Why Downtown Phoenix Still Has A Runway Ahead

A number of U.S. cities' urban cores have seen remarkable change in the years after the recession — think Boston, Seattle, Austin — but Phoenix is special in that regard, according to the speakers at our Future of Downtown Phoenix event. Downtown Phoenix is still in the early stages of its growth, with a lot of room left to run.

The main reason Downtown Phoenix still has a lot of runway, the speakers said, is residential growth has been relatively slow until very recently. That's slow compared to other cities attracting educated Millennials, although not that slow compared to the last decades of the 20th century, when the suburbs expanded and few people wanted to call Downtown Phoenix home.

Even so, a solid urban environment was coming into place, as the result of smart-growth public policies and a private sector that supported growth in Downtown Phoenix. The development of light rail and the growth of ASU's Downtown presence were two big shots in the arm for the area. Now people want to be here, and development is accommodating them. Some 2,000 new apartment units are underway in Downtown Phoenix.

Pictured here: ASU VP Rick Naimark, Urban Development Partners principal Todd Marshall and Holualoa Cos COO Stanton Shafer.

Public and private efforts have led not only to a light rail system and a university Downtown, but also a basketball arena, a baseball stadium, a new convention center and a biomedical campus. The growth of that kind of job-creating and people-attracting infrastructure is hardly over, our speakers said.

The Phoenix Biomedical Campus, for example, will continue to expand, becoming even more of a major economic engine for Downtown and the entire state. As people move to the area for the jobs created here, new restaurants, shops and entertainment will follow. Growth in one sector (residential) is encouraging growth of other sectors (retail, entertainment), which further encourages residential development.

Here are Plaza Cos CEO Sharon Harper and Downtown Phoenix Inc director Dorina Bustamante, who moderated the Central Phoenix panel.

Challenges come with the growth of Downtown Phoenix, the speakers said. For developers, construction costs, especially labor, are on the rise, as they are in a lot of markets. That's especially true because of a shortage of skilled workers. Also, financing is getting tight. Construction financing in particular has tightened considerably, especially for office and hotels.

Are too many new apartments going to come online? That's happening in other markets, especially high-rent markets that have attracted a lot of upper-end multifamily development. Too much Class-A, not enough everything else. That probably isn't the dynamic in Phoenix, because the market's still early in the cycle, speakers said, and as more people move Downtown, more people want to live there. 

Above: RED Development VP-development Jeff Moloznik, P.B. Bell VP-development Michael Trueman, and ExperGroup founder Bill Hansen, who moderated the new developments panel.

Transit is another challenge. The light rail system's been a boon, but it is only the beginning. Phoenix is improving its bus system by providing more buses that run later and to more places, to connect with the expanding light rail system. That might not have the allure of light rail, but it will be an important part of the puzzle, because not everyone can afford to live near a light rail node.

Improving Downtown's walkability is also an important task that lies ahead, with improvements in shading and street-crossing safety at the top of the list. A more walkable Downtown will be more attractive to Millennials, especially as they start families, and everyone else interested in living there.

Here is DWG Phoenix owner Daniel "Buzz" Gosnell, Trammell Crow VP Paul Tuchin and Downtown Phoenix Inc CEO David Krietor.

Also speaking at the event was LevineMachine owner/CEO Michael Levine, whose company specializes in redeveloping vintage properties in Phoenix. The Kobold Group founder/chief acquisitions officer Scott Hintze spoke as well. Scottsdale-based Kobold specializes in commercial build-to-suit construction, along with monetizing retail assets through sale/leaseback. 

The event was held at an unusual venue for Bisnow: the Beth Hebrew Synagogue, which was built in 1955 and is one of nine historic landmark buildings that LevineMachine has saved from the wrecking ball and brought back to life in the Warehouse District and Roosevelt Row.