Phoenix - "Business Friendly"
With a $50 billion marketplace and ever expanding population, Phoenix has earned a reputation for being "business friendly."
"Phoenix is very aggressively evaluating its business climate and taking steps to improve it," said Arizona economist Jim Rounds, member of the Arizona Department of Commerce's Economic Research Advisory Council.
Business Tax Environment
In a recent tax overhaul, legislation resulted in the reduction of Phoenix commercial property taxes, lowering the assessment ratio on business properties from 25 percent to 20 percent over 10 years; a move economists speculate will stimulate the Phoenix commercial real estate market.
Additional tax changes included revisions to the corporate apportionment formula that allow companies to base up to 80 percent of their state income tax on in-state sales.
"The law was changed so that companies that hire local workers but export most of their product out of the state are taxed favorably," Rounds said.
Potential effects on Phoenix commercial properties are already taking place. Intel executives sited recent tax changes as a key factor in deciding to build a $3 billion computer-chipmaking factory in the greater Phoenix area. The two-year construction project is set to begin August 2005.
Attracting these large companies does more than provide high-tech jobs. Every tech job created is expected to result in 2.5 support jobs ranging from finance to food service. This boost in peripheral business is expected to positively affect Phoenix commercial real estate values.
Broadening the Economic Base
A recent recession made it evident to city leaders and economists that Phoenix needed to broaden its economic base. Citrus, cotton, copper and cattle once fueled the economy but a more diverse industry portfolio was needed to provide continued growth.
In 2003, Phoenix broke ground on the Phoenix Bioscience Center, a hub for biotechnology in the Phoenix area. This and upcoming downtown expansion projects provide a unique opportunity for Phoenix commercial real estate investors.
Future Commercial Real Estate Market
Economists project retail sales in Phoenix will increase 25 percent over the next 5 years compared to 20 percent in the country's top 50 metro areas. During that same period, the population is expected to grow by more than 500,000, further pushing retail spending and the need for Phoenix commercial real estate and Phoenix office space. Phoenix retail sales rank higher than San Diego, Seattle, Denver, San Francisco, Miami and Orange County, CA.
In order to meet anticipated growing needs for Phoenix office space and meeting facilities, the city has sold nearly $1 billion in bonds to triple the size of the Phoenix Civic Plaza and build a nearby Sheraton by 2008.
These developments, combined with other downtown improvements, add to the city's rising profile as "a place to do business," and the time to invest in Phoenix commercial property sales.