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CBRE Research | Phoenix
10 Stories from Last Week's Market
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- Economist Sees Hope for Arizona Recovery
The Arizona Republic – February 3, 2012
Arizona State University economist Dennis Hoffman projected sustained but modest growth for Arizona through this year, but he said that the economic recovery should accelerate.
“When this state gets cooking, it’s cooking, and I think the winds are beginning to change,” he said Friday at the annual economic-forecast meeting of Westmarc, a West Valley coalition of business owners, government leaders and educators, at ASU’s West campus.
A year ago, Hoffman told Westmarc members that he was seeing the first “signs of life” in the state’s economy but did not expect much improvement until at least 2013.
Hoffman, director of ASU’s L. William Seidman Research Institute, sounded more upbeat this year, especially with a report showing that the national unemployment rate had dropped to 8.3 percent.
“The nation, at least temporarily, appears to be raining jobs,” he said. “We’ve created a lot of jobs in the last month.”
Consumer spending is expected to remain in the modest range, and some analysts predict that housing starts will stay in the “trough” for a prolonged period, but Hoffman again is picking up on winds of change.
“There is a buzz in the air,” he said, speaking of real-estate trends. “It may be a low buzz right now — it may be beginning to accelerate — but it’s a different attitude, in my experience, from 2009 to 2010 or even 2011.”
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- Medical-Research Cache in Works
The Arizona Republic – January 28, 2012
A massive building near Phoenix Sky Harbor International Airport is now home to a supercomputer that one day is expected to store clinical-research reports, medical records and the decoded genetic makeup of millions of patients and their cancers.
Having this vault of medical information is a dream for doctors, specialists and researchers who are trying to tailor medical care to the individual needs of their cancer patients. Despite huge advances in research and medicine, doctors have no one-stop shop for up-to-date clinical-trial results, other medical cases and genetic maps of their patients.
With access to this massive library, cancer doctors potentially could specify with precision the dosages of medicines, chemotherapy and radiation therapy for their patients by comparing those cases to those of other patients with similar genetic makeups and similar cancers.
In effect, this supercomputer could be a gateway to personalized medical care, as its creator, billionaire scientist Patrick Soon-Shiong, envisions it. His staff at CSS Institute for Advanced Health in California, which owns the project, and supporters of personalized medicine said the vault also could help reduce doctor error in the diagnosis and treatment of patients.
Better treatments and more accurate diagnoses could help lower the cost of medical care and enable patients to get treatment at home instead of at the hospital, they said.
The presence of the supercomputer could put Phoenix on the cutting edge of medical research and treatment. The path to these potential medical breakthroughs, however, is fraught with privacy concerns. Patient advocates fear the project could open a pathway to exploitation if patient information isn't confidential. They want assurances that the institute would require patient consent to obtain records, the records would be kept private and the project would be under close regulatory oversight.
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- Arizona's Bioscience Industry Prospers
The Arizona Republic – February 1, 2012
Arizona's bioscience industry posted gains in jobs after the recession even as the state's private-sector employment dipped, according to a new report.
The Battelle Technology Partnership Practice annual report of the state's bioscience efforts showed that bioscience jobs in Arizona increased 7.4 percent in 2009 and 2010 compared with a 1.8 percent drop in the state's overall private-sector employment during the same period.
Other bright spots for the state's bioscience sector included a surge of venture-capital funding last year as several private-sector biotech companies secured large funding rounds.
The state's bioscience sector had 96,223 jobs in 2010, a surge of nearly 41 percent since Arizona's Bioscience Roadmap was launched in 2002, according to Battelle.
Most were hospital jobs, but other bioscience areas such as pharmaceuticals, medical devices, and research, testing and medical laboratories showed fast growth in high-paying jobs.
Bioscience experts say the annual report shows the state has made strides in areas such as forming new companies and creating jobs, but the report also points out challenging areas such as sustaining funding for university research and securing investments in early-stage companies.
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- Warehouses Fill, Brightening Industrial Space
The Wall Street Journal – January 30, 2012
One often-overlooked corner of commercial real estate showed signs of stabilizing in the fourth quarter, as healthy demand for warehouse space helped push down the industrial vacancy rate.
The activity buoyed several major markets, such as the Inland Empire in Southern California, Phoenix and Dallas-Fort Worth, as owners slowly filled the glut of space left from the recession. Warehouse absorption was about 40 million square feet during the fourth quarter, a number “that looks like it comes from the 2005-‘07 expansion years and not the sluggish 2011,” says Rene Circ, director of research, industrial, at CoStar Group’s Property & Portfolio Research. About 50 million square feet remains to be absorbed to return to pre-recession levels.
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- The Coming Tech-led Boom
The Wall Street Journal – January 30, 2012
In January 1912, the United States emerged from a two-year recession. Nineteen more followed—along with a century of phenomenal economic growth. Americans in real terms are 700% wealthier today.
In hindsight it seems obvious that emerging technologies circa 1912—electrification, telephony, the dawn of the automobile age, the invention of stainless steel and the radio amplifier—would foster such growth. Yet even knowledgeable contemporary observers failed to grasp their transformational power.
In January 2012, we sit again on the cusp of three grand technological transformations with the potential to rival that of the past century. All find their epicenters in America: big data, smart manufacturing and the wireless revolution.
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- Cleantech, Exports and Manufacturing Key Phoenix Economic Growth
Phoenix Business Journal – February 1, 2012
Phoenix is going to have to wean itself off of retail and tourism jobs in the coming decades if it wants to keep up with the rest of the world.
That’s according to some preliminary information from the ongoing development of a regional business plan by the Brookings Institution that looks at how the area can better compete in the global economy.
Amy Liu, senior fellow and co-director of the Brookings Metropolitan Policy Program, said because the Great Recession was a structural change rather than a cyclical one, Phoenix and the rest of the U.S. is going to have to find a different way to grow.
“We have to recognize that what we had was a consumption-oriented economy, and it was highly insular,” said Liu, who was in the Valley last week briefing members of the Greater Phoenix Economic Council about the study’s progress.
Brookings is advising GPEC on developing a business plan for the region that would help it grow beyond its dependence on housing and other industries. GPEC and the region were one of several chosen in a competitive process to help them find ways through a new economy.
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- Borrower Trends 2012: Capital Markets Recovery Holds Steady
National Real Estate Investor – February 1, 2012
The volume of multifamily and commercial real estate lending is a far cry from the frothy days of 2005 through 2007. Yet the flow of capital is growing and both borrowers and lenders are optimistic that financing will continue to improve in 2012.
According to National Real Estate Investor’s annual Borrower Trends Survey, more than half of lenders (56 percent) and 44 percent of borrowers are predicting that credit will be more widely available in the coming year. [Figure 1].
That optimism is good news for borrowers who are hungry for capital. Jury & Associates Inc. is one developer that is hoping this will be the year that it clinches financing for a $300 million 1,000-room convention center hotel in Kansas City. The developer has been hard pressed to land debt in a climate where hotels remain a tough sell among lenders. “The new construction loans are very difficult today. However, lenders are at a point where they have to start lending more,” says Ronald Jury, president of Jury & Associates in Shawnee Mission, Kan.
No one is expecting the flood gates to open in 2012. Lenders remain conservative with stringent underwriting practices in place. But lenders are increasingly returning to the table and lending volumes are set to continue to rise. The lenders polled said that the total volume of commercial and multifamily loans at their firms increased by an average amount of 10.8 percent in 2011 with volumes expected to grow an additional 12.2 percent in 2012.
“Clearly, 2011 was a very active year, on the loan origination side, as well as on the acquisition side,” says Michael Melody, executive managing director and co-head of real estate investment banking for Jones Lang LaSalle Capital Markets group in the Americas. The volume of commercial and multifamily sales transactions rose 29 percent in 2011 to reach $162.8 billion, according to New York-based Real Capital Analytics. Meanwhile, the Mortgage Bankers Association (MBA) originations index for commercial and multifamily loans hit 138 in the third quarter—the highest point since 2007. “It continues to be a favorable environment, and much improved from 2010,” adds Melody.
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- Amazon Has Tried Everything to Make Shopping Easier. Except This.
The New York Times – February 3, 2012
Much of the discussion about Amazon is focused on its digital side, yet the company is relentlessly expanding into the physical.
It has announced five new United States warehouses since late December, all with more than a million square feet. It is testing out delivery lockers in New York and Seattle for those who cannot receive their goods at home. It has been experimenting with a grocery delivery service in Seattle for several years. It has expanded its Prime $79 annual shipping fee program, hoping members will order more of everything. In all sorts of ways Amazon is trying to remove the obstacles from home delivery. Does anyone remember how mail order once meant getting things a month later? Now Amazon thinks two days is too long.
One major reason the retailer seems to be giving up its hard-line position on charging customers sales taxes is that it wants to build its warehouses close to major population centers. If it does that, it cannot argue that it is exempt from collecting state taxes because it lacks a physical presence in a state. But the increased business from faster delivery might be a worthwhile trade-off to charging the tax.
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- Sky Harbor Traffic Highest Since Recession
Phoenix Business Journal – February 1, 2012
Nearly 40.6 million passengers passed through Phoenix Sky Harbor International Airport in 2011, a 5 percent increase over 2010 and the highest traffic count since 2007.
Passenger traffic, however, is still not back to pre-recession levels.
Sky Harbor saw only a slight year-over-year increase in passenger traffic for December — 3.39 million persons for December 2011 versus 3.33 million travelers in December 2010 — according to the Phoenix Aviation Department.
But the Phoenix airport ended 2011 with just under 40.6 million passengers. That is up from 38.55 million passengers for 2010 and highest since recession and housing drop started at the end of 2007.
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- Do the Job You're Meant to Do
The Wall Street Journal – February 1, 2012
A young woman I know is a star. In her early thirties, she had an M.B.A. and was already running a small division of a successful fashion company. She had that rare combination of design sense and business savvy that makes a virtuoso fashion executive.
The owner of her company noticed. And when the company's president left, the owner tapped my friend for the job.
She had her doubts. In the job, she would be more disconnected from the design work she loved and she would be focused far more on finances and doing deals. More than anything, she would have to manage the owner who was temperamental. That wasn't really her forte or interest.
On the other hand, what an opportunity! And honor! It would look amazing on her résumé, the money was great, and to be president at this young age? How could she turn it down?
So she took the job.
The first few months were grueling, but she expected that. What she didn't expect is that it wouldn't get better. She mastered the finances - and even enjoyed that part - but the politics of her relationship with the owner were sapping her energy. Things began to slip through the cracks. The designs began to sell less well. And the owner was becoming increasingly tense and erratic.
Within a few years, she left the job and the company.
If you think about it, the entire outcome was predictable.
We all have a sweet spot where everything seems to flow; where we feel happy, competent, in sync with everything around us, uniquely talented, and predictably successful. It feels like magic, but it's not: It's the intersection of our strengths, weaknesses, passions, and differences.
My friend, in taking the job, veered from her sweet spot.
The scenario is not uncommon. Of more than 10,000 people who have taken a productivity quiz on my website, a full 72% admit to doing work they neither excel at nor enjoy.
That's a mistake. We should plan our work and our lives so that we operate in that intersection. Outside it? Chances are we'll fail. We might succeed at first, but it won't be sustainable.
So why do we ever leave our sweet spot? Sometimes, it's because we want to learn. One of the reasons my friend took the position was to get experience running her own business.
But there's another temptation at play: ego. A new job sounds impressive and the external rewards and recognition are significant, so we think we should take it, even when we might know in our gut it's not the right fit.
A few years ago, I was asked to sit on the board of a non-profit. I was honored and I accepted. After a few meetings though, my enthusiasm started to wane. I liked the organization and I liked the people on the board, but I didn't care enough to devote real time to it. It wasn't something I was passionate enough about and it required that I be a strong fundraiser, definitely a weakness of mine. In other words, it failed two out of four of my sweet spot criteria.
Here's the crazy thing: A year later, they asked me to be president of the board, and I accepted again. I lasted a year.
So, why did I accept? I'm embarrassed to say that, mostly, I liked the idea of being president of the board, even though the role took me out of my sweet spot.
At first glance, you might think the dilemma of seduction could be solved by being clear about what you want versus what other people what from you. That would be a fairly easy distinction to sort out.
But it's more complicated than that. In fact, the dilemma is entirely within us: It's between what we want and what we think we should want, which is hard to distinguish.
Still, in the midst of that complexity, there's a simple way to assess an opportunity. Next time you're given an "offer you can't refuse," ask yourself if it will place you squarely in your sweet spot. If it won't, you know what to do.
As for my friend? She eventually started her own company. She works on the designs herself, which she loves, and is very close to the marketing, promotions and finances. And politics? Very little.
The company is successful, of course. She's in her sweet spot.
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