Outlook 2005, September 9, 2004

Provided by area industry experts

Phoenix Outlook:

• In 2003, Arizona was 6^th in U.S. in job growth; 31 states lost jobs
• In 2004, thru June, Arizona was 3^rd in job growth; 10 states lost jobs
• AZ has the 2^nd fastest growing economy in the nation
• Phoenix-Mesa Employment growth at #2, is much better than virtually anywhere in the nation
• Semiconductor industry will take off again with resultant job growth. Intel is set to reopen one of its facilities
• Post-recession job creation – Phoenix went into recession later and came out sooner than U.S. as a whole and we’re now growing at twice the rate of the U.S. economy
• Phoenix- Mesa employment – about 50,000 jobs will be created this year and about 70,000 next year.  More growth this year and next year in education and health services
• Phoenix is growing at about 100,000 people per year.  Every time the population increases by 2.8 people, we need another housing unit.  AZ is 2^nd in population growth for the 10^th year in a row – and has been virtually every decade since WWII
• Every year we add 100,000 to 110,000 people – this growth is expected ad infinitum
• Single family new home permits are up 40% this year over last year at this time; resale permits are up 28%
• About 15 to 20% of the market is investor homes –not good.  If too many houses come on the market at the same time, the market could slow
• Housing Bubble? What happens in San Diego, New York City or San Jose has nothing to do with what is going on in Phoenix

Joe Porter – CB Richard Ellis – Office and Industrial:

Industrial – West Valley will be the hot spot. Not only are there a lot of master planned communities being built, like Verrado and Sundance, but there will be a big need for industrial space as well.

Office – Scottsdale Airpark, Perimeter Center and Kierland will be the best office space in the metro area. Strong office space areas will be the Loop 101 from Chaparral to Desert Ridge, Deer Valley and Chandler.

Lenders love the Phoenix market.

Judi Butterworth – DeRito Partners -- Retail:

• 27 planned power centers along the loop 101, 202 and 303 freeways
• Big Box retailers are making commitments long before the freeways are finished
• 5 planned Westcor Malls
• Retail is experiencing an invasion of Las Vegas developers because Las Vegas is out of land.  This is and will have a big impact on the retail market and cost per square foot
• The future in retail in the Phoenix market is very bright for the next 10 years, barring another terrorist attack

Stanley Cook – Housing Market:

·        All elements are here for the continuation of good growth.  We have one of the greatest markets in the U.S., second only to Atlanta, which is much different than ours.  In Phoenix it take 1000 homes per year to make it into the top 10 home builders – that’s huge

·        Our marketplace is a 12 month building market – most are not. Big advantage

·        Sundance in the west Valley has new homes going in for under $100,000 – Sundance is a retirement community

·        There will be a new Sun City on the west side of the White Tanks Mountains, Call Sun City Festival.  There will be 9,000 units built by Pulte

·        Rancho El Dorado, just north of Casa Grande, is a new master planned community in Maricopa and only 20 minutes from the southern Tempe and Chandler business markets

·        “If you think the last 10 years were big in Phoenix, just wait and see where the next 10 years will go”

·        All the surrounding states in the Southwest have problems affecting housing: New Mexico, Colorado, Vegas, California and Utah – all have very limited growth potential due in part to affordability, land availability and water EXCEPT the Phoenix area.  Vegas is “frozen” now due to lack of water

·        USAA alone will have 30,000 employees when it’s built out