Guest Editorial: How Tempe Charts Its Growth & Future Will Reverberate in Scottsdale, Phoenix, East Valley

By Recker McDowell —

The city of Tempe is looking at its long-term growth plans for its downtown area including Mill Avenue and Arizona State University’s main campus. Tempe leaders are examining how to bring more residential development and workforce housing options as well as the height of buildings.

The rest of the region should pay close attention to Tempe’s trajectory. Tempe has been the dominant office submarket in the current real estate and economic cycle.

It has seen new Class A office space developed and landed some large and big-name tenants including JPMorgan Chase, Northern Trust, Microsoft, Amazon, State Farm and Silicon Valley Bank.

Tempe has the lowest office vacancy rate in the Phoenix metro area (3.2 percent). That compares to 12.3 percent in central and southern Scottsdale and 19.2 percent in downtown Phoenix, according to commercial real estate firm CBRE. There is more than 1.1 square feet of office space in Tempe. That is 75 percent of all the new office space being built in the Valley.

Tempe is also looking at housing in downtown and other areas. That includes projects with micro units and those along transit lines with limited or even no parking.

What Tempe does will reverberate in Scottsdale, downtown Phoenix, the East Valley and the rest of the region.

Scottsdale has lost tenants and jobs to Tempe and the Salt River Pima Maricopa Indian Community because it lacks new and larger blocks of Class A office space. That has led the likes of McKesson and Harkins Theatres to move to the Salt River while Opendoor announced last month it was moving from Scottsdale to Tempe as it looks to grow its local footprint from 250 to 1,000.

Scottsdale is also figuring its own path on potential new developments, needed office space and heights. The city must realize it is not in a bubble or vacuum and despite Scottsdale’s appeal jobs and investments will continue to land in Tempe and other locations if there isn’t Class A space available.

Tempe has also in some ways supplanted downtown Phoenix as the region’s core. Downtown Phoenix has not seen significant new office developments since the last real estate crash. Downtown Phoenix is adding more residential and benefiting from the growth of ASU’s Downtown campus, but Tempe has been the preferred landing spot for developers and a number of tenants.

Tempe’s path will also impact its East Valley neighbors (Chandler, Mesa and Gilbert) as office tenants look for space as well as on the housing front. Affordable housing is an issue throughout the region. How Tempe approaches both offices and housing will impact growth strategies and economic development in the rest of the East Valley.

Tempe might not get all the political attention Phoenix gets or have the cache of Scottsdale. But it has increasingly grown in its economic importance and how it charts its future will impact the rest of the region.