By Roland Murphy for AZBEX
The City of Mesa has set its strategic economic development focus on workforce development in manufacturing and technology in recent years, while allowing retail development to happen more organically.
As a result, Mesa’s sales tax revenue is the third lowest among 11 Valley cities, according to a recent Arizona Republic article. The two further behind are Gilbert and Buckeye. Gilbert is catching up rapidly, and Buckeye, which has recently begun transitioning from a primarily bedroom community, is now one of the fastest developing cities in the U.S.
Mesa officials, including some City Council members, are working to establish a more concentrated retail focus moving forward, particularly expressing a desire to boost retail in portions of both the aging west side of town and the newly expanding east.
Councilmember Scott Somers referred to the lagging retail development as a combination of insufficient infrastructure in some parts of Mesa and “bad luck” stemming from the Great Recession and the pandemic.
Some Eastmark residents quoted in the article say they have waited more than a decade to see the fulfillment of the mantra that retail follows rooftops (and employment). They say Eastmark and southeast Mesa have largely been overlooked and they want action to draw lifestyle businesses to east Mesa and to optimize their development processes.
Mesa Economic Director Jaye O’Donnell was quoted as saying the City has focused on attracting high-paying jobs and workforce development and the time has come to examine new or additional policies that can accelerate retail growth.
Retail vs. Industrial Numbers
That uneven focus is readily apparent when looking at what has been proposed and built in Mesa in recent years.
The DATABEX project database, which tracks developments with estimated construction valuations of more than $5M, was launched in mid-2016. In that time, and not including master planned developments, 150 industrial developments have entered Mesa’s development cycle. Of those, 107 are identified in the database as having a specific warehouse/logistics component.
Mesa has also been one of the key development areas for data center projects, with a total of 19 projects in the database.
Although construction cost estimates are not routinely updated or adjusted for inflation, DATABEX puts the total valuation of Mesa Industrial proposals at $16.37B. Planned square footage is available for 148 of the 150 projects, coming in at a total of 73MSF.
Of those 150 proposed developments, only 12 ($1B, 4.9MSF) have been canceled, while eight ($275M, 3.2MSF) are listed as On Hold. Conversely, 68 projects ($4B, 26.5MSF) have been completed, and 18 ($2.9B, 9.2MSF) are actively under construction.
On the other side of the project development tracks, Retail (including Hospitality-focused projects centered on dining and entertainment but eliminating specifically hotel/resort/casino developments) has just 37 total projects listed. Construction valuation estimates total $2B, and the total square footage is 6.5MSF.
It should be noted this is not the totality of Mesa retail development, as several retail plans and proposals would be for projects that would be too small to meet the DATABEX $5M threshold. Still, $5M is a relatively low point of entry, and 37 projects in a city of more than 512,000 people with an area covering more than 138 square miles can be considered “light.”
The Mesa Retail news gets even less engaging when looking at the project statuses in greater detail. Of the 37 proposed projects, eight ($585M, $3.3MSF) have been canceled and two ($275M, 465KSF) are On Hold. Eight projects have been delivered, totaling $110.8M in construction costs and 810KSF. It should be noted those delivered projects do not include the 320-acre Arizona Athletic Grounds at Mesa Campus, formerly known as Legacy Sports Park.
Mesa Planning Course Corrections
Mesa officials speaking at various BEX Companies events in the last few years have often mentioned a need for a shift in economic development focus. As shown above, most of the City’s successful efforts have been in drawing warehouse and data center development. While those are certainly project areas of value, they also have comparatively few jobs per project once they are up and running.
Officials have expressed, and have been acting upon, a need to draw more manufacturing operations rather than logistics and data center concerns, because manufacturing—particularly advanced manufacturing like semiconductor suppliers and battery developers—provide more high-paying jobs.
To support those existing and potential workers, Mesa has also been one of the cities most receptive to new residential development, including multifamily. While NIMBYism is present in every jurisdiction, and Mesa has seen its share of high-profile instances, resident opposition has generally been less entrenched in the population and less indulged by City Council and other regulatory bodies.
Attracting and enabling retail development has not been as prioritized or as successful. To begin rectifying that, Mesa hired a consulting firm last year to look at the market and help strategize ways to draw more retailers, especially those with high brand value, to the city.
The report from Retail Coach found that key areas of Mesa have a high demand and that the city is ready to begin drawing in so-called “next-level” retailers and hospitality/entertainment providers, but hindrances and roadblocks remain in place.
These include some negative perceptions in the development community that Mesa is too-challenging of an environment for planning, zoning and project approvals, according to the Republic article. Developers also cite concerns about officials and other stakeholders holding views about what should go in specific sites that do not match the needs and desires of end users for particular projects.
As just one example, Mesa City Council engaged in a months-long fight last year with retail developers over the number of drive-thru restaurant requests to be allowed as part of new developments. Many on Council believed the high volume of drive-thru eateries in the city was preventing new sit-down dining establishments from setting up shop.
Developers, on the other hand, pointed to market research identifying customer demand for drive-thru services, particularly in the post-pandemic era, and said restrictions on drive-thru establishments would reduce their ability to secure project financing.
A compromise measure was eventually adopted, but the debate did little to warm builders’ hearts to the idea of retail hospitality and entertainment development in the area and reinforced perceptions that Mesa is more difficult to work with in those sectors than other jurisdictions.
The Retail Coach report added that while Mesa is ready to attract new, desirable retail development, parts of town are still considered “blighted” and the City must improve its appeal in all areas if those goals are to be met.
Director O’Donnell said the improvement plan will be put in place over the next three years. Specific actions that may be undertaken include possibly hiring additional staff, including members focused directly on retail attraction and development, and creating new marketing efforts to showcase the changes in Mesa over the last two decades.