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OCTOBER Friday Morning Breakfast

Posted By Heather Garbarino, Friday, November 1, 2019


Trading Spaces

Valley enjoying robust industrial, office activity


The saying used to be: “Location, location, location.”


With industrial space leading a surge in commercial real estate activity in the Valley (along with office), the saying now goes: “Logistics, logistics, logistics.”


As the Valley’s economy continues to remain strong post-Great Recession, the need for industrial and office space to attract quality companies and high-level talent continues to play a significant role for developers and investors.


With a record amount of industrial and office space currently available in the Metro Phoenix market, some of that remains vacant with development continuing based on the positive trends the state has seen over the past half-decade in the job market.


The October Friday Morning Breakfast brought together a group of panelists whose respective companies are among the most active in both industrial and office markets in the Valley.


Moderating the panel was John DiVall, Principal Regional Head, Mountain Region, with Exeter Property Group. The panel comprised Keith Earnest, Executive Vice President, VanTrust Real Estate; Jeff Foster, Vice President/Market Officer, Prologis; and Cathy Thuringer, Principal, Trammell Crow.


“We have $13 billion worth of work in the process or in the pipeline,” Thuringer said. “That’s the highest level ever. They are primarily office and industrial as we’ve been extremely active the last quarter. We’re busy as long as the market allows us.”


Trammell Crow’s projects include Axis Raintree in Scottsdale, a 175,000 SF spec office building; Gilbert Gateway, a 420,000 SF industrial project totaling three buildings; and Park Aldea in Glendale, a 356,000 SF industrial project totaling four buildings.


Prologis has perhaps one of the largest footprints in the Valley with 46 buildings totaling 6.8 MSF. It recently completed a 136,000 SF facility for Sun State Builders in Phoenix. It currently is getting drawings done for Prologis Commerce Park in Goodyear.


“We missed out on some of the bigger deals in the market,” Foster said. “This is our opportunity to build 2.3 million square feet.”


Earnest said that while his firm is a “small family company,” it is also pursuing the same property types as Trammell Crow and Prologis. Two of its office projects include Chandler Corporate Center, 120,000 SF, and Chandler 101, 200,000 SF.

Talking about the Valley’s growth and demand for office and industrial product, Earnest said: “Now the (Loop) 303 seems like the I-17 or the 101.”


As with any property type, hurdles exist, the panel agreed. Some included:

>> Infrastructure and water: who is paying for it and how much is it?

>> Construction and land costs: how much is too much?


“We’re seeing people move here,” Foster said. “People who are seeing this as fastest growing county in the country. Infill is now Southwest Phoenix. Developers are out there pushing towards Goodyear, Glendale and Buckeye.”

Said DiVall: “There are now more manufacturing jobs that construction jobs in Arizona.”


So, what other things keep them up at night?


>> Foster: “Growing rents. Access to labor. We boast the third-fastest growing market in the U.S. Site selectors are choosing Phoenix for a reason. That’s the big story right there.”


>> Thuringer: “The elections. We saw that in 2016. I don’t know what the outcome will be. And TI costs.”


>> Earnest: “It’s not the when for me, it’s the what. Sublime lending crushed us the last time. If the what stays away, it’s a good thing. I like the discipline we have now. There is good competition. It feels healthier. I’m sleeping better.”


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