Phoenix Market News :: August 22, 2011

LOCAL NEWS

Arizona Sees More Job Gains in July from Year Earlier

The Arizona Republic :: August 19, 2011
Arizona's employment picture brightened in July, with almost 21,000 more people holding jobs in the state than 12 months before. Economists are projecting 2011 will be the first year of job growth since 2007. Although 21,000 jobs is just under a 1 percent gain, it's the largest increase reported by Arizona's economists so far this year. Hiring now is occurring more broadly, as 10 of the state's 11 major job sectors added positions from July 2010 to July 2011, the Arizona Department of Administration reported Thursday. The number of construction jobs has increased for five straight months. And July brought the first gain in construction jobs compared with the previous year since December 2006. "It seems pretty likely that 2011 will be the first year of overall job growth since 2007," Arizona State University economist Lee McPheters said, adding that Arizona now has had seven months of year-over-year job gains.

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Tempe-Based First Solar Dedicates 1st Plant at Gateway

The Arizona Republic :: August 20, 2011

When it comes to its massive new factory in Mesa, First Solar Inc. tends to get a bit ahead of itself. First Solar, based in Tempe, broke ground on the 1.3 million-square-foot facility even before it had finalized all the agreements necessary to authorize the project. On Friday, it dedicated the first of what could be four solar-panel fabricating plants near Phoenix-Mesa Gateway Airport even though not even half the steel has been erected yet.

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Triumph Group Moving into Chandler Facility

Phoenix Business Journal :: August 17, 2011
Triumph Group Inc., an international aerospace company, has leased about 78,200 square feet at 50 S. 56th St. in Chandler. The company will move its Auxiliary Power Unit repair and overhaul facility there in May. The lease term is for 11 years, and financial details were not disclosed. The company is moving from 4010 S. 43rd Place Phoenix. That building will be torn down to make way for the expansion of Interstate 10. “This move to Chandler represents the opportunity for an internationally recognized name in the aerospace industry to stay in greater Phoenix,” said Chandler Mayor Jay Tibshraeny. “The move also allows for expansion and new jobs while taking some critical vacant industrial space off the market.”

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Retail, Homes Planned at Former Phoenix Golf Course

Phoenix Business Journal :: August 19, 2011
For years, El Caro Golf Course entertained duffers looking for a quick round of executive golf and youngsters learning how to play the game. Today, the 60-acre site at 23rd and Northern avenues is being revamped as a retail and residential infill project. Several retail pads are the first components of the overall project, called El Caro Commercial Center. L.A. Fitness Health Club and International House of Pancakes have purchased pads to build stores, and Circle K recently finished building a convenience store on its 1.5-acre pad. That leaves about 8 acres for other retail uses. The remaining 44 acres will be developed into a residential community.

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Phoenix Housing Recovery Might Take Until 2016

Phoenix Business Journal :: August 16, 2011
Scottsdale economist Elliott Pollack doesn’t expect a recovery in the local housing market until 2015 or 2016, and the commercial real estate markets until 2014 or 2015, as Arizona’s job market and population growth continue their slow recovery from the recession. Pollack briefed the Maricopa County Board of Supervisors Tuesday on the state of the national, Arizona and regional economies. He said the oversupply of homes in the Phoenix marketplace has gone down from approximately 80,000 units to 55,000- 60,000 homes. But that is still too many, and the lack of job growth in the state and Valley hampers a recovery. Pollack points to national numbers showing declines in mortgage equity and higher rates of young adults living with their parents, as well as flat job and population numbers here in Arizona as indicators of continued struggles.

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Arizona the 8th Most Financially Distressed State

Phoenix Business Journal :: August 17, 2011
Arizona was the 8th most financially distressed state in the second quarter, but that's an improvement from the previous quarter. Credit counseling agency CredAbility reported in its CredAbility Consumer Distress Index that Arizona improved from being the 5th most financially distressed state in the first quarter, but lingering housing, credit and consumer bankruptcy issues continued to weigh the state down in the second quarter. Arizona scored a 66 out of 100 in the index — an improvement from from 64 in the first quarter. The index measures consumer health in five categories — employment, housing, credit, household budget and net worth.

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NATIONAL NEWS

Commercial Real Estate: Shrinking to Fit

Newgeography.com :: August 10, 2011

We are going to need less commercial real estate in the future, at least on a per-unit-of-population basis. Advances in communications technology are causing profound and sometimes unanticipated changes in our lives.

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Buyers Wary of Building Bubble

The Wall Street Journal :: August 17, 2011

Some of the nation's largest pension funds are starting to back away from trophy properties in the most expensive real-estate markets over concerns a new bubble is inflating. After property prices crashed during the financial crisis, pension funds—among the biggest investors in commercial real estate—turned their investment strategies away from risky speculative projects and toward properties considered "core," well-leased buildings that are seen as low risk due to their stable income, in cities such as New York, Washington and San Francisco. But strong demand for a limited number of buildings has boosted prices of big-city skyscrapers so high they are approaching record levels. That has prompted pension funds such as the giant California State Teachers' Retirement System and the Texas Municipal Retirement System to look elsewhere. To make matters worse, income produced from the buildings hasn't risen as quickly as valuations have, compressing capitalization rates, a measure used by real-estate investors to estimate the annual return of income-producing properties. "Major coastal markets have seen significant price appreciation that has not coincided" with increases in either occupancy or rental rates, says Mike DiRe, director of real-estate investments for the California teachers' fund, known as Calstrs. "We believe the reason for this pricing increase" for the buildings in these markets "is a significant demand for core assets from private and public buyers along with overseas investors."

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The Dollar-Store Economy

The New York Times :: August 18, 2011

We are awakening to a dollar-store economy. For years the dollar store has not only made a market out of the detritus of a hyperproductive global manufacturing system, but it has also made it appealing — by making it amazingly cheap. Before the market meltdown of 2008 and the stagnant, jobless recovery that followed, the conventional wisdom about dollar stores — whether one of the three big corporate chains (Dollar General, Family Dollar and Dollar Tree) or any of the smaller chains (like “99 Cents Only Stores”) or the world of independents — was that they appeal to only poor people. And while it’s true that low-wage earners still make up the core of dollar-store customers (42 percent earn $30,000 or less), what has turned this sector into a nearly recession-proof corner of the economy is a new customer base. “What’s driving the growth,” says James Russo, a vice president with the Nielsen Company, a consumer survey firm, “is affluent households.” The affluent are not just quirky D.I.Y. types. These new customers are people who, though they have money, feel as if they don’t, or soon won’t. This anxiety — sure to be restoked by the recent stock-market gyrations and generally abysmal predictions for the economy — creates a kind of fear-induced pleasure in selective bargain-hunting. Rick Dreiling, the chief executive of Dollar General, the largest chain, with more than 9,500 stores, calls this idea the New Consumerism. “Savings is fashionable again,” Dreiling told me. “A gallon of Clorox bleach, say, is $1.44 at a drugstore or $1.24 at a grocery store, and you pay a buck for it at the Dollar General. When the neighbors come over, they can’t tell where you bought it, and you save anywhere from 20 to 40 cents, right?” Financial anxiety — or the New Consumerism, if you like — has been a boon to dollar stores. Same-store sales, a key measure of a retailer’s health, spiked at the three large, publicly traded chains in this year’s first quarter — all were up by at least 5 percent — while Wal-Mart had its eighth straight quarterly decline. Dreiling says that much of Dollar General’s growth is generated by what he calls “fill-in trips” ¬— increasingly made by wealthier people. Why linger in the canyons of Wal-Mart or Target when you can pop into a dollar store? Dreiling says that 22 percent of his customers make more than $70,000 a year and added, “That 22 percent is our fastest-growing segment.”

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A Second Great Depression, or Worse?

The New York Times :: August 18, 2011

With the United States and European economies having slowed markedly according to the latest data, and with global growth continuing to disappoint, a reasonable question increasingly arises: Are we in another Great Depression? The easy answer is “no” — the main features of the Great Depression have not yet manifested themselves and still seem unlikely. But it is increasingly likely that we will find ourselves in the midst of something nearly as traumatic, a long slump of the kind seen with some regularity in the 19th century, particularly if presidential election-year politics continue to head in a dangerous direction. The Great Depression had three main characteristics, seen in the United States and most other countries that were severely affected. None of these have been part of our collective experience since 2007.

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