Here’s how available land and improved infrastructure drive industrial development

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The last few years have seen unprecedented growth in the Greater Phoenix area. A favorable business environment, mild winters, and a high overall quality of life have attracted businesses from across the country and around the world to Grand Canyon State. As a result, farmland and empty plots across the Valley quickly became the sites of industrial development for large manufacturing and distribution facilities.

“The industry has been the darling of the recession and the COVID response. It’s the one use that has excelled over others and has generated the most energy, money and interest, ”says Adam Baugh, partner at Withey Morris.

The East and West valleys received the lion’s share of industrial investment. According to Baugh, nearly 20 million square feet of land has been cleared so far in 2021. The winning trifecta of strong demand, investor interest and available land has led to atypical behavior in the market.


READ ALSO: Metro Phoenix industrial market breaks construction record


“Usually you don’t build until you have a user, but the demand is so high that people are willing to bet on speculation. Traditionally, developers have not spent this amount of money because of the risk, ”notes Baugh.

In particular, Mesa to the east and the areas along Loop 303 to the west have attracted the majority of new structures and expansion projects. John Orsak, Vice President of Real Estate Development at Lincoln Property Company, believes Loop 303 will continue to attract large mega-users with projects over one million square feet due to land availability in the area. and ease of access to California ports via Interstate 10. Cities on the east side of the valley, such as Mesa, will continue to primarily build small to medium-sized projects.

“There are different types of products and users when you compare East Valley to West Valley. You might find a huge Amazon Fulfillment Center in the West Valley, and you will see a last mile Fulfillment Center in the East Valley. Both regions are experiencing booms in different types of products, ”says Orsak. “It’s a testament to the overall Greater Phoenix market – affordability, housing opportunities, available labor and the number of people moving here who need jobs.”

West Side Story

Approximately 5 miles of Loop 303 goes through Glendale. In 2018, there were no buildings along this stretch, but now approximately 14.8 million square feet of industrial space is either under construction, recently completed, or in early stages of development.

“A lot of people find it hard to imagine the 14.8 million square foot scale because it’s not like a 3,000 square foot house,” says Randy Huggins, Economic Development Officer for the Town of Glendale . “To put it in perspective, regional malls are typically one million square feet. So there are 15 Arrowhead Towne Centers that exist where there was nothing at all two years ago.

Lincoln Property Company developed Park303 in the New Frontier District of Glendale for flexibility. It was originally designed as two separate buildings which could be combined if desired. Orsak says Park303 was created with a Class A office approach rather than just a big box, with nearly 5,000 square feet of outdoor space with design flourishes and architectural flair on the exterior of the building.

“In the end, we rented the structure to a tenant and are in the process of finishing our building combination. That’s almost 1.3 million square feet, or 29 acres under one roof, ”notes Orsak. “The traffic lanes around the building have been designed to separate cars and trucks so that employees and vehicles bringing in and out of product do not mix in traffic. “

On the west side of the 303 Loop, just south of Glendale Avenue, Barclay Group and WM Grace Companies built a structure, known as 303 Logistics, which was also sold before construction was completed. “Stories keep coming from people building on specs, and before they’re done, they have an end user. It’s great to have sites ready for development, but it’s even better to have people consuming the buildings, ”Huggins points out.

The intense demand precipitated a sharp increase in land prices. Huggins notes that in 2002, the large 80-acre plots sought after by many developers were selling for 23 cents per square foot. By 2016, that price had risen to 75 cents. Today, costs hover around $ 6 per square foot. “There has been a tenfold increase in three years, and prices continue to rise,” said Brian Friedman, Director of Economic Development for the Town of Glendale. “This is due to demand, but also to the establishment of an appropriate infrastructure. “

Friedman puts growth in context: “The town of Glendale was founded in 1910. It took 111 years to build approximately 14 million square feet of industrial buildings across the city. In the last three years alone, we’ve doubled it.

Near where Loop 303 meets Interstate 17, Taiwan Semiconductor Manufacturing Company (TSMC) is investing $ 12 billion in new plant development, an initiative that will attract other companies to its supply chain in the valley. The town of Surprise is in a prime position for related businesses to locate.

“Taiwan Semiconductor Manufacturing will attract many talented people and companies to the region. We have already had great conversations and meetings with companies that are part of TSMC’s supply chain, ”said Jeanine Jerkovic, Director of Economic Development for City of Surprise. “We have the opportunity to prepare our future employment corridor and to attract jobs for heads of families and quality employers. “

Trammell Crow’s Elliot Footbridge.

Southeast spread

Across the valley, Mesa has seen a deluge of similar activity.

“Industrial development in Mesa has been white-hot,” says William Jabjiniak, director of economic development for the town of Mesa. “By our calculations, there is just over 10 million square feet of industrial space in the planning stages, under construction or nearing completion. And much of it is rented out before it’s finished.

In the northeast of Mesa, near the Falcon Field airport, many industrial projects are underway.

“There is an industrial specification development by Majestic Realty right at Greenfield Road and Loop 202. That’s about 150,000 square feet combined between two buildings that will be completed by the end of the year,” notes Jabjiniak. “One of Amazon’s first last mile distribution facilities is also in the Falcon Field area. Boeing is expanding its operations nearby. And just south of the airport, we saw industrial developments that include Mitsubishi Chemicals.

The Elliott Road Technology Corridor, which connects Signal Butte Road and Hawes Road, plays a strategic role in Mesa’s focus for high-tech manufacturers, according to Baugh. “The corridor has electricity, land, water, natural gas, fiber, market access, rapid allocation process, foreign trade zone and a willing municipal partner with Mesa” , he explains. “As part of an existing zoning overlay, the City of Mesa was able to streamline its process for developers and potential applicants, reducing the eligibility time to weeks instead of months for potential applicants. eligible properties. “

Facebook recently announced that it is building an $ 800 million data center down the hall, joining other industry leaders including Apple, Amazon, Google, Edgecore and Dignity Health.

Further south, near Phoenix-Mesa Gateway Airport, electric vehicle maker ElectraMeccanica opened its first US-based assembly plant and technical center in May on 18 acres of land. The $ 35 million, 235,000 square foot facility

bring around 500 technology jobs to the region. Much of the city’s industrial activity is concentrated in the southeast, Jabjiniak said – a trend he plans to continue in the years to come.

“About a year ago, CMC Steel announced a $ 300 million investment in southeast Mesa,” Jabjiniak recalls. “The vast majority of industrial development takes place in this region because that’s where we have the most open land.

Baugh points out that noise contours, areas potentially exposed to aircraft noise, limit the type of buildings that can be built near airports. “But industrial developments are working very well at these sites,” he says, adding that “modern industry today is unlike anything from the past. The buildings are highly designed, they are extremely efficient, and they function for both manufacturing and distribution.

Much like Glendale, part of what makes Mesa attractive is the available terrain and the quality infrastructure, including the completion of the southern portion of Loop 202, which bypasses Phoenix and cuts travel time to the Los Basin. Angeles and its ports. “Thousands of acres are ready for development,” says Jabjiniak. “We have come to a point where our investment in infrastructure is paying off. “

To complement the existing infrastructure, Mesa is working to bring rail to the southeastern part of the city. “We are planning what we call PIRATE, which stands for Pecos Industrial Rail and Train Extension,” says Jabjiniak. “This has generated a lot of interest from employers who need rail access, and it helps us keep large trucks off the roads to allow residents to move. “

Jabjiniak concludes that the Mesa and Loop 303 regions share many strengths that will continue to attract new investment. “Why are both areas so strong? Some things come to mind, ”he says. “There is a lot of developable land as well as a great transportation system in place. But there’s another thing we’re doing in Mesa that has helped not only developers but end users as well: streamline the authorization process. Time is money. The ability to move quickly has been one of the hallmarks of this city in general. Mesa is a big city, but it can turn in a hurry.

In just a few short years, the Greater Phoenix has become one of the nation’s fastest growing hotbeds of industrial development, with areas along Loop 303 and in Mesa considered by developers and users to be diamonds in the desert. While these two regions prosper, the entire Valley benefits from the jobs, tax revenues and network effects that accompany increased investment.

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