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JUNE Friday Morning Breakfast

Posted By Heather Garbarino, Thursday, July 18, 2019

 

Looking back, looking forward



Numbers tell the story at the 2019 mid-year review of real estate development,
growth in the Valley

 

 

Numbers don’t lie. Actually, they tell a pretty good story.

Economic momentum. Employment growth. Population growth. Personal income growth.

 

“In my opinion, getting knocked out during the downturn gave us the opportunity to get back up. Obviously, we’re doing something right. Look at the numbers. They tell the story. We are consistently seeing things headed in the right direction.”

Jim Rounds, President of Round Consulting Group, painted a positive picture as moderator of Valley Partnership’s June Friday Morning Breakfast at Phoenix Country Club.

And why not.

 

 The economies of Arizona and the U.S. have been buoyed by low employment and new highs for consumer confidence. The real estate and development markets in Arizona have been equally impressive in the first half of the year.

As the Valley approached the halfway point of 2019, June’s Friday Morning Breakfast featured a conversation hosted by Rounds, a renowned economist, on what we've seen so far in 2019 and where investors should expect we'll go for the remainder of the year.

 

“The market has been incredibly frothy for some time,” said panelist Ryan Sarbinoff, Vice President/Regional Manager Phoenix, Marcus & Millichap. “A big driving force is foreign investment. There is still safety and security in the U.S.”

Joining Rounds and Sarbinoff were Jessica Morin, Director of Market Analytics, CoStar Group; Pete Wentis, Senior Vice President, CBRE; and Micah Miranda, Economic Development Director, City of Chandler.

What can slow down the train that’s driving the Valley’s economic engine? A lack of new and existing office and industrial space could present a challenge, Morin said.

“During the Great Recession we were one of the hardest hit markets in the country,” she said. “We lost 300,000 jobs, about a quarter of that were construction jobs. Since then, we have shown steady growth. Are we building enough space now?

 

“Some of our markets are showing incredible growth,” Morin said. “The East Valley. Tempe. Chandler. There is a large labor pool of quality talent in those markets. ASU has also been a significant catalyst for the growth.”

While the Southeast Valley’s office market is booming, Morin said Downtown Phoenix hasn’t caught up just yet. However, she said she expects that to change in the next few years.

 

With Chandler becoming one of the top submarkets in the Valley for financial service and technology companies, Miranda said, “Product wins projects. Unless we have the products, companies will skip over us.

“In Chandler, preserving the Price Corridor and other employment corridors is key as we create the right environment for growth,” he said. “My perspective is that education is also key to business attraction. Education is critical.”

On the industrial side, Wentis said the cost of development of that product type presents an advantage for the Valley over competitors in Southern California. He said the West Valley will benefit greatly when the Loop 202 South Mountain Freeway bypass opens later this year.

 

“We are at historically low vacancy numbers in the industrial market,” Wentis said. “This is a sign we have a very healthy market (in the Valley). Two of biggest challenges are the net cost of tenant improvements and lack of labor.

“Developers are trying to be creative,” he added. “And with better corridors such as the 202 South Mountain Freeway, there will be a huge impact on our transportation of goods and services.”

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