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PHOENIX-Blasting myths, supporting trends and determining if the Phoenix metro could conceivably become the next Inland Empire were among the many topics explored at yesterday’s second annual RealShare Phoenix.

Concurrent sessions covered the latest in multifamily trends, identifying opportunities in an extraordinarily active market and updates in office leasing and capital availability. Meanwhile a trend-oriented town hall meeting explored facts and fiction about the market, with a focus on the West Valley. RealShare Phoenix, along with other RealShare events nationwide, is produced by Real Estate Media, publishers of GlobeSt.com, GlobeSt.RETAIL, Real Estate Forum magazine and other print and online publications devoted to commercial real estate.

The conference opened with a “fact or fiction” session, answering questions about if $45-plus per sf leases will emerge in the Camelback submarket and if the new Arizona State University campus and planned light rail would revitalize the CBD. Lincoln Property Co. executive vice president David Krumwiede and Alter Group senior vice president Kurt Rosene took different sides on the issue that Phoenix was on a fast track to becoming the next Inland Empire. Neither denied that, for various reasons, the industrial market is enjoying a boom.

Krumwiede pointed out that Phoenix’s positioning just a handful of hours from the ports of Long Beach and California makes it a natural progression for companies shipping cargo east. “The fact is the Inland Empire is built out and it’s full. People are looking to Phoenix,” he said. “It’s less expensive here. And there’s space.”

Rosene believes Phoenix is too far from the ports to legitimately be considered a logistical alternative to the Inland Empire. Nonetheless, he pointed out that the metro is playing host to companies unable to develop in Southern California. “The pricing is crazy in Southern California,” he added, “and they’re fast running out of parcels to buy and develop out there.”

Whether or not Phoenix could become the second Inland Empire also was explored in a break-out session. “We’re beautifully positioned as an alternative to the Inland Empire,” said Jonathan Tratt, principal with KT Riverside LLC. “The prospects here are phenomenal. Add to that it’s only a one-day truck ride between here and Los Angeles. Even if the driver is only that of overflow, it’s still a huge driver.”

Pat Gallagher, senior vice president with the Alter Group, said that, because they’re closer to Los Angeles and the ports, the west submarkets are gaining in popularity among many tenants. But, he cautioned the metro area shouldn’t be considered a stepchild of the Inland Empire, Ontario or any Southern California submarket. “The Phoenix market has matured,” he added. “Several years ago, we wouldn’t be considered in this light. Users coming to the area these days are consumer product companies actually serving the area and the region rather than satellite offices of Los Angeles companies.”

The problem the industrial market continues to struggle with is not much supply and increasing demand. Tony Lydon, senior vice president, Grubb & Ellis/BRE Commercial LLC, pointed out vacancies area-wide are hovering between 6% and 7% in the 250-million-sf inventory. Although seven to eight million sf will deliver this year, there are barriers to development: shrinking land base, ever-expanding entitlement process and rising construction costs.

But, the panelists agreed that the challenges had a positive impact because they prevent overbuilding. “In the short term, yeah, we could see some overbuilding and increasing inventory,” Gallagher said. “But if it gets overbuilt, it all stops until inventory gets absorbed.”

Lydon explained the main challenge to any development is infrastructure, or rather, lack of it. “If an investor has an opportunity to get land with utilities, he needs to think about it,” he said. Another obstacle in some area markets is lack of labor, which also could present a development challenge.

The industrial market also took center stage during the town hall meeting: “Has the red-hot Phoenix and national commercial real estate market reached its peak.” The participants acknowledged there is still room for growth in Phoenix, plenty of room. But that growth is attracting more national and international investors and developers with deep pockets. And like their peers in the industrial session, they spoke about tightening supply and overwhelming demand. “In spite of the industrial activity, a number of users who couldn’t find a home in Phoenix went elsewhere,” said Jim Wentworth, principal of Wentworth Property Co.

Infrastructure also was an issue for a session entitled “Will the West Valley be the next boom market.” The majority of the panelists were extraordinarily positive about the West Valley, claiming it is a boom that will likely go on for two decades or more. But the boom, which is mainly residential and retail, won’t attract much in the way of office development unless transportation infrastructure–specifically east-west roads–is improved. “If we don’t provide a better east-west corridor through White Tank Park, there’ll be difficulties,” predicted Jack Lundsford, president and CEO with Westmarc.

Grubb & Ellis/BRE’s senior vice president Brent Moser pointed out that some east-west roads are on the drawing boards, mainly Loop 303. “There needs to be an exploration of alternative mechanisms to funnel traffic,” he added.

Panelists suggested municipalities should band together to figure out infrastructure and other needs because growth is definitely coming to the West Valley. John Schottenstein, CEO and designated broker with NAI Horizon, independent broker Dan Colton, Don Shilkes, senior sales associate with Coldwell Banker Commercial, and Rick Burton, president and CEO of Rightpath Development pointed out that if the municipalities in the West Valley did nothing, they could be caught short with the growth. “The market is emerging right now,” Burton added. “Municipalities don’t want to be caught unaware by the coming wave.”

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