A joint venture of Toll Brothers Inc., Meritage Homes Corp. and Simon Property Group Inc. recently acquired 5,485 acres at 183rd Avenue and Joy Ranch Road for $312 million from DaimlerChrysler Corp., with plans to create a mixed-use residential, commercial and office development. Meanwhile, a Woodland Hills, CA investor paid $25 million to the Farm of Phoenix for more than 290 acres between Litchfield and Dysart roads, which will be primed for office, light industrial and retail development.
"There was a ton of competition for the land [the 290 acres]," Eric Bell, marketing associate with Colliers Classic in Scottsdale, tells GlobeSt.com. "We had four different parties make offers on the site." The Colliers Classic team included Bob Lundstedt, Mike Ciosek and Darren Tappen.
Local experts say land hunger and development in and around Surprise isn't overly surprising. "The Surprise area really started taking off in the late 1990s," says Brent Moser, senior vice president of Grubb & Ellis/BRE Commercial LLC's Phoenix office. "Now we're seeing it become a mature submarket, which is why it's so active right now."
But, maturity is only one reason for the demand. "The East Valley is running out of land," explains Iain Vasey, former economic development director for the City of Glendale and now a senior associate with Trammell Crow Co.'s Phoenix office. "All developable parcels have been purchased there already--and developed."
The pros point out that people are looking farther west for cheaper housing because the East Valley has become a more expensive place to live. "Overall, the population center of metro Phoenix has shifted farther west to where the land is less expensive," says James Mason, economic development specialist for the City of Peoria, a neighbor to Surprise. "That's where the market is now and that's where we're seeing the commercial development."
Vasey says the housing growth is just the beginning of the development wave. "Unless you're willing to pay someone $25 an hour to commute back into the city from there, the jobs will be moving out west too," he predicts.
From an investment perspective, out-of-town developers, most notably from Southern California and Las Vegas, also believe the cheaper land is going to yield higher returns in the long run. Additionally, a good chunk of Arizona land is public land--meaning developers can either go through a complicated and lengthy bidding process to obtain land, or go elsewhere. "Where growth bumps up to the public land," Moser says, "growth just shifts."
Though development might be inevitable, Mason cautions that cities need to formulate balanced approaches toward growth. "The challenge in this case is putting together a strong use plan," he says. "We need to support the infrastructure to allow office and industrial development to go along with residential development."
Moser agrees, adding both Surprise and Peoria have succeeded in staying ahead and preparing for the growth. "Others are playing catch-up as we speak and are unable to handle the extent of the growth that's happening now," he says.
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