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Posted Jan 24, 2020, 4:44 PM
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Join Date: Jan 2010
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Some PBJ articles about the apartment boom with some nice little tidbits about maybe other future projects:
Sorry about the terrible formatting.
Quote:
PAYING UP FOR URBAN LIVING
More professionals are looking at downtown Phoenix as a place to live, even as prices rise quickly for new apartments and houses amid a flurry of high-rise development
By Angela Gonzales – Senior Reporter, Phoenix Business Journal
Jan 24, 2020, 5:00am MST
After graduating from Arizona State University, Zachary Rall moved into a Tempe apartment, then lived in Old Town Scottsdale for a few years.
But the co-founder of commercial real estate investment company B&R Capital Partners wasn’t getting the urban feel he wanted.
“I’ve always wanted to live in a big city like Los Angeles or New York,” said the Arizona native. “When my partner and I started our business 18 months ago, it necessitated us to stay here. Downtown Phoenix is the closest we can get to a big-city feel.”
While Tempe and Old Town Scottsdale seem geared more toward a younger, professional demographic, the central core in Phoenix feels more grown up, Rall said.
“This is a little bit cool and hip but more mature,” he said.
In July 2019, Rall, 30, and his wife, Diliana, 28, found a 1,400-square-foot, two-bedroom apartment for $2,100 a month at the 44 Monroe Luxury Apartments at the northeast corner of First Avenue and Monroe Street in downtown Phoenix.
What the Ralls are paying in rent is typical for that part of town. While the Valley overall has seen a boost in rental
and home prices, the city’s core features prices significantly higher than regional averages, though not as pricey as some communities in north Scottsdale. For now, the professionals moving into downtown aren’t deterred by rising prices.
Higher cost of living
The Ralls’ rent is more than the $1,706 average monthly rate for the 85003 ZIP code — which is the highest apartment rental rate in the downtown and midtown area of Phoenix, according to data compiled by NorthMarq for the Phoenix Business Journal.
The next highest monthly rental rate is $1,560 in the adjacent 85004 ZIP code, said Peter O’Neil, research director for NorthMarq in Phoenix.
“There are dozens of new projects that are commanding some of the highest rates in all of metro Phoenix, while there are also many older complexes where rents are at or below the market average,” he said.
Downtown is not unique for high rents as prices are rising throughout metro Phoenix, O’Neil said.
“The areas close in to the city core recorded annual rent gains from about 6% to 12% in 2019, with an average of approximately 8%, while the more suburban locations showed similar gains,” O’Neil said. “For the year, the market posted an average annual increase of 9.4% in 2019. Wherever you’re looking for rentals in Phoenix, the reality is, rents are probably going to be on the rise.”
Living in downtown Phoenix does come at a price, especially for home ownership, said Molly Boesel, chief economist for CoreLogic.
While the median price for an Arizona home is $262,000, that price bumps up to $280,000 in metro Phoenix. U.S. median home prices are $232,000, Boesel noted.
“You have the 85003 ZIP code quite a bit above that,” Boesel said, pointing to a $374,000 median home price in 85003, a narrow strip running down Central Avenue from Thomas Road to Lower Buckeye Road, and Seventh Avenue on the west.
“The rest of the ZIP codes are falling in line there, and 85034 is kind of a bargain compared to the other ones,” she said of the area surrounding Phoenix Sky Harbor International Airport.
Paying higher rents to live downtown is worth it to Rall, who moved his B&R Capital Partners’ office downtown in November. Now he walks to work, which is just north of the newly opened Fry’s Food Store at 125 E. Washington St., where he and his wife walk to pick up a few groceries for dinner. They’re only a couple of blocks from the Crescent Ballroom and the Van Buren night life.
And if they don’t want to walk all the way to a restaurant on Roosevelt Row, they’ll rent scooters. Rall said he never uses his car anymore and is considering selling it.
“I love it, personally,” Rall said. “I know there’s 15,000 units coming in the next couple of years. It’s been the last thing that downtown Phoenix needs.”
While he’s not interested in moving into a historic home in downtown Phoenix, he said he’ll consider buying a condo.
Feeding the housing boom
That kind of love for downtown living is music to John Graham’s ears.
Graham, the chairman and CEO of Scottsdale-based Sunbelt Holdings, has one condominium left to sell at the company’s 149-unit Portland on the Park, 200 W. Portland St. He already is turning his eye toward building Jefferson Place at 1 E. Jefferson St. The building is the former Jefferson Hotel, featured in Alfred Hitchcock’s movie, “Psycho.”
“The time has arrived,” said Graham, who has owned that property for two years. “There is a lot of ongoing growth and things like the light rail and the sports arenas.”
John Graham, president and CEO of Sunbelt Holdings, sees room for growth in downtown living.
The development of Arizona State University’s downtown campus, the Phoenix Biomedical Campus expansions, and the Fry’s store are game changers to getting more people to live downtown, he said.
Plans call for building 150 condos at Jefferson Place that will average 1,500 square feet and cost about $1 million each. Graham estimates total development costs to be north of $100 million for that project, which will be financed by traditional debt and equity partners.
“I’m higher than a kite on downtown Phoenix,” Graham said.
Rajen Shastri, founder and CEO of Chicago-based Akara Partners, is equally excited. He’s in the midst of building the 320-unit Kenect Phoenix at 355 N. Central Ave., across the street from ASU’s downtown campus.
That 23-story tower will include 4,000 square feet of retail and a coworking space.
While Shastri previously served as COO for Campus Acquisitions that built student housing for ASU in Tempe and University of Arizona in Tucson, this is the first housing project for Akara Partners in Phoenix.
Kenect Phoenix is not considered student housing, but it will appeal to ASU students interested in sharing space in the three-bedroom units.
Sharing space, lower rents
Still, the by-the-bed program — somewhat similar to what the $150 million X Phoenix will offer at Second Avenue and Van Buren Street a few blocks away — isn’t just for students.
“A lot of people out of school want to live in that roommate format,” Shastri said. “We see that in many markets around the country — an elongation of college life. They still want to live that lifestyle.”
Shastri said he’s investing about $1 billion in Kenect projects across the country, with financing from a variety of sources, including banks and equity partners.
He describes Kenect as affordable luxury, targeting rents 20% below the market average for comparable luxury products with the same unit type.
“I don’t have to tell you Phoenix is hot,” Shastri said. “And it’s not just the weather.”
More employers and employees are relocating from California to Phoenix while seeking a lower cost of living, he said, and once they arrive, they find a place with great infrastructure, transportation and cultural amenities.
“We love it for all those reasons,” he said.
Going for density
Christine Mackay, Phoenix’s economic development director, hasn’t seen this much interest in downtown housing in her 25 years in the business.
“I can’t keep up with this book of business,” she said. “That has never happened before.”
The other day, she climbed to the top of one of the 190-foot cranes to get a view of the city and counted 14 cranes in the downtown Phoenix area.
She remembers when downtown office workers had to grab lunch before 2 p.m. before the restaurants shut their doors.
“We had an eight-hour economy,” she said. “You came in at 8 a.m. and left at 5 p.m. and the only time you came back downtown was for a [Phoenix] Suns game, an [Arizona] Diamondbacks game or a concert.”
The big shift, Mackay said, is that the area is becoming sustainable. Potentially there will be 12,000 more people living around downtown during the next 24 months — and that means more retail will follow, on the heels of last October’s opening of the new downtown Fry’s Food Stores market.
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So looks like there is still potential for "barrister" AKA Jefferson Place and they'll be condos.
Quote:
As developers eye downtown and midtown Phoenix for future work, density will be a big driver in how these projects get built.
“Density will be critical for downtown housing because there is no or little vacant land and its scarcity makes it more valuable than suburban land,” said RL Brown, publisher of the Phoenix Housing Market Reports. “Likewise, for the most part, in-town housing will have more judicious use of square footage for the same reason. I would not expect to see any traditional detached homes but much more high-density urban offerings.”
Apartment units in downtown and midtown Phoenix, called Central City, generally are smaller than in the suburban submarkets, said Peter O’Neil, research director for NorthMarq.
“So while the average rent per unit will be a little lower on average, the rent per square foot is very similar to the market as a whole,” he said. “This is consistent with more dense city living. When comparing suburban versus downtown/midtown/central rents, it’s probably more useful to compare rents on a per-square-foot basis than on a per-unit basis.”
Patricia Watts, co-founder and partner of Scottsdale-based Greenlight Communities LLC, is looking for land to build more affordable housing projects in the uptown, midtown and downtown Phoenix areas.
“To meet these goals, we require economies of scale, which means sites that will allow us to build at least 200 units,” she said. “This density is critical to the development of the projects.”
The land along Central Avenue is too expensive for this type of project, which means Greenlight most likely will seek land a half mile off Central Avenue to still be within that corridor.
Greenlight is investing $325 million to build 2,500 Cabana-brand units across the Valley during the next two years.
“The need is there for attainable rental housing,” Watts said.
Density also is crucial for Chicago-based Akara Partners, which is building Kenect Phoenix, a 320-unit tower across the street from Arizona State University’s downtown campus.
To fit that many units on a half-acre parcel requires building vertical, said Rajen Shastri, founder and CEO of Akara Partners, which has $1 billion worth of development for these types of properties nationwide.
“From an urban densification standpoint, going vertical is a natural progression for a city like Phoenix to go through in this life cycle,” he said.
That means units will be smaller, he said, with studios around 300 square feet, one-bedroom units around 500 square feet and three-bedroom units around 1,150 square feet.
“There are going to be more people coming to Phoenix,” Shastri said. “The natural way to build in Phoenix is to go vertical because the city is getting more and more dense.”
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