The beginning is the most important part of the work. Plato
Dec 21, 2015, 1:44pm MST Mike Sunnucks Senior Reporter Phoenix Business Journal
This time last year I made a few predictions for the real estate market and overall Arizona economy. I looked at whether we would see an apartment bubble, what would actually get built in Tempe and the continued development maturation of the Westgate area in Glendale.
The apartment bubble
The apartment bubble or oversupply still hasn’t arrived here in Phoenix or other U.S. markets.
Developers keep on building units and financing is still there for projects.
Here in Phoenix, the real estate crowd is hoping for improved population and economic growth to spur more demand for apartments.
Maybe there is a new normal for housing demand after the recession, decades of stagnant wages and the replacement of manufacturing jobs with flipping burgers and answering customer service calls. Millennials, empty nesters and a post-recession economy with plenty of lower wage workers with iffy credit all contribute to demand for apartments.
It will probably come down to submarkets and price points. There are some areas where new construction might outpace demand. How many luxury apartments can be filled in downtown Phoenix or student heavy Tempe?
Will the apartment wave come to the West Valley or other suburban areas?
Glendale’s Westgate area is inching slowly toward becoming the West Valley’s downtown. But it still has a ways to go. There are a few more developments coming in near University of Phoenix Stadium and Gila River Arena. But it’s baby steps, and the Bell Road/Arrowhead area a few miles north is still the west side’s top retail corridor. The Tanger Outlets has helped the Westgate Entertainment District as well as its tax base.
The Tohono O’odham Nation has opened some slots at its casino site at Northern and 91st avenues. The tribe is still battling with the state and other tribes over getting more licenses and gaming tables. But the casino and new health care facilities are bringing more jobs and people to Glendale sports area.
It remains to be seen if all the proposed developments in Tempe near Arizona State University and Mill Avenue get built. State Farm’s Marina Heights campus across from Sun Devil Stadium has opened up with more buildings under construction. There are plenty of developments still in the works at the Monti’s restaurant site and long vacant Hayden Flour Mill.
There’s optimism they will get built. But the idea of several new hotels being built in Tempe still seems far-fetched.
Ducey, budgets, priorities
I thought the state might look at consumption and even possibly marijuana taxes to solve what was touted earlier this year as big budget deficit. Instead, Gov. Doug Ducey and the Republican Legislature sliced university spending to help solve what they said was a deficit.
By the summer, tax revenues had improved and the state now has a surplus.
Ducey also ended up focusing more on education this year than economic development as I had predicted. That’s because the governor was dealing with a lawsuit brought by K-12 schools over inflation funding cut by the Legislature. Ducey also battled with Arizona Treasurer Jeff DeWit over the governor’s plan to use more State Trust Land proceeds in the short-term to help fund education. Businesses and important voters segments including women and moderates are upset with Arizona’s low levels of spending on schools and higher education.
Ducey also crafted a plan to settle the K-12 funding lawsuit that will head to voters next spring.
Ducey, who has political aspirations beyond the governor’s office, is trying to address the state’s low education scores and spending while not raising taxes.
The Republican governor has focused on business attraction and the state’s image for high-wage industries. It’s just circumstances pushed education to the forefront.
Mike Sunnucks writes about residential and commercial real estate, government, law, sports business and workplace issues.
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