By Tasha Anderson for AZBEX
The first week of May has come and gone, which in BEX’s world means another successful Private Development Summit has passed.
More than 200 attendees gathered at the DoubleTree by Hilton in Tempe on Tuesday, May 7th, for an afternoon of looking into the current and future state of the private sector… and of course, the always famous happy hour complete with churro station.
After BEX President and Founder, Rebekah Morris peered into her crystal ball to provide attendees with what the future has in store for private development (see pg 1), several speakers dove into important areas of development to give their perspectives on the market.
These are just some of the highlights from Tuesday afternoon’s program.
Local Icons of Real Estate
Other than “Local Icons,” attendees might also know the panelists from the first segment as Spike Lawrence, Co-founder of Lawrence & Geyser Development; Michael Levine, Owner of Levine Machine, LLC; Tim Sprague, Owner/Principal of Habitat Metro, LLC; and moderator, Pete Bolton, President of Pete Bolton Company.
During their segment the panelists discussed where they plan on building next. While Lawrence wants to stick with Tempe and Chandler, Sprague explains that Habitat Metro is headed to downtown Mesa where it is “ripe” for development. Levine mentioned sticking with the warehouse district and moving toward the West Valley and near the fairgrounds.
The discussion moved to building for changing needs such as parking where the panelists agreed that building a parking garage that can be retrofitted to retail or other uses in the future is important to keeping product we have while meeting the needs of the market.
The predictions for the future were all around optimistic as they also discussed Opportunity Zones.
“Opportunity Zone activity is high and no one’s really doing anything with it yet,” explained Levine.
Sprague agreed, adding that there’s a “nice runway in front of us for the next two to three years,” and stating that, “Opportunity Zones will make a good project better, they will not make a bad project good.”
Lawrence predicts development to be “very bullish. I Think we’ve got… the best infrastructure… and we have amazing jobs coming that I’ve never seen.”
Best Practices in Neighborhood Outreach
One of the more challenging things to overcome is getting neighborhoods on board with a large project that will ultimately change the area. Luckily, William E. Lalley, Land Use & Zoning Attorney with Tiffany & Bosco gave attendees some tips on how to overcome neighborhood pushback.
“You’ve got to understand the process and part of that process is really understanding who are the stakeholders, who’s ultimately going to control your destiny and how am I going to get them on board,” he stated.
Lalley went on to discuss how important it is to have “wiggle room in your case” or a Plan B, something to negotiate with protestors. Getting in front of the neighborhood very early in in the process and that builders having their “ducks in a row” by the time the first neighborhood meeting letter goes out is also very important.
“If you’re not in front of it early, a brushfire will start and it’s almost impossible to take care of it,” Lalley explained.
The Masters of Masterplan Development
The Masterplan panel of Charley Freericks, Senior VP of Catellus Development Corporation; George Melara, VP/Managing Director in Scottsdale for Nelsen Partners; and Scott Phillips, VP of Carefree Partners, along with moderator Lisa Buelna, Director of Business Development with hardison/downey, took the stage to give attendees insight into what goes into masterplans.
The biggest takeaway was the need for patience and flexibility when developing a masterplan project.
“We have very flexible zoning,” said Freericks discussing the several phases of the Novus Innovation Corridor. “So, when you’re doing these long-range projects you have to be able to move things around over time as you need to when the market changes.”
Phillips agreed, adding, “You cannot be locked in with anything, so capital has to be patient, and your zoning has to be flexible, and people have to be able to adjust as the market changes.”
Melara added to that, talking about Kierland Commons and how after 15-20 years of building onto it, they just added another building.
Some of the struggles, other than patience, that they noted in building long range projects is the cities themselves and the lack of utilities.
According to Freericks, “Not every city and town… is eager to have growth and a lot of the cities and towns that are eager to have growth, aren’t sophisticated enough to deal with a big complicated project.”
When it came to utilities, Phillips noted, “Nobody’s building any large-scale utilities, nobody’s building any sewer treatment plants or water treatment facilities, so builders are fighting over smaller and smaller portions of land on which to build houses and other things.”
However, the overall outlook for the future for master plan building was still optimistic.
“Right now, we have a lot of masterplans in play… so right now the barometer is still pretty strong,” said Melara.
The City of Phoenix and the City of Goodyear provided attendees with a brief account of what’s going on in their areas, while Valley Metro discussed the impacts light rail is having on real estate development.
Eric Johnson, Deputy Economic Director for City of Phoenix touched on several spots in the midtown/downtown area ready for development including:
- Indian School and Central Avenue: currently going through a rezoning process and is expected to house six towers on 15 acres.
- Central Avenue and Willetta: An RFP is expected to hit later this for a developer to come up with different housing options for the site.
- First Street and Adams: The site of the Regency Garage – an RFP is expected to be issued in the next couple of weeks for a developer to come up with a redevelopment option.
Johnson also mentioned specific projects such as:
- The Central Station being developed by Medistar
- The Park Central Revitalization project
Lori Gary, Director of Economic Development for the City of Goodyear answered the burning question that everyone has been dying to know: “what is going on in Goodyear?”
“Fiscal year 2019 has been an extremely good year for Goodyear,” Gary began as she showed attendees the impressive list of companies making Goodyear their home.
“These projects represent $1.2B in [capital expenditure], 1,000 net new jobs created and almost 3MSF of new construction,” she stated, talking about companies like Microsoft, Fairlife, LLC, Anderson Corporation, Stream Data Centers and Vantage Data Centers that have announced new buildings in the past year.
Toward the end of the program, Hillary Foose, Communications & Marketing Director for Valley Metro briefly touched on the positives that the light rail investment has made to economic development, such as a reinvestment in housing, job creation and more.
“Light rail investment has cost about “$2.3B. So that includes the initial starter line that opened as well as the recent extensions, and we have seen more than $11B in economic development within a half mile of all of our stations.”
Foose also brought to everyone’s attention the initiative on the ballot in August to stop all light rail funding.
Is Multifamily Development Ever Going to Peak?
The last panel of the afternoon discussed the growing rate of multifamily housing and the panel’s perspectives on where they think it’s heading.
Panelists Jamie Jacobs, VP of Business Development for Katerra; Alvaro Sande, Business Development Principal for UEB; and Brian Rosebaum, VP of Operations for NexMetro, with moderator, Roland Murphy, Director of Research for ABI Multifamily, took the stage and began by discussing the fear of the market softening.
“The fear, I think is a normal fear. Market rate is definitely booming right now, it’s a robust market. There will reach a peak,” Jacobs said explaining that if the market does peak, there will always be a need for affordable housing and that should take precedent.”
According to Murphy, “For two years we’ve been hearing about over- delivery and potential demand softening. However, the best projections are Phoenix needs to add 11K-11.5K units/year to meet need.”
Sande is fairly optimistic and believes that the market will continue to be strong while the demographics and growth remain strong, while Rosenbaum believes in “responsible growth” and being able to be flexible.
One of the biggest challenges noted that delays projects is construction costs; however, Sande noted that it helps to have strong relationships with subcontractors and to have them onboard early on in the process.
One of the biggest talking points in this segment was the importance of affordable housing and Murphy asked the million-dollar question, “What, if anything, can the industry do now to improve its ability to meet demand?”
Jacobs noted the need to “preserve what we have” and to create mixed-use of market rate and affordable housing because in the end, both the market rate and affordable housing projects, “look the same on the inside.”
Rosenbaum stated the possibility of “transitioning it to a new building to make it more appetizing to a builder.”
The panelists were optimistic that the multifamily market was going to keep going the way is in the next couple of years, that infill will continue to draw the market and that there will be more of a need for affordable housing.
The next BEX Event now open for registration is the June 6th Leading Market Series, where the topic will be on the Office and Industrial market sectors. Visit http://bex-events.com/lms/office_industrial/ for event details or to register.