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Publication: East Valley Tribune; Date: 01/30/2005

Area attracting out-of-town developers
Falcon Field takes off


Falcon Field has its share of takeoffs and landings, but itís off the runway where activity is soaring.

The once drowsy general avi ation airport is being noticed for the first time by out-of-town developers who are building commercial space on the bet that tenants will follow. Indus trial parks are beginning to take shape with nearly 200,000 square feet of commercial and office space planned to start by May.

But while smaller projects are burgeoning in the Falcon Field Business District, the areaís commercial crown jewel, the 330-acre Longbow Business Park and Golf Club, remains stuck on the drawing board after three years. The projectís devel oper says the city has no finan cial incentive to build nonretail commercial space because it does not have a property tax.

"Everybody, including our selves, have benefited from the fact that Longbow is not on the market," said Bob McNichols, managing member of Daedalus Real Estate Advisors, developers of Longbow and owners of Dover Industrial Park.

"Longbow is a very desirable place to locate a business and when it does come out, it will capture more than its share because all these other parks will be filled or near full when we can finally do something after wrestling the city of Mesa to the ground and getting them to release some entitlements on this project."

Those who oversee land in the area say activity has spiked dramatically, particularly in the last six months.

"With the introduction of some brokers with statewide and national ties, this really is going to expose the area to a much broader audience," said Lois Yates, executive director of the Falcon Field Area Alliance, the nonprofit firm formed last year to market the business district. "Also, the area has been so void of speculative space in the past and with such a low vacancy rate, a lot of people havenít even taken a look at the area. Thereís been nothing available. Thereís going to be more and more people that begin to look at the northeast area of Mesa as a place to do business because there is going to be space available in addition to land available to build their own building."

Estimates show the Longbow project alone is expected to create 7,000 jobs when the area is built out in seven to 10 years.

The Falcon Field Business District has more than 1,000 acres of industrial zoned lands and it currently contains more than 3.2 million square feet of commercial space. About half of the land is still to be developed.

The 11-square mile district stretches from the Red Mountain Freeway section of Loop 202 to the north, Brown Road to the south, Val Vista Drive to the west and Power Road to the east. The area has been a longtime hub for large corporate manufacturers such as Boeing, Special Devices, MD Helicopters, TRW and Talley Defense Systems.

But two projects announced in the last six months for Dover Industrial Park at Greenfield and McDowell roads are being called the most important developments in the area since Boeing was built more than 20 years ago. They are expected to be the springboard in district that has 10 commercial projects that are newly built, planned or under construction.

Phoenix-based Hewson Real Estate Development will start building the first phase of its 15-acre project by the end of February. It will include 85,000 square feet of industrial space and 26,000 square feet of offices in two buildings.

The key, a company executive says, is Loop 202.

"We decided to go out there, as everyone probably will, because now we have access to it," says David Lord, senior vice president and chief operating officer. "Falcon Field was always there, but how did you get there from here? Now, with the rooftops in Las Sendas and in all the other areas, and a number of decision makers out in that area, it just makes all the sense in the world. Thereís a good base of current tenants that will be expanding and theyíll be new people coming in. Thereís going to a continuation of more and more rooftops and right now the options are going to Scottsdale and even further south along the U.S. 60 somewhat."

Hewson has a history of building speculative buildings in areas that are just beginning to take off. In the mid-1970s, it developed much of the commercial space around University Drive and state Route 143 near Phoenix Sky Harbor International Airport and at Metrocenter in Phoenix.

Another project slated for 65-acre Dover Industrial Park will be about 80,000 square feet of office-warehouse condominiums. Greenfield Airpark LLC purchased more than six acres for nearly $1.6 million and it plans to build four buildings. Construction is scheduled for May.

Greenfield Airpark principal Brad Davis, who has developed similar space in Phoenix, Scottsdale and Chandler, says he sees a day when Falcon Field will be similar to Deer Valley Airport in Phoenix.

"When I first went into Deer Valley three or four years ago, I was one of the first ones to do officewarehouse condos," he said. "You could by land at $5.50 a square foot and now itís up to $12 a foot. Thereís projects going on all over the place and thing is popping because of the freeway access there. I see the 202 doing the same thing to the north Mesa area, maybe not as much as there due to the fact you have the Interstate 17 and the convergence of the freeways. The 202 will bring in people from south Chandler into north Mesa that want to locate in the airpark area and also from Las Sendas and the housing developments there."

The Falcon Field area is expected to get a major boost when Loop 202 opens between Higley and Power roads this spring and between Power and U.S 60 by the fall of 2007.

Davis expects the area to be attractive to starter mom-andpop businesses that can easily obtain financing from the Small Business Administration.

"Itís cheaper to buy than to lease in this marketplace with the rates the way they are," he said. "Theyíre all familyowned businesses and they want their own building. Itís prohibitive for them to go out there and buy a piece of land and put up a 3,000-squarefoot building. You just canít do it."

Davis is more bullish on development at Falcon Field than Williams Gateway Airport, where international cargo and commercial aviation are expected to flourish.

"People keep talking about that and I guess itís going to come around, but I donít see that happening as fast as I do Falcon Field," he said.

Marc Pierce has been working on behalf of landlords and tenants in the Falcon Field area for seven years, the last five he says in real earnest. A broker at Lee & Associates, he says the turning point for the market was the Loop 202 connection at Gilbert, Greenfield and Higley roads in 2002.

"Iíve just watched it grow and grow and Iíve experienced market changes in other areas of the Valley and I saw it coming," Pierce said. "There really wasnít much to do but fill up buildings. There wasnít new construction on that area until about three or four years ago. The market and development and the amount of available space is probably three to five years behind where it should be based on the demand. Thereís been a constant demand for space from buyers and tenants. Itís really picked up in the last 18 months."

Mike Haenel, a broker with Grubb and Ellis, said the district will do well because there is limited land available south of U.S. 60. That fact has led to some higher rates for industrial space at Falcon compared with other areas of the Valley.

"The rates are higher there due to a limited supply of available land and buildings and a recent increase in tenant demand," Haenel said. "Itís truly the old issue of supply and demand. With the recent tenant demand and manufacturing coming back and companies looking for more space, itís become a vibrant area."

McNichols said a study two years ago showed the Falcon Field area consisted of 1,400 square miles, contained 11,000 employees and was half developed in terms of vacant versus improved land. Its vacancy rate was less than 1 percent because developers didnít build buildings for others. By contrast, McNichols said, Scottsdale Airpark had lots of developers and tenants, which has created high vacancy rates because of turnover.

"This is a test for the Falcon Field area," he says. "Itís a test for city of Mesa. Itís a test for the 202 freeway. Itís a test whether or not brokers and tenants are going to be attracted to this area because itís there."

About 170 acres of Longbow is to be developed around the golf course.

McNichols said the project was to be under construction two years ago, but due to a lack of city incentives, itís still on the drawing board. Because the city doesnít have a property tax, it canít tax real property, he said.

"They brag about that to a lot of people," McNichols said. "The problem is theyíre losing revenue from the commercial and residential tax base and with no incentive to create more of a tax base on the commercial development side, nonretail, thereís no incentive for them to help developers build nonretail commercial space. Thatís why I think Longbow is stuck in the mud and, right now, itís really in he mud."

McNichols envisions the area booming once Loop 202 reaches U.S. 60.

"Once that happens, that will connect the south to the north and the south to the west," he said. "Itíll take a lot of traffic off the Superstition Freeway and it will divert a lot of traffic down toward Phoenix Sky Harbor International through Mesa on the north side. As people travel those distances and think about their daily commute and businesses think about where to locate, weíre in the center of that Loop 202 as it connects to two major airports, Williams Gateway and Sky Harbor. We think weíre in a good position to capture businesses that want to be centrally located between those two major airports. In addition to that, we have an airport right across the street from us, which is the third busiest airport in the state. Itís only exceeded . . . by Sky Harbor and Deer Valley in terms of operations."

Mesa Mayor Keno Hawker said Longbow is an important component in the cityís plan to make the Falcon Field area one of its largest job centers.

"Weíll compete with Scottsdale at Falcon Field and weíll compete with Sky Harbor at Williams Gateway," he said. "I think itís been discovered now, all the amenities and easy access."

He said the city would like to offer Longbow any incentives it does to other businesses that locate in the city.

"The difficulty with employment and industrial is it doesnít have that immediate pay back like a sales tax does," Hawker said.

"Because we donít have a property tax, we are at a slight disadvantage in Mesa compared to other cities if we donít somewhat change our financial structure."

LOOKING AHEAD: Marc Pierce, a principal with Lee and Associates commercial real estate services, stands next to a 56,000-square- foot office/hanger building at Falcon Field Municipal Airport.

Falcon Field business district 7,000 acres in 11 square miles Includes most of the employment center for north Mesa Population in excess of 200,000 people, with more than 17,000 employees working within the district boundaries The median household income is $54,060, versus a median household income of $48,857 in the United States.

Top employers in the district Alliant Techsystems: Makes ammunition, "smart" bombs and rocket propulsion systems AMSAFE Aviation: Manufacturer of aircraft passenger seat belts and other safety equipment for the aerospace, defense and ground transportation industries Lockheed Martin: Makes electronic systems for aviation industry MD Helicopters: Commercial helicopter manufacturer Talley Defense Systems: Makes propellant-based defense products for weapons systems The Boeing Company: Apache helicopter producer Trans-Matic: Manufacturer of precision deep-drawn stampings used in automobile and lock industries

Current/Proposed developments:
A Dover Industrial Park A 65-acre industrial, office and commercial development park. The park currently includes several manufacturing companies. Phoenix-based Hewson Development Company will break ground by the end of February on the first phase of its 200,000-square-foot industrial/office development.
B Falcon Field Airport Suites Potential development sites on the airport. Tri-Star Associates of Scottsdale has been awarded development rights on 14 acres at the entrance to the airport. Tri Vista and Mesa are nearing completion on lease for the land.
C Falcon Business Park I & II 20 acres that are planned to feature about 260,000 square feet of office and industrial buildings.
D Longbow Business Park and Golf Club Longbow Business Park is 170 acres and will incorporate office, light industrial, retail and hotel uses surrounded by desert vegetation a

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