Chris Camacho, president and CEO of the Greater Phoenix Economic Council
Phoenix Economic, Real Estate Leaders Express ‘Guarded Optimism’ For 2021
Economic development leaders and real estate professionals are expressing “guarded optimism” for the Phoenix economy and real estate industry in 2021.
Chris Camacho, president and CEO of the Greater Phoenix Economic Council, said he expects the state to regain all of the jobs lost in 2020 by the end of the year.
“With the momentum we have with high-value companies like (Taiwan Semiconductor Manufacturing Co. Ltd.), these are catalyst projects,” he said. “I think Phoenix will be on company’s lists like Dallas or Austin.”
TSMC, which purchased land for its factory in north Phoenix in December, represents the largest foreign direct investment in Arizona’s history, and the factory alone is expected to create 1,900 jobs.
“I don’t think the market fully grasps what a big win TSMC is for the Valley,” Camacho said. “This is like what Intel did for the East Valley, TSMC will do for the North Valley. The level of partnerships they have with global companies will make Phoenix a hub for semiconductor manufacturing.”
In 2020, Arizona’s job totals fell by about 2% and greater Phoenix lost about 2.2% of its jobs, according to GPEC data. From February to April, greater Phoenix lost 214,400 jobs, with the largest percentage decline in the leisure and hospitality industry, which saw a 39.7% drop. Since April, the region has experienced significant gains, but has still not reached pre-pandemic levels. Since April, greater Phoenix gained 170,600 jobs. Natural resources and mining and government were the only sectors that had not gained any jobs since April, according to GPEC data.
“Some sectors just exploded and were doing really well, but other industries, like anything related to travel, are having a slower recovery,” Camacho said.
Camacho said greater Phoenix, as well as the rest of the country, needs “reskilling” for jobs that have been lost during the recession that resulted from the pandemic. Many of the jobs most affected by the pandemic were held by low-wage earners, and Camacho said GPEC is working with Pipeline AZ to connect trainees who have gone through the program with companies that are hiring for in-demand jobs to replace the jobs that were lost.
Other emerging sectors, like data centers, have also been a focus for GPEC, which Camacho said represent large capital investments and boosts in tax revenue, even if they do not create large employment demands. Moving forward, Camacho said, the need for data storage and streaming capacity will only grow.
Going forward, Camacho said he expects greater Phoenix to have a “strong economic surge” in 2021.
“I think Phoenix will be a market that does well,” he said. “The same fundamentals that existed pre-recession will still lend true.”
Real estate moves
Some areas, particularly users of industrial real estate, continued to do well during the pandemic as many people shifted their buying online, bolstering an already strong industrial market in the Valley in 2020.
“We had record numbers on the industrial side and that’s not going to change,” Mark Seale, principal and director of brokerage services for Avison Young in Phoenix said. “We’ve had record numbers in multifamily sales. Data centers will continue to do well and life sciences will continue to grow.”
The Valley has several life sciences projects, such as the Wexford Science + Technology building in downtown Phoenix, that have come online and will create jobs and attract more companies to the area, Dean Volker, research analyst with Avison Young said.
Industrial projects, including those around SkyBridge in Mesa, the inland United States-Mexico port at Phoenix-Mesa Gateway Airport, will continue to gain momentum, Volker said.
The Valley was nearing a natural cycle in office construction where many high-profile buildings were coming online at the same time near the beginning of the pandemic, Volker said, creating a “bit of a pause” in construction even before the pandemic forced closures.
Seale said that as 2021 continues and Covid-19 vaccines get more widely distributed, corporate expansions and relocations, which were already strong in Arizona, will continue to grow as companies get past the uncertainty of the pandemic.
“The speed of the deals will increase dramatically,” Seale said.
Along with company relocations, Arizona continues to benefit from people moving from California, which Volker said has increased and is expected to continue.
Additionally, the trend toward flexible office space and coworking will likely accelerate in 2021, as companies seek shorter, more flexible lease terms, Seale said. Landlords are likely to get into creating flexible office spaces themselves, rather than leasing to a coworking operator.
“Office lease terms will remain a little shorter,” he said. “Especially in the first half of the year, it won’t be too much different.”