Tempe Development Thread

[azsunsurfer]

There was an article today saying that Amazon is delaying some of its return to the office policies due to the fact that they dont have enough office space for everyone. One of the cities mentioned in the article was Tempe. I wonder if they will lease more space?

[combusean]

Yes, Arizona suffers from a housing affordability crisis due to strict development patterns and land use restrictions. This stifles supply, driving housing costs up. This is a land use regulation problem. Cities like Houston and Minneapolis have overcome this with land use reform. Cities like LA and SF in contrast make housing really hard to build, driving up costs. That is the duality of policy in differing liberal strongholds.
https://www.pewtrusts.org/en/research-an...ousing-costs-and-homelessness-in-arizona

I love how that article conflates the general plan with the zoning code. This state does not have "strict development patterns and land use restrictions" because rezonings are plentiful in nearly all cities. It is one of the easiest places to build in the country.

[cdfif030]

The Pier's contractor hit with worker safety and regulatory fines again. They are contesting the fines with state regulators.

"ADOSH said Springbrook SGC has not paid last year’s $40,177 fine and is now facing additional fines this year of $17,517."

https://www.abc15.com/news/local-news/in...eloper-hit-with-more-worker-safety-fines

[AZSunHiker]

Yes, Arizona suffers from a housing affordability crisis due to strict development patterns and land use restrictions. This stifles supply, driving housing costs up. This is a land use regulation problem. Cities like Houston and Minneapolis have overcome this with land use reform. Cities like LA and SF in contrast make housing really hard to build, driving up costs. That is the duality of policy in differing liberal strongholds.

There’s more to it than that. If you compare the case chiller index and all housing transactions index of Phoenix to other metros, Phoenix home prices shot up much faster than many places. Per the Maricopa Association of Governments (MAG) 42% of homes in metro Phoenix are owned by people with out of state residences and 26% are seasonal or investor owned which confirms the scale of the snowbird and tourism phenomenon. This means when interest rates were abnormally low during the pandemic, a large number of well capitalized buyers from all over North American drove up prices.

See https://azmag.gov/Programs/Maps-and-Data/Land-Use-and-Housing/Housing-Data-Explorer

[AZSunHiker]

Anecdotal, but Tempe is no longer the sole urban hub in the valley. Ten year ago you would not have seen me regularly going to downtown Phoenix for the First Friday art festivals. Both Phoenix and Scottsdale are experiencing urban transformations. Tempe is facing competition.

Cushman Wakefield puts Tempe office vacancy even higher at 32% with Phoenix CBD at 31% and East Phoenix at 36%. But this is not a knock on Tempe. Tempe has a high vacancy rate precisely because before the pandemic Tempe had the lowest class A vacancy rate so a bunch of brand new office buildings were built before, during, and after the pandemic. It is still one of the most desirable place to locate an office as indicated by its having the highest lease rates for all classes and second highest for Class A (behind the Biltmore area) which is due in no small part to its commute times for the professional residents of the East Valley, proximity to ASU for interns and recruiting, and the “work, live, play” lifestyle of the North Tempe. Per same report YTD Tempe had a positive net absorption of 270k while Phoenix CBD lost 390k. Anecdotally Deloitte put their name on 100 Mill while Amazon leased up space. When was the last time big names did that in downtown Phoenix?



References:

https://cw-gbl-gws-prod.azureedge.net/-/...pdf?rev=408d347d52894d0da58f3e2f647d0612

https://azmag.gov/Programs/Maps-and-Data/Commute-and-Workforce/Commute-Shed-Reports

[combusean]

Tempe and Phoenix complement each other fine and their "competition" is part of their success. Downtown Phoenix kills it with market rate housing (many of Tempe's projects are student oriented which belie its success) while Tempe has the premier office properties. This is a good thing as they don't have to be monoliths and be all things to all people which is impossible.

For example, I never wanted to live in Tempe because of the transient nature of everyone but other adults might thrive in the close proximity of the university. Other people can and do like Mesa's more low key vibe even which has let places that don't serve hard alcohol thrive in particular. If I were to ever move back I'd probably be in Midtown Phoenix and work in Tempe off the light rail.

[locolife]

Originally Posted by combusean

I love how that article conflates the general plan with the zoning code. This state does not have "strict development patterns and land use restrictions" because rezonings are plentiful in nearly all cities. It is one of the easiest places to build in the country.

That was my thought as well, I've never heard AZ considered strict on development, it's almost always regarded as the exact opposite.

[locolife]

Originally Posted by AZSunHiker

Cushman Wakefield puts Tempe office vacancy even higher at 32% with Phoenix CBD at 31% and East Phoenix at 36%. But this is not a knock on Tempe. Tempe has a high vacancy rate precisely because before the pandemic Tempe had the lowest class A vacancy rate so a bunch of brand new office buildings were built before, during, and after the pandemic. It is still one of the most desirable place to locate an office as indicated by its having the highest lease rates for all classes and second highest for Class A (behind the Biltmore area) which is due in no small part to its commute times for the professional residents of the East Valley, proximity to ASU for interns and recruiting, and the “work, live, play” lifestyle of the North Tempe. Per same report YTD Tempe had a positive net absorption of 270k while Phoenix CBD lost 390k. Anecdotally Deloitte put their name on 100 Mill while Amazon leased up space. When was the last time big names did that in downtown Phoenix?

References:

https://cw-gbl-gws-prod.azureedge.net/-/...pdf?rev=408d347d52894d0da58f3e2f647d0612

https://azmag.gov/Programs/Maps-and-Data/Commute-and-Workforce/Commute-Shed-Reports

The only news I can find on new notable offices downtown is the Suns new HQ. For fun, I also googled downtown offices and you can find a ton of companies leaving downtown locations across the country. So, I guess it's not a Phoenix thing but more of a national trend.

Some examples:

Wedbush Securities joins downtown L.A. exodus, opting for smaller, more flexible office in Pasadena
In latest blows for city center San Antonio, Visionworks, PwC leaving downtown for new digs on North Side
Cincinnati-based Total Quality Logistics is moving its more than 170 local employees out of Meidinger Tower.
Stifel is moving from downtown Baltimore to Harbor Point
Another law firm to depart downtown Dallas for Uptown
Downtown Louisville suffered a one-two punch last week, based on news that Humana and Fifth Third plan to vacate office space.

[exit2lef]

Originally Posted by locolife

The only news I can find on new notable offices downtown is the Suns new HQ. For fun, I also googled downtown offices and you can find a ton of companies leaving downtown locations across the country. So, I guess it's not a Phoenix thing but more of a national trend.

Some examples:

Wedbush Securities joins downtown L.A. exodus, opting for smaller, more flexible office in Pasadena
In latest blows for city center San Antonio, Visionworks, PwC leaving downtown for new digs on North Side
Cincinnati-based Total Quality Logistics is moving its more than 170 local employees out of Meidinger Tower.
Stifel is moving from downtown Baltimore to Harbor Point
Another law firm to depart downtown Dallas for Uptown
Downtown Louisville suffered a one-two punch last week, based on news that Humana and Fifth Third plan to vacate office space.

Unfortunately, job sprawl was a nationwide disease even before COVID. The state's tallest building, the Chase Tower, is vacant largely because the bank decided to move its employees to southern Tempe. There are all sorts of weak rationalizations given, including horizontal spaces being better suited to collaboration and putting offices closer to the company's target clientele. More often, though, I think it's a thinly veiled exercise in executive privilege. Offices along the 101 corridor are relatively close to affluent areas where C-Suite decision makers live, even if they're a longer commute for ordinary workers. The Brookings Institution has done really good research into job sprawl, although it needs to be updated:

https://www.brookings.edu/?s=job+sprawl

[AZSunHiker]

Downtown Phoenix kills it with market rate housing (many of Tempe's projects are student oriented which belie its success) while Tempe has the premier office properties.

Have you not looked at 140 E Rio? They had two units sell for $2.3 million earlier this year. I'd much rather have views of the Lake, Papago, and Camelback than of downtown or Midtown.

https://www.zillow.com/homedetails/140-E-Rio-Salado-Pkwy-UNIT-709-Tempe-AZ-85281/82385823_zpid/?

[AZSunHiker]

Offices along the 101 corridor are relatively close to affluent areas where C-Suite decision makers live, even if they're a longer commute for ordinary workers.

Offices along the 101 are also closer to the white collar office workforce which is more characteristic of the East Valley than West Valley. You can see the discrepancies in the education of the workforce via the Census Reporter or MAG Commute Shed reports.

https://azmag.gov/Programs/Maps-and-Data/Commute-and-Workforce/Commute-Shed-Reports

[exit2lef]

Originally Posted by AZSunHiker

Offices along the 101 are also closer to the white collar office workforce which is more characteristic of the East Valley than West Valley. You can see the discrepancies in the education of the workforce via the Census Reporter or MAG Commute Shed reports.

https://azmag.gov/Programs/Maps-and-Data/Commute-and-Workforce/Commute-Shed-Reports

Yes, that's true. It works out well for software engineers and financial analysts, but not so well for the people who clean their offices and prepare their food.

Editing this to add another thought: While it works out well for many white collar workers who live on the east side of the metro area, it doesn't work out well for white collar workers who prefer an urban lifestyle. I know a decent number of white collar professionals who choose to live Downtown. They're attracted to a less car-centric lifestyle with access to walkable neighborhoods and public transit, but then they find they still need to drive to work because they're reverse commuting to offices in suburban locations.

[builder03]

https://www.abc15.com/news/business/norwegian-software-company-to-establish-global-hq-in-tempe

[azsunsurfer]

I like that term Exit...job sprawl.

[exit2lef]

Originally Posted by azsunsurfer

I like that term Exit...job sprawl.

All credit should go to the Brookings Institution. I first read the phrase in one of their reports.

[builder03]

https://news.asu.edu/20250106-science-an...acility-semiconductor-advanced-packaging

[BurjKhalifa2Builder]

Originally Posted by builder03

https://news.asu.edu/20250106-science-an...acility-semiconductor-advanced-packaging

I've only seen this news from ASU and Tempe affiliated sources. How big of a deal is this? It seems like Tempe is attracting a lot of semiconductor related stuff, but I can't tell if it's meaningfully more than our peer cities (not including Chandler and Peoria who have actual chip plants, of course)

[Obadno]

Originally Posted by BurjKhalifa2Builder

I've only seen this news from ASU and Tempe affiliated sources. How big of a deal is this? It seems like Tempe is attracting a lot of semiconductor related stuff, but I can't tell if it's meaningfully more than our peer cities (not including Chandler and Peoria who have actual chip plants, of course)

Arizona has been a Semi Conductor hub for the USA since the 1950's quite frankly had we not gotten some of this federally backed incubator/research plans it would be a snub.

It's a big deal, but not as big of a deal as the billions already dropping on Intel, TSMC, Amkor etc. all working on ramping up or building out fabs en mass for the last 5 years. Chips are going to continue to be a leading high value industry for the valley and this only further cements that.

[az_daniel]

the real value here is the opportunity for the phoenix area to host a complete chip ecosystem - something no other american city can offer. a strong research/development foundation bolstered by an established talent pipeline through partnerships with ASU and MCCC should make Arizona the default for any chip related investment, large or small, to strengthen that ecosystem. That puts Arizona in position to compete at a high level internationally for decades.

Phoenix is now THE place you think of when you think of high tech manufacturing.

[Obadno]

Originally Posted by az_daniel

the real value here is the opportunity for the phoenix area to host a complete chip ecosystem - something no other american city can offer. a strong research/development foundation bolstered by an established talent pipeline through partnerships with ASU and MCCC should make Arizona the default for any chip related investment, large or small, to strengthen that ecosystem. That puts Arizona in position to compete at a high level internationally for decades.

Phoenix is now THE place you think of when you think of high tech manufacturing.

It will be really interesting to see how much we can leverage more vehicle manufacturing as well as robotics as these fields grow and we have such huge direct influence on the production of these items. They marry very well together. Even just computing depending on how serious tariffs are on Asia.

There was just an article the other day about meetings between Arizona and Mexico for them to do lower end electronics leveraging Arizona chips

This is all very good for our state.