Phoenix, AZ Developers Climb Aboard Light-Rail Bandwagon

Developers and designers, for the most part, have had few problems changing their mindsets from developing standard mixed-use projects to a more vertical approach.

By Amy Wolff Sorter

(Published in Globe St. on March 31, 2008.)

PHOENIX - In a $1.7-billion investment, cars will begin to roll on the Valley Metro Light Rail at year's end, creating a 20-mile route that snakes from just north of the CBD to the southeast and into Mesa. As the tracks move horizontally, developers are considering and others begun vertical work on transit-oriented developments.

The high-density, low-acre, mixed-use developments are somewhat unusual in a city like Phoenix, which grew out, rather than up. But Melinda Korth, executive vice president in CB Richard Ellis' Phoenix office, points out that the metro is predicted to grow by at least 2.5 million people in the next 20 years. Transit-oriented developments present a good start on urban core space that will save space and provide important services.

Korth says she became interested in transit-oriented projects as she prepared to market the 291,000-sf Meridian Bank Tower at 3550 N. Central Ave. In marketing the class A office building, she wanted to understand the impact that light rail would have on the property and the neighborhood. "I was blown away by the proposition and value to this part of central Phoenix," she says.

Korth says the light-rail system also is helping in the marketing of Meridian Bank Tower, which sits on 8.8 acres. Korth says much of the acreage is devoted to parking right now. "The light rail can help whoever owns this facility eventually justify converting that extra land to a higher-density use," she explains. "Whoever buys that project could inventory a future development as part of that deal."

Other developers are preparing for future projects along the line as well. Scottsdale, AZ-based RED Development LLC is well under way on the 2.5-million-sf CityScape at 1 E. Washington St., which broke ground in October 2007. Another local developer, Michael Hallmark, has begun work on the Jackson Street Entertainment District, bounded by Central Avenue and Jackson and 4th streets. The project will be a mixed-use entertainment, retail and residential district that will easily top 1.2 million sf.

And, there is Arizona State University. The light rail will connect the school's Downtown campuses to its main campus in Tempe. Ryc Loope, director of the Masters of Real Estate Development Program at ASU, says the connection not only will link several campuses, but help to move students, professors and others from one to another. Much like Korth, Loope says the light rail presents a great opportunity to strengthen the area's urban core.

Developers and designers, for the most part, have had few problems changing their mindsets from developing standard mixed-use projects to a more vertical approach. "The cities of Phoenix, Tempe and Mesa spent time with the design and development community, discussing how the light rail should operate," Loope tells GlobeSt.com. "Many of our leading designers and developers visited other cities and have incorporated what they learned early on in both the design and early rollout of light rail here."

While some developers are staking claims along the light-rail system, other developers are taking a wait-and-see approach, partly because TODs are so new and partly because of the economic slowdown.

"Like any new innovation, there are those that will sit back, look at it, see if it works, then go on in," says Richard R. Hubbard, CEO and president with Valley Partnership, a Phoenix-based organization dedicated to urban and sustainable developments.

Although developers already starting their light-rail projects are taking a gamble, Hubbard believes the investment is worth the risk. "They've looked at other cities and have said it's not something they're used to," he acknowledges. "But once people see the advantages of the light rail system, they want to be ready for the influx."

In addition to viewing the TODs as passenger-service centers, Korth considers them "poster children" for other urban cores in Phoenix. "Maricopa County is larger than the state of New Jersey," she says wryly.

"We need more urban cores. These transit-oriented developments will be great as a laboratory to get them going. We can take the lessons learned and best practices and move them into the other parts of the Valley."