Westcor to Begin Planning for 40-Year Development in Tucson

Gail Kalinoski, Commercial Property News

Phoenix-based mall builder and operator Westcor is poised to receive a permit allowing it to make plans for the future development of 12,000 acres of state-owned land in southeastern Tucson.

Arizona Star reporter Rob O'Dell wrote in the newspaper's Jan. 2 edition that officials of the Arizona State Land Department and Westcor, a wholly owned subsidiary of Macerich Co. in Santa Monica, Calif., are about a week away from signing off on a deal that would allow Westcor to create a master plan for the area. City officials told O'Dell that Westcor could spend up to $12 million in the next year making site plans.

State Land Department Commissioner Mark Winkleman and Deputy Commissioner Jamie Hogue noted in various news reports that the state would retain ownership of the land and that Westcor would have to bid on development parcels along with any other interested developers. Hogue told the Arizona Daily Star that the site is so massive that it could take up to 40 years to build out. It is expected to include plans for developing commercial and residential projects as well as keeping open space.

Hogue was out of the office today and Winkleman was not available for comment before press time.

The state-owned land runs from South Harrison and East Irvington roads south to the Union Pacific Railroad tracks and east past Houghton Road, according to the newspaper's story. Land along Interstate 10 would also be included in the site plan.

Kent Simpson, a realtor with The Pepper Group Diversified Real Estate in Tucson who writes a local real estate blog, told CPN today that many of his colleagues were "taking a wait and see attitude to see what actually becomes of it." Simpson, who specializes in residential real estate, said the people in Tucson are starting to embrace managed growth to handle traffic, sewer and water concerns.

"Forty years is a good way to plan that way because water is going to be a really huge issue," he said. "People are starting to embrace (managed growth). They see growth as inevitable and it's better to have it planned and managed than have it sprout up willy-nilly all over the place."

Simpson said Westcor is known in the area for its development of high-end shopping centers and open-air lifestyle centers such as La Encantada in Tucson. Founded in 1969, Westcor was acquired by Macerich in 2002 for $1.5 billion. Westcor's portfolio includes 28 shopping centers, including 11 super-regional centers, three specialty retail centers and 14 urban villages. Most of its holdings are in Arizona, such as the Scottsdale Fashion Square mall and Kierland Commons in Phoenix.

Arizona Now Tops the Nation in Growth
Breaks Nevada's 20-Year Grip on the Title

By Howard Fischer, Arizona Daily Star

New figures today from the U.S. Census Bureau show Arizona is now the fastest-growing state in the nation. Its 4 percent population increase between 2005 and 2006 broke the stranglehold Nevada had on the title for the prior 20 years.

The addition of 220,000 Arizonans during that period boosted the official state population to 6,500,000 -- good enough to bump Tennessee, which added only 83,000 new residents, from its spot as the 16th-largest state in the nation. When the last formal census was taken in 2000, Arizona was just 20th. The state is only about 300,000 residents behind Massachusetts, which is growing at just 0.6 percent a year.

Lawmakers pumped an extra $345 million into the budget last session to accelerate road construction. But they were able to do that only because the state was running a surplus, permitting legislators to provide a tax cut and finance new programs.

The Arizona Department of Housing said that about 47 percent of renters and 27 percent of homeowners paid more than 30 percent of income for housing -- a figure the agency considers the benchmark of affordability.

So far, all that growth has not translated into higher unemployment. In fact, new figures released Thursday by the Department of Economic Security put the state's seasonally adjusted jobless rate for November at 4.1 percent, down from 4.7 percent a year earlier. The nationwide rate is 4.5 percent.

New residents also mean new schools -- lots of them. The state School Facilities Board already is planning to build 31 schools this budget year to accommodate 29,000 youngsters.

According to the Census Bureau, 130,000 people moved here from other states. Another 30,000 are international migrants.

Growth Increase in Population from 2005 to 2006:

• Arizona: 3.6%
• Nevada: 3.5%
• Idaho: 2.6%
• Georgia: 2.5%
• Texas: 2.5%
• Utah: 2.4%
• North Carolina: 2.1%
• Colorado: 1.9%
• Florida: 1.8%
• South Carolina: 1.7%

Source: U.S. Census Bureau

Arizona Tops Nevada as Fastest Growing State

By STEPHEN OHLEMACHER, CNN

WASHINGTON (Dec. 22) -- Arizona: It's not just for retired Midwesterners. Arizona is attracting people from across the U.S. and across the border at such a pace that it is now the fastest-growing state in the country, replacing Nevada, which had held the crown for 20 straight years. The new population figures were released by the Census Bureau.

"It used to be merely a retirement magnet for Midwest seniors," said William Frey, a demographer at the Brookings Institution, a Washington think tank. "Now it's an escape hatch for Californians seeking affordable housing."

Arizona led the nation with a population growth rate of 3.6 percent in the past year, followed by Nevada, Idaho, Georgia and Texas. "Every area where there's private land there's some form of development going on or being considered," said Century 21 real estate offices in Phoenix and Sierra Vista. "We've been in the business 25 years and we have never seen anything like this."

Wuerch said Arizona's real estate market has cooled after sizzling for several years. Still, he said, the market remains stronger than in other parts of the country, with growing medical and high-tech industries providing the jobs, and the sunshine providing the allure. "Good climate and affordability seem to be the draws for Americans this decade," said Frey, the demographer.

Forecasters See Real Estate Riding Population Wave

By "Inside Tucson Business"

Although Tucson rests in the middle of the Sonoran desert, the city's rising tide is expected to continue raising all boats, at least when it comes to the real estate market in Southern Arizona.

In their 15th annual industry recap and forecast, members of the Tucson area chapter of the CIM real estate networking and educational association, heard from last year's winning forecasters and additional industry experts. The forecasters said that Tucson's continuing influx of residents will keep all sectors booming for the indefinite future.

Noting that the CIM conference attracted almost 400 participants for this year, a record for the Southern Arizona chapter, CIM president said, "This is testimony to both the strength of the market and the level of interest in it."

"Macro-economic events affect everything," said 2005 appraisal forecast winner, principal of MJN Enterprises. "In Tucson, our drivers start with the housing market, and while housing starts here are high in relation to the number of new residents, as compared to other cities, loan service costs in relation to individual debt remain low, indicating that there's no risk of a housing bubble."

What the city's housing numbers do point to is continued pressure on construction costs and land prices, which will push up apartment prices, put a premium on retail space nearest the new housing and more demand for offices and industrial property.

"When 2004 was the hottest market on record, nobody expected 2005 to be even hotter," said a accredited land consultant. "We normally average about 2.5 people per house. If you look at the 28,000 people who moved to Tucson in 2005, a total of 11,200 homes were sold to meet their needs. That means 1,000 homes were sold to meet speculator demand, but even with these homes back on the market, I would still predict 10,000 new homes sold in 2006."

"That total also subtracts the potential purchasers of condominium conversions. With between 2,500 and 5,000 of them planned, mostly for the Catalina Foothills, they will make their mark," the consultant said.

Beyond Tucson, he said even more sales are likely outside of metropolitan boundaries as the city's growth continues on the periphery in Catalina, south on I-19 and beyond Vail into the Benson area. "As office and home builders compete for land, we could continue to see that outward pressure with 500 homes sold, in 2006 alone, in Cochise County."

"Another result of the home sales, themselves, has been fundamental changes in the development process," said a major Tucson Division Builder President. He said the growth of the city and changes in accounting rules mean developers are more likely to acquire unimproved property than take option on it. "We're closing on the land at the preliminary plat, rather than waiting until the final plat."

He said booming sales, which have left real estate developers with a lot of cash, mean there's more to spend on future land inventory. Combined with post-Enron accounting rules that mean land development work "goes on the balance sheet whether we own the land or not, we feel we might as well own it."

As for the condominium market, a Tucson developer, said it's no longer about price. Along with the Catalina Foothills, he said a total of 1,300 condominium units are planned for downtown.

"More residents are choosing the option," he said. For the first time, this group includes those who prefer single-family attached to traditional single-family residential. "They prefer the controlled access and the various amenities that the former apartment complexes offer."

Despite competition from the condominiums and people priced out of the market by increasing home costs, he said, "I would forecast a fantastic year for the industry."

By comparison, the market for multi-family housing will continue to be constrained by a lack of available land and capitalization rates less than mortgage rates, said a founding partner of a Tucson real estate company. Condominium conversions have pushed up per-unit prices and slashed the available inventory, but comparisons between rents in Albuquerque and Las Vegas and household income demonstrate that rents remain lower. "So, there's still a lot of room to raise them."

He called the real estate market "a perfect storm" for buyers and sellers. "There's no where to go but up, which means things are just going to get better and better."

Keeping pace, retail and office markets are also headed upward. "Downtown Tucson retains its 15-year inventory of available space, and retail or office space in older areas," said a president of a Tucson commercial company. "The retail vacancy rate is 8 percent, the lowest since 1988, with the lowest vacancies following the rooftops," he said. With master-planned communities becoming the standard, "developers are answering with better design, meeting the increasingly more local needs of the tenants."

They're also working to meet municipal government demands for designs that fit into the community setting and attention from national retailers. "As the city approaches a million in population they're looking at Tucson with new eyes."

Examining the status of the finance market and mortgage rates, a business development officer for last year's winning Wells Fargo Bank, said the decade-long relative stability of premium mortgage rates will continue, even if continue to slowly climbs. The only thing that will change is the amount of cash available for loans, which should tighten as investment returns to the stock markets, "and this will benefit the real estate market by making investors shift back to looking at market fundamentals."