Phoenix, Arizona

Regional Analysis

The Phoenix-Mesa-Scottsdale Metropolitan Statistical Area (Phoenix MSA) is located in south central Arizona and includes Maricopa and Pinal Counties.  Located in Maricopa County, Phoenix is the capital of the state, and the largest incorporated area within the MSA with an estimated population of roughly 4.6 million.  Although population growth slowed as a result of the recession, according to Moody’s Analytics, the Phoenix metro should post average yearly growth of 2.4 percent through 2019.  Affordable housing and strong employment growth is expected to spur increased population growth.

Commonly referred to as the “Valley of the Sun”, Phoenix has a warm climate with optimal weather most of the year, making the region a desirable location for residents and winter visitors alike.

The following area notable points about the Phoenix MSA:

  • Due to its central location in the rapidly growing southwestern quadrant of the United States, Phoenix has evolved into a commercial and distribution hub.  During the past three decades, the area’s low business costs, housing affordability, and proximity to major southern California markets such as Los Angeles and San Diego have made it an appealing business-friendly environment.
  • Quality lifestyles, unique developments and proactive business environments provide the catalyst for future success in the growing Phoenix MSA communities.  Two especially noteworthy communities are Gilbert and Chandler.  The Gilbert suburb is fast becoming one of the leading locations for healthcare in Greater Phoenix by providing state-of-the-art medical care, holistic care alternatives and an increasing supply of medical offices.  Chandler is one of the fastest growing high-technology manufacturing cities in the West, which has helped it earn the nickname “The Silicon Desert.”
  • The Phoenix metro has created a technology environment that is easier for entrepreneurs and startups, aided by a growing and young educated workforce plus an office market that is more affordable when compared to competitors in other markets.  As noted in the September 2015 Phoenix Business Journal and according to a new report by CBRE, Phoenix tied San Francisco for the best high-tech job growth among major North American markets over the past two years, posting a 42.7 percent increase and adding 12,662 new high tech jobs.  In terms of percentage growth, Phoenix had higher rates than Austin, Silicon Valley, New York, and Seattle.  Arizona and the Phoenix metro are already home to several well-established tech giants, including Apple, Intel, IBM, Microchip and GoDaddy.  Representing the aerospace and defense industries are Raytheon, Honeywell, Boeing, Orbital, General Dynamics and Freescale.  These and others put thousands of people to work and are helping to restore the region’s economy.

The Phoenix economy continues to gain momentum, with increased job growth in most sectors throughout 2015.  Moody’s Analytics noted regarding the metro, “Phoenix will prove to be one of the strongest large metro areas in the coming years.  Growth will be powered by well-paying professional services and healthcare, with tourism-related industries making a more modest contribution.  The decline of public payrolls bears watching, but near-term risks are stacked to the upside.  Favorable demographics and a diverse industrial base suggest Phoenix will best the nation longer term.”

Additional considerations are as follows:

  • Despite an influx of new workers, the labor market has tightened and demand for skilled labor will enable workers to negotiate higher incomes.  Personal income growth is expected to accelerate through early 2016 as a result.  Moody’s predicts, “In coming years, the effects of higher incomes, when combined with improved household balance sheets, will support consumer spending and payroll gains in retail and hospitality.”
  • The region’s still-affordable housing will boost demographic trends.  Additionally, the metro’s status as an inland trade hub with lower business costs than those in California will attract businesses seeing access to global markets.  These lower costs help to attract corporate headquarters and manufacturers to the region, such as State Farm’s regional headquarters, which will strengthen the economy.

Local Area Analysis

The Metro Gateway Shopping Center is located within Maricopa County, in the northern portion of the greater Phoenix metropolitan area.  Generally, the boundaries of the immediate area are Greenway Road on the north, Glendale Avenue on the south, 7th Avenue on the east and 51st Avenue on the west.

Overall, the subject’s market area is mature and stabilized with a good location within the greater Phoenix metropolitan area.  The market area is primarily composed of industrial and office uses and is considered a high employment area.  The most prominent influences for the area are Deer Valley Airport and Metro Center Mall.  The proximity of the Black Canyon Freeway and Loop 101 make the local area accessible to other parts of the metropolitan area.

Retail Market Analysis

A variety of factors influence the performance of a property in the market.  The following are our key conclusions.

  • The Phoenix Retail market has been performing better since 2010, mainly as a result of rising vacancy levels.
  • Generally, the majority of the subject’s tenant mix have been at the center for 10+ years.
  • The subject demographics represent a middle to low income profile commensurate with the subject’s target demographic.
  • The Metro Center Mall has been a driver of the immediate area.  The center has struggled in recent years but is in the process of being repositioned.
  • The subject has good accessibility via the regional Interstate network and local arterials that provide linkages throughout the Phoenix CBSA.
  • The marketplace is competitive with an abundance of available retail space in competing centers.

(Source: Cushman & Wakefield Appraisal of Real Property – Metro Gateway Shopping Center – As of January 20, 2016)