Out-of-state developers are bullish on the Phoenix market. In addition to several notable new construction starts, developers from out of the state are calling brokerage offices regularly to find new opportunities in the market. All signs point to increased construction activity—which also means more land transactions—in 2021.
“We are very optimistic when it comes to the Phoenix market in 2021. We currently have a strong pipeline of future projects and we are receiving calls on a weekly basis from new out of state developers looking to come to this market,” Mike Sutton, a principal at Lee & Associates, tells GlobeSt.com.
Sutton and his Lee & Associates colleagues recently sold a two-acre development site in Downtown Phoenix. Aspirant Development plans to build two towers on the site totaling 1.8 million square feet. They will be the tallest buildings in the state, and will house apartments, a hotel, office and retail.
There are a handful of other impressive developments recently delivered as well. Sutton notes CityScape and The Stewart. Both of these projects have helped increase development interest and fueled land prices. “The Stewart, which is a 19 -story class-A multifamily project, opened just a few blocks up the street along Central Ave. CityScape through the efforts of RED Development & Streetlights opened across the street from Talking Stick Arena, which brought additional shopping, dining, working, living and entertainment options to the submarket,” says Stewart.
Overall, the quality of life in Phoenix is the biggest driver of new construction activity. “There is a quality of life that Phoenix brings to the table and its obviously no secret,” says Sutton. “Even through the pandemic the strength of the multifamily market fueled by increasing immigration numbers from our neighboring westerly states and elsewhere keep the pricing and market strong.”
Multifamily isn’t the only asset class under construction, but it is certainly the most popular, along with industrial. The pandemic has suppressed demand for office and hotel product, and as a result, there is less development activity for those asset classes. “New ground up projects that are solely focused on office or hotel will be slower to come but we believe they will rebound and be stronger than ever once the air clears,” says Sutton.
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