There's Still Room For Upscale Residential In Tempe
A lot of markets nationwide have overloaded on upscale residential, in a race to the top for developers. But some places have not reached saturation. According to Watt Communities of Arizona president and CEO Steve Pritulsky, Tempe is one such market.
Watt Communities recently finished selling out Dorsey Lane, its 51-unit townhome community near Downtown Tempe that marked the company’s entrance into upscale urban infill housing in metro Phoenix. The company broke ground on the development in 2015 and began sales about a year ago, averaging one unit sold a week afterward.
Bisnow: What's sustaining demand for upscale residential in Tempe?
Pritulsky: Unlike Tempe's student towers, which are fed by rising enrollment numbers at ASU, demand for upscale living in Tempe is all about jobs. Residents want well-paying employment opportunities and lots of dining, shopping and entertainment.
The growth of multi-building, Class-A office projects like Hayden Ferry Lakeside, Marina Heights and Discovery Business Campus cements that job base with tenants such as Northern Trust, Silicon Valley Bank and State Farm, to name just a few.
Bisnow: Are there any interested buyers from beyond Phoenix, even international, for this kind of product?
Pritulsky: Dorsey Lane attracted domestic and international buyers. A fair number of our international buyers are coming to the market for jobs in the high-tech or engineering sectors. Other international buyers are purchasing as an investment.
Our out-of-area domestic buyer demographic is dominated by Californians, which are the dominant source of domestic in-migration to Arizona, and tracks closely with what other builders have experienced as well.
Bisnow: Are there more infill opportunities in Tempe or elsewhere?
Pritulsky: There are most definitely more infill opportunities in Tempe, but high land values, coupled with escalating construction costs, make it very difficult for a residential builder to build anything outside of stacked flat condominiums or mid- and high-rise apartments. The financial barriers alone have residential developers pushing out beyond traditional core infill locations into what we regard as first ring suburban locations.
Bisnow: Where would that be?
Pritulsky: This would include downtown Chandler, central Gilbert and the south I-10 area/Price Road Corridor. Demand hasn't yet shifted to the West Valley, but the planned extension of the light rail is quickly spurring interest in locations ranging from Spectrum Mall to Metrocenter.
