Phoenix, sell my sub-region, then I can sell my own municipality." In the West Valley, a Foreign Trade Zone helps make the region attractive for manufacturing and distribution centers with high volumes of imports and exports because of FTZ tax advantages and the region's close proximity to California. The recently completed Loop 303 feeway allows truck drivers going to and from industrial facilities in the area — like REI Distribution and Dicks Sporting Goods — to travel to the ports and markets in California in less than a day to deliver supplies and products. On the opposite side of town, Mesa is establishing itself as a hot market for data centers and high-energy-use companies. One reason is because Easy Valley employment corridors like the Elliot Road Technology Corridor in Mesa were designed with the needed infrastructure to facilitate at least one data center. With thousands of acres of shovel-ready sites and a streamlined
Jim Rounds 63
Roosevelt Dam, PHOTO COURTESY: SRP
entitlement process, the area was able to land Apple’s new 1.2-million-squarefoot “Global Command Center,” which is prompting more technology and data firms to consider the corridor. Lewis says the Apple facility required the Salt River Project, City of Mesa and local leaders to quickly meet the company's requested needs before it would commit to the site. In most cases, the building blocks of all businesses start with reliable water, energy and infrastructure, which are at the top of site selectors’ priority lists. If everybody continues to leave their egos at the door and they want to work together, Rounds thinks Arizona will continue to advance the state’s position that directly impacts development, commercial real estate, job growth and the economy.
WATER Deserts are known for their scarcity of water, which is why efficient management and regulation of Arizona water supplies and usage were implemented early on to ensure the viability of the region. For Arizona, water is and always will be an important issue. Continued 64 | November-December 2016
forward thinking, smart policies and partnerships on new projects to better utilize and save water supplies remain critical in the development of the state. “Nearly all economic activity relies on the ability of some amount of water and water infrastructure,” says Gretchen Kitchel, economic development analyst at SRP. Efforts to properly manage the state’s water supply started in 1903 when SRP — known then as the Salt River Valley Water Users’ Association — led the financing, building and operation of one of the first federal reclamation projects in the nation — the Theodore Roosevelt Dam, which was completed in 1911. Today, SRP’s water management networks consist of 13,000-squaremiles of Salt River and Verde River watershed, more than 250 groundwater wells and seven dams and reservoirs to service a 2,900-square-mile area with electric and water. Christa McJunkin, director of water rights and contracts at SRP, says, “The dependable water supplies — Salt and Verde rivers’ water and groundwater — managed by SRP on behalf of our customers facilitated the development
of the Valley of the Sun.” She says Arizona uses less water today than it did in 1957. This is partially attributable to collaboration between different cities and officials to fund and construct new facilities to more effectively manage and treat water for portable and nonportable uses like irrigation. Lewis remembers several occasions where he partnered with officials from the cities of Mesa, Gilbert, Queen Creek and Chandler to build new water treatment facilities. He says in 2009, during his first year as mayor of Gilbert, he worked with Chandler to build a water facility that saved both cities $10 million in up-front costs and $800,000 in yearly maintenance costs. In addition to Arizona’s cutting-edge water management infrastructure, Arizona has always been on the forefront of effectively managing its water supplies to ensure the region’s future. The 1980 Groundwater Management Act created Active Management Areas with policies to regulate usage in urban areas. One policy requires AMAs to prove there’s a 100-year renewable water
supply before homes can be sold or built, which was the first regulatory measure of its kind and has since been replicated in other states. “The combination of advance planning, investment in resources and infrastructure, with careful regulation, sets Arizona apart,” McJunkin says.
ENERGY Businesses can’t operate if employees can’t turn the lights on. An added bonus is that in Arizona, energy is bountiful and affordable. Arizona public utilities cost substantially less per kilowatt hour than other western states, according to the U.S. Energy Information Association. It helps having assets like the Palo Verde Nuclear Generating Station, the largest nuclear power plant and second-largest power plant of any kind in the U.S. The story to watch in Arizona as it pertains to energy is in renewable energy, particularly solar. In a state where it’s sunny 300-days per year, Arizona is uniquely positioned to take advantage of the emerging solar energy market. In 2014, Arizona ranked second in the nation in utility-scale electricity generation from solar energy. Plans are to meet 20 percent of retail demand through renewable energy by 2020. If Arizona can capitalize on the solar supply chain and green-technology sectors, it can become the hot spot for solar component manufactures and solar company headquarters. Similar to the aerospace and defense sector, the solar energy industry is positioned to take advantage of the resources readily available — like affordable land and plenty of sun.
INFRASTRUCTURE Without the proper infrastructure, the efficient delivery of water, energy, goods and services would not be possible. The services that infrastructure needs to support are largely dictated by the consumers’ needs — whether it’s for residential, commercial or economic development. 66 | November-December 2016
APS Hyder II Solar Plant
Looking at transportation infrastructure, Arizona has recently shown great strides in infrastructure investments to support economic development in its freeways and railways. The completion of the Loop 303 in the West Valley created a new employment and transportation corridor, known as PV303, spurring multiple big box industrial built-to-suit projects, with more planned in the future. The Arizona Department of Transportation also recently started the Loop 202 expansion to alleviate traffic congestion in Metro Phoenix and stay ahead of growing demands. There’s even talk about turning State Route 30 into a toll road, which runs parallel to I-10 just north of South Mountain. “It’s necessary to have good access
to transportation to be successful in real estate development, but it’s not sufficient,” says Eric Anderson, transportation director for the Maricopa Association of Governments. “You have to have other things in place, too. You have to have some other positive economic influences in the area as well.” Things like the light rail system to create convenient access to urban areas and things to do are needed, he says. Areas along light rail routes have experienced a lot of economic and commercial development opportunities, including mixed-use, retail and multifamily projects. “In Downtown Phoenix, there has been a radical transformation in terms of the revitalization of Downtown,” says Anderson. “Light rail played a big part of that.”
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AAED BORDER For the last 50-years and counting, the Arizona-Mexico Commission has promoted cross-border dialogue in economic development, real estate, infrastructure and more, representing statewide interests. Its unified voice helped secure federal funding to improve infrastructure at ports of entry in border communities like Nogales, Douglas and Mariposa. An investment to improve infrastructure for land ports of entry along the Mexico-Arizona border is helping drive economic development activity in Southern Arizona. Victor Gonzalez, economic development manager for Sahuarita, which is located about 50 miles north of the border on Interstate 19, says it’s been tremendous to see the activity following the expansion of ports like the Mariposa Port of Entry. “It really has increased the region’s competitiveness and as a result attracted more investment in the form of warehouses being built to be able to accommodate that flow of goods and services,” he adds. In total, about 85 percent of goods CenturyLink servers
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manufactured in Mexico cross the border into U.S. markets. These warehouses along I-19 serve as a clearinghouse for the storage of raw material and finished products. “You have the manufacturing facility on the Mexico side and distribution of that on the U.S. side,” Gonzalez explains. Before the Mariposa Port was expanded, inspection times ranged from 8-12 hours and 48 hours during peak season,” he adds. Today, he sees trucks cross in a couple hours. Gonzalez attributes the creation of more economic development opportunities between Arizona and Mexico through the leadership of Gov. Doug Ducey. He says his business background is helping promote the state as a tourist destination and good market for business.
DATA In the digital world, data and broadband connection are essential to managing and coordinating the operations of a business. The first thing a business or organization needs is access to the speed that fits their needs and budget, says Guy Gunther, CenturyLink vice
president of operations for Arizona. CenturyLink provides services over more than 250,000-route-miles of fiber network across the U.S., offering customers a wide range of IT services and solutions, including network, managed hosting, managed services, colocation and cloud services. “At CenturyLink, we know that one size does not fit all,” Gunther says, which is why data services are sized and priced to meet a customer’s needs, from small-sized businesses to global enterprises requiring 10G services. In October, CenturyLink expanded those services by making fiber-ready broadcast speeds up to one gigabyte per second available to 14,000 multitenant units in more than 600 cities, which included Phoenix and Tucson. According to the Ookla Net Index, Internet speeds and mobile networks in Phoenix are among the fastest in the country. “Businesses that are interested in expanding or relocating to this area want to focus on their core business, not figuring out IT-related issues,” says Gunther. “So we have dedicated significant capital in our metro markets to enable a more complete solution.”
Recipe for success The tools and strategies behind economic development By DAVID MCGLOTHLIN
oday, it takes more than simply having the needed tools to support economic development like land, labor and existing building stock. How a state, region and city are able to market and leverage those assets separates it from other competing markets as a good place to relocate. Bill Honsaker, managing director for JLL Phoenix, has 25 years of
Marina Heights 70 | November-December 2016
experience representing users and investors in lease and sale transactions for various product types. He says while it’s important to have the resources and tools — whether it’s the land, buildings or incentive offerings — it’s also about having the data that gives the economic development personnel the ability to be competitive. “If a marketplace can show and prove it has the offerings that a client is looking for, then it puts us in a
great position to compete and win,” he explains. “Today, clients are looking for amenities — walkability, live/work/ play — but a lot of that is dependent on that nature of the industry.” “A number of these users are coming from the Bay Area, Silicon Valley or otherwise,” he says, “They are used to having walkability, amenities, unique lifestyle options, eateries, bars and entertainment and near a light rail.” Groups like the Arizona Association of Economic Development serve as a unified voice advocating for responsible economic development through a robust programming of professional education, advocacy and collaboration. Honsaker says groups like Arizona Commerce Authority and Greater Phoenix Economic Council compile a tremendous amount of information that acts as a wonderful tool in garnering the interest of companies that are considering to relocate and build in a new marketplace.
While AAED provides the training where professionals hone their data gathering skills for success. “We have all the right elements,” says Greg Vogel, CEO and founder of Land Advisors Organization. “We just need to put all the pieces of the puzzle together and market the region.” Since the company opened in 1987, Vogel has become a trusted advisor throughout the state by applying his unique knowledge in the areas of land economics, land use and market trends. “We have our lifestyle, affordable housing, ample land, close to California, infrastructure investments,’ he explains, “but we don’t have the big hammer,” which is the ability to offer major monetary incentives like the Dallas or Austin markets. Instead, economic development
teams research and evaluate what communities are better suited to meet a company’s needed capacity and services based on the assets and services best provided in the area for that type of industry. “The best pro-growth communities are fast-tracking the permitting processes,” Vogel says, which Arizona is doing well as a result of the ongoing collaboration among all levels. Whether it’s building permits, helping with the hiring process, financial incentives or foreign trade zones, Arizona runs the gamut. Aside from the numbers and overall costs to operate in the market, companies also look for an urban area, walkability, amenities and things to do as a means to help it attract and retain a qualified workforce. In the office market, Honsaker sees a lot more corporate campus activity. He says employers are interested in starting with one building and having a campus environment to expand and grow as needs dictate. For instance, State Farm Insurance chose a 20-acre site on Tempe Town Lake to build Marina Heights, a 2-million-square-foot mixed-use project valued at $600 million. Since construction started in 2013, four of the five office builds are
completed, with the last building slated for completion in early 2017. Marina Heights currently employees thousands of people between State Farm, retail tenants and restaurants. In addition, the campus will add two new healthcare and wellness amenities by 2017, with an HonorHealth medical clinic and Mountainside Fitness facility joining the campus. Honsaker says other companies — like technology and innovation firms — are looking for offices that create an artsy, creative and collaborative environment. Certain neighborhoods like Downtown Phoenix, South Scottsdale and Tempe Town Lake are better tailored to provide that environment. In Downtown Phoenix, the creation of the light rail transformed the area from an eight-hour economy to an 18-hour economy, where people live, work and play, which spurred job and housing growth. Vogel attributes some of the state’s recent success in creating more jobs to Gov. Doug Ducey’s leadership. “Gov. Ducey is using his business acumen to be proactive in working to bring jobs to our state,” says Vogel. He adds the areas our state could improve are tax rates, infrastructure financing and lower impact fees to increase economic development.
The northern stars Collaboration and innovation drive development in Flagstaff and surrounding areas By DAVID MCGLOTHLIN
IMAGE COURTESY nasa.gov
orthern Arizona may not have the same towering skylines or network of commuter trains as Metro Phoenix or Tucson, but the Economic Collaborative of Northern Arizona doesn’t want companies to be fooled by its laid-back demeanor. ECNoA, an economic development organization supported by 16 regional agencies in Northern Arizona, works collaboratively across public and private sectors to cultivate economic growth through leveraging regional economic development resources. The organization markets the region as an inspirational live/work/ play environment with more rapidly emerging opportunities through innovation and entrepreneurism. “The largest factors in a company deciding to locate in Northern Arizona include workforce, infrastructure, education and quality of life,” explains Richard Bowen, president of ECNoA. All of those factors are essential to
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Northern Arizona’s biggest industries: tourism, education, bioscience, healthcare, software/digital products and advanced manufacturing, he says. The region’s lush forests, majestic mountains and winter recreational activities attract lots of tourists. These qualities are some of the reasons why students choose to attend Northern Arizona University in Flagstaff, which generates $2 billion in annual economic impact. Bowen says more bioscience companies are relocating to Flagstaff because of NAU’s growing bioscience, genetics and genomics research portfolio. Those companies include W.L. Gore & Associates, Inc., a large medical products manufacturer with more than 2,200 employees. Other hot spots for industrial development include Kingman, Winslow and Prescott, which have affordable sites ready for development with easy access to major shipping
routes on the Interstate-17 and Interstate-40. It takes less than a day for truck drivers to reach markets in major population hubs such as Los Angeles, Denver, Albuquerque, Richard Bowen Phoenix, Tucson, Las Vegas and Salt Lake City. Bowen says digital products and software development companies are also attracted to Northern Arizona from Los Angeles and Silicon Valley. Overall, Bowen attributes the progression of the region as being a byproduct of its public and private partnerships. “Communities in Northern Arizona have been very collaborative in economic development rather than competitive,” he says.
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Policy Impact Dinner Celebrating Policies, Best Practices, and Champions of Economic Development
Tuesday, January 17, 2017 * 5:30 - 7:30p.m.
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SKY’S THE LIMIT Southern Arizona takes advantage of geography, aerospace and defense pedigree to grow economy By DAVID MCGLOTHLIN
outhern Arizona’s close proximity to Mexico makes it unique in its ability to generate additional economic development opportunities by tapping into another country’s market. Tucson Regional Economic Opportunities was formed in 2005 as the area’s main economic development entity. TREO changed its name to Sun Corridor Inc. in May 2015 and expanded its footprint to serve all border counties. Joe Snell, president and CEO of Sun Corridor Inc., says the economic development organization also recently opened an office in Mexico City, which gives it bi-national status as it explores business opportunities with Mexico. Southern Arizona’s largest industries remain aerospace and defense, biotech and healthcare. “It’s been a journey the last 10 years, learning from the wins and losses,” Snell says. A wake-up call came a few years ago when Tucson lost an opportunity to create 400 jobs after Raytheon Missile Systems chose to open a new facility in Huntsville, Ala. Snell quickly learned the reason after seeing the company’s new facility at the Cumming Research Park, which is the second-largest research park in the United States and fourth-largest
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globally, spanning across 3,843 acres. It was built using federal, state and local partnerships to properly plan, zone, incentivize and develop the area to land the deal with Joe Snell Raytheon. Snell says by studying Cumming Park and other successful business parks, Sun Corridor Inc. started working more closely with the city and county to create the Sonoran Corridor, a 50-square-miles business park near the Tucson International Airport. The Sonoran Corridor is home to some of Pima County’s largest employers, such as Raytheon, Davis-Monthan Air Force Base, the University of Arizona Tech Park and other suppliers and vendors within the aerospace and defense industry. This region has the fifth-highest concentration of A&D workers in the entire U.S. and is home to 200 A&D firms. The largest company is Raytheon Missile Systems, employing between 12,000 and 15,000 people. Snell says, “We have gotten a lot better in the way we are operating and it has paid off.”
Regional collaboration aided in Caterpillar Surface Mining’s decision to relocate its headquarters from Milwaukee to Downtown Tucson. The 250,000-square-foot corporate office will employ 1,000 people at its location west of downtown, which is a first for the area. “This wouldn’t be possible 10 years ago,” says Snell. He notes the public invested more than $40 million in the project, which is projected to generate an economic return and impact of more than $2 billion in the next 10 years. Aiding in the company’s decision to relocate were things like access to light rail, proximity to a large talent pool of educated workers at the University of Arizona, location in a rapidly growing urban environment and the region’s proximity to Mexico, which is a large market for Caterpillar. “We have become a hyper aggressive community,” Snell explains. “Tucson is knocking down a lot of companies and people are starting to take notice.” Snell works to prepare people and businesses in the region to feed into the supply chain of the economic expansion in Mexico and take advantage of the economic development opportunities to come. “We feel our best times are definitely ahead of us right now,” he says.
A tale of two markets
URBAN VILLAGE: DMBâ€™s Eastline Village is a proposed mixed-use project that would occupy 13.56 acres along the southside of Apache Boulevard and west of the Loop 101 in Tempe.
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What trends and issues can we expect to see in land development in 2017? By ERIN DAVIS
n “A Tale of Two Cities,” “It was the best of times, it was the worst of times.” A 2017 preview of land development for Phoenix and outlying regions may not be as dramatic as being best or worst, but it assuredly is a tale of two markets. Residential land development will call the shots transitioning into a new year, but how the land is utilized is beginning to manifest into a wide divide. Welcome to a sneak peak into the realm of the first-time, peripheral homebuyer market versus that of urban-core infill multifamily and single-homes. 77
LAND DEVELOPMENT GO BIG AND GO HOMES It’s no secret that Arizona, Metro Phoenix in particular, has grown exponentially within the past few decades. Brent Herrington, president and CEO of DMB, pinpoints the landexpansion of our “ditat deus” state back to post-World War I, when Phoenix proper had a mere population of 100,000 people. “The post-war era set off a gigantic series of boomtowns along the American Sunbelt — Arizona included,” Herrington says. “We’ve experienced a 60-year run of radical expansion.” And while the belief for some may be that because so much growth has significantly reduced the amount of vacant-developable land, it has forced more subdivisions and master-planned community activity to occur on “peripheral land,” this isn’t entirely true. Yes, there is a mere 17-percent of private vacant land remaining for development in Arizona. Residentialperipheral land development further West in places like Buckeye, Goodyear and Avondale, for example has something to do with the low percentage of vacant land, but more — much more — to do with buyer demographic rather than geography. “The real story,” explains Brian Rosella, land broker at Cushman & Wakefield, “is that the first-time home buyer is coming back.” What is it that’s bringing them not only back to the market, but to the outskirts of urban-core areas in particular? “Our projected job growth is expected to be close to between 60,000 and 70,000 jobs for 2017,” says Greg Vogel, founder and CEO of Land Advisors Organization. “The job-to-housing ratio is far out of normal range, and a real demand for housing is kicking into higher gears in 2017.”
MILLENNIAL-MINDSET, URBAN LEGEND? Just when you thought you couldn’t stand one more reference to Millennial mindsets, its relevancy to future land development is quite intriguing: Here’s 78 | November-December 2016
Brian D. Greathouse
things to watch in land development in 2017
Brian D. Greathouse, associate, Burch & Cracchiolo: “We should continue to see strong demand for urban infill commercial developments. The demand should outpace supply because of the land use, zoning and development challenges associated with such properties.”
Brent Herrington, president and CEO of DMB: “Big builders are diversifying business, building houses in master plan communities and infill. The greater Phoenix market has created a situation where builders have to have a combination of strategies.”
Brian Rosella, land broker at Cushman & Wakefield: “We haven’t seen much in the way of retail development with the exception for restaurants and a few select grocers closer to peripheralresidential areas.”
Chaz Smith, senior vice president of The Landsource Team for Colliers International: “I think we’ll see more development of senior care campuses with seniors moving from larger to smaller residences."
Kuldip Verma, founder and CEO of Vermaland: “In 2017 and beyond, we will see a surge in development in the West Valley, and that is where we believe the path of growth is headed, based on the largest amount of available private land.”
Greg Vogel, founder and CEO of Land Advisors Organization: “Industrial is starting to see demand. There is absorption and continued demand for big distribution facilities to address the demand for online shopping.”
why: It’s wrong. Or, let’s amend the statement to say that the trending Millennial mindset is faulty when related to first-time homebuyers. On a global scale, it’s been repeatedly touted that the Millennials want to be part of the urban core; that they have no desire to partake in the subdivisionsuburban culture. Herrington helps to debunk this theory by explaining that, “It’s not a matter of urban versus suburban living. It’s a matter of proximity,” he says. He adds that when considering housing options, Millennials do want to be in close proximity to their jobs, towns, cities, entertainment and good schools, but not because they necessarily long to be in urban high rises and high-density areas. “Millennials are every bit as diverse in their home-buying preferences as any other generation,” Herrington says. So what, exactly, does this diversity in taste have to do with land development? Everything. Land on the peripheral — the West Valley, Maricopa, Queen Creek, the Southeast Valley — is affordable for builders to develop and now even more desirable for new-home buyers, a large majority of whom happen to be Millennials. Again, this has much to do with cost effectiveness and satisfied proximity to entertainment/retail and freeway corridors.
FILL OF INFILL? Does this maturation into outlayingregional land development mean the dwindling of infill land activity? No. In fact, it’s the flip side — it’s the other tale of the market trend for 2017. There will continue to be as much demand for infill as ever, despite the growing interest in peripheral land — but it wont’ be easy. “The land in infill locations is significantly, more expensive,” says Chaz Smith, senior vice president of The Land Source team for Colliers International. “And it's hard to come by. I can’t show you a vacant new parcel (in Metro Phoenix). You have to go out on 80 | November-December 2016
THINGS TO COME: DMB’s Eastline is a 440-unit transit oriented multifamily development in Tempe that will be anchored by a 16,000-square-foot plaza street scene with up to 4,000 square feet of street vender retail.
LAND DEVELOPMENT A tale of two land prices An analysis of land sales in the Phoenix Metropolitan area over last year shows two very distinctive prices when looking at the sale of land contained inside the Loop 101 compared with the sale of land outside of the Loop 101.
INSIDE LOOP 101
AVERAGE PRICE PER SQUARE FOOT
OUTSIDE LOOP 101
AVERAGE PRICE PER SQUARE FOOT
Source: Cushman & Wakefield
the perimeter to find vacant parcels, if you can find them.” According to Curtis Hornaday, associate market director of research for Cushman & Wakefield, prized redevelopment land projects in infill areas demand high dollar. “Right now, they’re trading at $24.66 per square foot,” Hornaday says, “especially in areas like Biltmore.” A stark comparison considering the average price per land in Metro Phoenix, according to Hornaday, comes in at $2.21 per square foot. In addition to being lucrative and expensive, infill land development comes with other challenges. “It’s more challenging to knock down what used to be there to make room for new housing,” Herrington says. “It’s also difficult to get permits and buildout takes longer.” The upside, however, and there is a big one, is that because land is so valuable in infill locations, people will pay more — which equates to a substantial return on investment in the long run for developers and builders. According to Vogel, a majority of infill will be dedicated to multifamily land with projected total single family 84 | November-December 2016
and multifamily permits in 2017 ranging between 27,000 and 32,000. “The majority of multifamily start the past few years has been located in downtown Phoenix, Tempe and Scottsdale,” Vogel says. “There will also be a preponderance of new apartment construction spreading toward the west and Southeast Valley.” But when it comes to infill, be prepared for obstacles that might not be present in other land development projects. “Infill property challenges arise on a case-by-case basis and navigating city zoning ordinances and other code provisions can be difficult,” says Brian D. Greathouse, an associate with Burch & Cracchiolo. “We recommend reaching out to a zoning attorney early in the process to identify development challenges, collaborate with neighborhood leaders and understand the city processes, which are key ingredients to delivering an urban infill development on schedule and within budget.”
LANDING THE MASTER PLAN During the recent recession, we witnessed the halt to sprawling pop-up subdivisions. Will we see a continuation
now that the economy is recovering and the residential market is clearly dominating land development in 2017? Yes and no. “We will likely see an increase in demand for land from homebuilders for finished lots,” says Kuldip Verma, founder and CEO of Vermaland. “Rents are going higher within the city and we are likely to see more people opting to buy an entry-level home versus renting.” Builders will continue to develop subdivisions on peripheral land to accommodate the influx of first-time homebuyers, but there may be a shift to more master-planned communities that include a retail component. Turn your eyes to the West for an example. DMB’s Verrado, nestled against a White Tank Mountain backdrop, saw the development of homes simultaneously with its “Main Street” retail. A risk, according to Herrington, as the motto for residential has always historically been fill homes first, then bring in retail. Now, however, opposed to when Verrado was first conceptualized a decade ago, master plans — especially those on the outskirts of urban core
locations — will have to take risks. “Verrado is a great example of what builders need to do to be successful,” Herrington says. “People do not want to live in remote locations where there is nothing to do. Building a subdivision on the edge of a metropolitan area is a challenging proposition for builders because it’s not consumers want.” The “master plan” isn’t relegated to single-home layouts. Take the 440unit transit oriented multifamily development in Tempe, where DMB prepares for Eastline, to include an anchored 16,000-square-foot plaza street scene with up to 4,000 square feet of street vendor retail. Although residential is clearly setting the stage for land development in 2017, we’ll be smart to remember that the state of the economy is still fragile. “I think we’re going to see a robust economy in 2017,” says Smith. “I think Christmas will tell us a big tale. The consumer always leads the charge.” Retail is a significant player, according to Brennan Ray, a partner at Burch & Cracchiolo, because Arizona — and more specifically Maricopa County — is considered to be overretailed as compared with the national per capita average. “There are many factors that will influence Arizona’s commercial real estate industry moving forward,” says Ray, a zoning and land use attorney, “including the general state of the national economy and the strength of the post-2007 recession recovery, the growth of nominal wages, and the continued impact of Internet shopping on ‘sticks-and-bricks’ developments ... When analyzing the overabundance of commercial developments with these factors, a challenging environment begins to appear with no readily apparent ‘quick fixes’ to ensure the commercial real estate industry regains the strength that it enjoyed in Arizona pre-2007. Creative business models, marketing and flexibility for the businesses using the commercial developments will be needed.” 86 | November-December 2016
GROUNDBREAKER: There may be a shift to more master-planned communities that include a retail component, like Verrado, which saw the development of homes simultaneously with its “Main Street” retail, which was a risk because the motto for residential has always historically been fill homes first, then bring in retail.
STATE LAND: LANDLOCKED Although experts don’t seem concerned in regard to languishing private land availability, what is the thought on the role of state land heading into a new year? According to the Arizona State Land Department, only a minute portion of land is allocated for sale each year, with an average of approximately 5,000 acres being sold statewide — which represents only onehundredths of one percent of total State Land Trust holdings. “State land is a complicated topic in that there is a regulatory standpoint on how that land is sold for the beneficiaries of the trust,”
says Herrington. “It’s frustrating for the real estate community because within state land holdings, there is tremendously attractive land opportunities located near freeways and infrastructure.” Until current policies are reformed, according to Herrington, we may not see much leniency in expanded state-land availability. Regardless, he’s still optimistic regarding the outlook for more accessibility to state land, although it will take time. “I’m encouraged for the likelihood that over the next 20 years, the state will get to a win-win regarding state land,” Herrington says.