Whether it’s the $136 million University of Arizona medical research building in downtown Phoenix or the 10-story office building in Tempe, economic development continues to be an integral part of the long-term strategy for the Phoenix Metropolitan Statistical Area (MSA).
Commercial real estate projects in Tempe are expected to draw in additional companies and workers. Developer, Ryan Companies, broke ground on a new Class A 10-story office building this year. This is the final phase of the Hayden Ferry development project which is a combined residential and business complex located on the southern portion of Tempe Town Lake. Next door to the Hayden Ferry development lays Marina Heights. This is the future site of a two million-square-foot project which will be a combination of retail activity, business activity and a lakeside plaza. The $600 million project, which broke ground in July of last year, will house a regional headquarters for State Farm Insurance. The dynamic developments are expected to bring new workers to the Tempe area, adding to consumer spending in the surrounding communities.
Residential development for the Phoenix MSA has been improving at a tepid pace in the early part of 2014. Phoenix total housing starts hovered at a 20,000 unit annual rate from December 2013 through March 2014. Our forecasts are for a population increase of 82,000 in 2014. If we take the population increase and divide it by the average persons per household, then the Phoenix area would need to build 32,000 units just to keep up with population growth. Therefore, a 20,000 unit annual rate for housing starts implies that residential vacancy rates are declining, and that housing markets are tightening in the Phoenix area. There is upside potential in construction activity for the area. Mortgage rates remain relatively low, aiding in housing affordability. Labor markets are improving, which can lead to increased household formation. Baby boomers are booming.
Click here for the complete Phoenix MSA Regional Economic Update: Phoenix 2014Q1.