Just in time for Halloween, the Arizona Republic published a story headlined, "Massive West Valley development to launch." It reads in part: "Two Phoenix-area developers, John F. Long Properties and the Alter Group, are planning a massive mixed-use commercial development in the West Valley that will span Phoenix, Avondale and Glendale. The project is made up of three separate parcels totaling 1,500 acres and likely will take decades to complete, the developers said." It went on to promise 3 million square feet of "employment space," 10,000 jobs and represent an investment of half-a-billion dollars.
The immediate "deliverable" is much more modest: A 60,000-square-foot medical office building at Thomas and the 101, for an unnamed client (guesses whether it is one stolen from elsewhere in the region?). Long and partners have been assembling and hanging onto this land for decades — that's part of the back story not mentioned in this article. Another is that many of these plans were rolled out in the mid-2000s before the roof fell in. Unanswered is who would finance such a massive project in one of the worst real-estate markets in the country, or how it could be filled with so much unoccupied space already sitting on the market where such deals as exist are filching clients from existing buildings rather than growing the economic pie.
The reality confronting the Phoenix real-estate economy is far different from the closed loop of local-yokel zombie boosterism.
Some interviewees tout the city’s rising-from-the-ashes potential. “Continuing population growth could make for a comeback story,” and the tortured housing market finally stabilizes after values dropped more than any other large market (56 percent) except Las Vegas (59 percent). Office vacancies start to dip into the low (but still uncomfortably high) 20 percent range, helped by a development shutdown, and job growth helps promising absorption resume. Doom-and-gloomers point to the region’s dependence on construction-related employment, back-office work, and retiree-based growth. “Don’t rush back”: the city “lacks big companies and brainpower jobs,” while the wide-open desert environs provide no barriers to entry, and inevitable overbuilding subdues investment returns. Bottom-basement pricing arguably provides acquisition opportunities, although cautious buyers wonder whether the nation’s economic drag will temper any typical hot-growth cyclical boom. For the future, the prospect of dwindling water supplies could restrict development and curtail the golf-based resort industry.
With the industry facing "a long grind," the places doing well are real cities with density, talent, walkable downtowns and neighborhoods, and diverse, high-quality economies. The top "wealth islands" with populations of 3 million or more are Washington, D.C., San Francisco, New York City, Boston and Seattle. Austin does well among the smaller markets. About Seattle, for example, it states: “ 'Starting to fire on all cylinders,' Seattle bounces back thanks to its diversified new age corporate base, including Amazon, Microsoft, and Google, as well as other formidable employers like Boeing, Costco, and Nordstrom. Even Facebook and Sales Force move into town, tapping a wellspring of local brainpower drawn to the attractive Northwest gateway for high-paying tech jobs."
From everything I can tell, what power brokers as exist in Phoenix haven't learned a thing from the biggest collapse since the Great Depression. The metro area is vastly overbuilt with the kind of suburban schlock of which we already have too much. It is a poster child for the startling turnaround in poverty statistics, where the majority of the poor are now located in suburbia.Treehugger commented on this phenomenon:
The scary thing about this is that unless some of these issues are tackled head-on, this could lead to a vicious cycle: Oil prices will continue to rise, making transportation even more difficult, and lowering property values in more remote suburbs even further. Some suburban cities are already seeing their well-off residents relocate -- as they do so, they lose vital revenue streams from property taxes and such, and lose the ability to provide the sort of robust social services that will become even more necessary in coming years.
Phoenix's problems don't end there. Unemployment is high and wages are low. The economy remains very narrow and low-end, particularly compared with peer cities and considering the "carrying costs" of such a populous metro. Unlike every other major metro, there is no real economy that provides the engine for real estate. Real estate is the engine. And it faces... The debt overhang confronting house owners and potential buyers is huge and could linger for years. The inventory of empty houses remains extremely high. Lending for the old, massive "master planned community" subdivisions is non-existent. Fewer people, especially young, college-educated, want to live a totally car-dependent life in amorphous subdivisions in the middle of nowhere, particularly when that nowhere is facing a rough ride from climate change. Many baby boomers want to "retire in place" in vibrant cities.
Yet it seems the Real Estate Industrial Complex borg is just waiting for the old growth machine to somehow sputter to life. That's a dream. For Phoenix's future, the continuing denial is a nightmare.