Saturday, May 3, 2008

West Valley commercial space continues growth

The Arizona Republic takes notice of the fundamentals

A Snapshot of the Delivery Entrance of the New Space Economy

Erin Zlomek
The Arizona Republic
Increased cargo traffic on Interstate 10 and the BNSF Railway tracks mean 24 million square feet of new commercial and warehouse space could be built in the West Valley by 2010, according to a report by the brokerage firm Colliers International.

Most of that construction probably would take place in Surprise, Goodyear and Buckeye.

In the northwest Valley, the BNSF's Ennis railroad spur originates in El Mirage and stretches west about 9 miles. The spur is ideal for industrial tenants looking to ship products by rail, but is used by few customers. Surprise and Glendale have about 3,000 acres of rail-served property near the spur available for sale and development, the report says.

In Surprise, the spur has generated about 900 acres of commercial development to date.

"Warehouse space is constantly going up in that area because Luke Air Force Base is prominent there, and once you start getting close to the base, you can't build any kind of residential or housing components because the noise contour lines don't allow it," said Mike Ciosek, Colliers associate vice president.

Ciosek said the housing slowdown would likely translate to a slowdown in Surprise's commercial real-estate sector but not to the point where residents might notice.

Construction continues at Westcor's retail project, Prasada, near the future Loop 303 and Waddell Road, as well as at the 290-acre mixed-use Surprise Pointe complex near Litchfield and Waddell roads.

"Regardless, those projects will get built because right now in Surprise so many people are underserved in a retail and commercial capacity," Ciosek said.

Residential and commercial construction should pick up again in Surprise once construction begins on Loop 303, he said. When that happens, Surprise could start to see high-end housing go up on the cusp on the White Tank Mountains, similar to how residents in the East Valley have built into the McDowell Mountains, Ciosek said.

In the southwest Valley, low property taxes, proximity to I-10 and California, and competitive prices have drawn several commercial developers to the area.

The cost for ready-to-build commercial sites jumped from $2.10 per square foot in 2001 to $8 per square foot in 2008, according to the Colliers report.

Construction has stayed strong in Goodyear because of the city's proximity to Phoenix and high number of building sites already served by infrastructure, said Payson MacWilliam, Colliers senior vice president.

However, the commercial market in Buckeye has softened because of the housing slowdown and the town's lack of infrastructure-served sites, he said.

Overall, sales prices and lease rates for commercial property in the West Valley are less expensive than elsewhere in metro Phoenix, according to Colliers. Those prices are expected to rise and be on par with Phoenix and the East Valley by 2020. At that time, the cost for ready-to-go West Valley sites is expected to reach $14 per square foot, MacWilliam said.

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