Categories Narrative

Transbay Tower To Become “Salesforce Tower” With Monster Lease

Jealousy can be a terrible thing. In this case, I am so jealous of the latest monster lease done in San Francisco: 714,000 SF lease with a 15 and a half year term. Hats off to them. While I have done plenty of large leases, I have not yet negotiated a 700,000 SF+ lease.
OK—Who on this email wants to help me surpass this deal and hire us to negotiate the next monster lease?


Transbay Tower To Become “Salesforce Tower” With Monster Lease

April 11, 2014

Transbay Tower will lease just over half of the 1,070-foot-tall Transbay Tower rising at 415 Mission Street, adding 714,000 square feet of space to their collective San Francisco “campus.”

The 61-story building will be renamed “Salesforce Tower” and be ready for occupancy in 2017, at which point Salesforce will control over 2 million square feet of office space in the city.

“Salesforce Tower represents an incredible milestone in our company’s history—it will be the heart of our global headquarters in San Francisco,” said Marc Benioff, the company chairman and CEO. “We founded in San Francisco 15 years ago and this expansion of our urban campus represents our commitment to growing in the city.”

Salesforce is paying $560 million for its 15-1/2 year lease and naming rights, with plans to move into the tower in early 2018. Salesforce will effectively occupy the bottom 30 floors of the tower along with the very top floor.

Salesforce Tower 1



Categories Narrative

World’s Top 15 Megacities–Growing and Growing

I am a third generation Arizonian. When I was born in Tucson in 1961, the population of Phoenix was 440,000. Today there are over 4.3 million in metro Phoenix making us the 13th largest metropolitan area in the US (see Top 13 areas below). Growth is expected to continue like crazy and by 2050, we should have over 7,000,000 people (see projections below). BUT that is NOTHING compared to the world’s top Megacities. Check out the graph at the bottom. Megacities are citites of over 10 million people (the US only has two—NYC and LA). The smallest of these is 12 million people…Phoenix will not get there for another 50 years. Crazy big.

Enjoy the stats and graphs.


Population Projections of Maricopa County

2000 to 2050

Population 10-Year Change
2000: 2,954,832
2010: 3,710,756
2020: 4,516,806
2030: 5,391,875
2040: 6,296,905
2050: 7,265,969

Source: Arizona Department of Economic Security.

Top Metropolitan Areas

The largest metropolitan areas in the U.S. ranked by population:
Updated: March 2013

Rank Population 2012 Population 2011 Annual Change Percentage Change Metro Area                                                   
1 19,831,858 19,729,930 101,928 0.5 New York-Newark-Jersey City, NY-NJ-PA
2 13,052,921 12,945,140 107,781 0.8 Los Angeles-Long Beach-Anaheim, CA
3 9,522,434 9,495,719 26,715 0.3 Chicago-Naperville-Elgin, IL-IN-WI
4 6,700,991 6,569,112 131,879 2.0 Dallas-Fort Worth-Arlington, TX
5 6,177,035 6,051,850 125,185 2.1 Houston-The Woodlands-Sugar Land, TX
6 6,018,800 5,997,474 21,326 0.4 Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
7 5,860,342 5,771,213 89,129 1.5 Washington-Arlington-Alexandria, DC-VA-MD-WV
8 5,762,717 5,687,908 74,809 1.3 Miami-Fort Lauderdale-West Palm Beach, FL
9 5,457,831 5,374,678 83,153 1.5 Atlanta-Sandy Springs-Roswell, GA
10 4,640,802 4,603,344 37,458 0.8 Boston-Cambridge-Newton, MA-NH
11 4,455,560 4,396,918 58,642 1.3 San Francisco-Oakland-Hayward, CA
12 4,350,096 4,301,841 48,255 1.1 Riverside-San Bernardino-Ontario, CA
13 4,329,534 4,252,078 77,456 1.8 Phoenix-Mesa-Scottsdale, AZ
Source: U.S. Bureau of Census (March 2013)



Categories Economy, Narrative

5 Measures of Arizona’s Economy As Fall Season Arrives

The local paper in Phoenix, The Arizona Republic, published a great summary about the Arizona economy and my favorite topic—Jobs. Please take a look below for the full article, but here are a few highlights:
–We are still at 60% of jobs recovered from pre-recession numbers.
–Construction, typically our get-out-of-the-slump card, is severely lagging.
–One bright spot is medical expansion. Arizona is becoming quite the spot for destination treatment, including the fabulous Banner MD Anderson facility in Gilbert. (Ok, that’s a plug for one of my favorite not-for-profits.)
–Education continues to lag compared to the rest of the US. This will be a topic of continued discussion during the next few months. I know both candidates for Governor are focused on this campaign hot potato. 
I am bullish on Arizona, not just because this is my home and my family’s home for over 100 years. I believe this state has its best days ahead of it. The slow recovery aside, I believe the future looks bright.


5 Measures of Arizona’s Economy As Fall Season Arrives


By: Ronald J. Hansen
August 31, 2014

AZ economy_fall 2014
(Photo: Charlie Leight/The Republic)

Labor Day has become the unofficial end of summer. As it was intended as a celebration of workers, this seems a good time to ask whether workers have much to celebrate in Arizona. Here are five measures of the state’s economy heading into the fall, with some bright spots highlighted.

1. Jobs remain scarce

Before the Great Recession, Arizona’s unemployment rate stood at 4 percent and the state was awash in growth. Five years after the downturn technically ended, Arizona has restored less than 60 percent of its recession job losses. The state has a 7 percent unemployment rate. Both of which are well behind the national average.

Bright spot: Much of the expected growth in jobs over the next two years will be in health-care services, retail positions and in the hospitality industry, said Aruna Murthy, director of economic analysis for the Arizona Office of Employment and Population Statistics. Arizona also should continue to see rapid growth in jobs in financial activities, although it remains a small portion of the overall workforce.

2. Wages are flat

For those who have work, wages in Arizona have scarcely moved in recent years after adjusting for inflation. While employers have groused that skilled construction workers, for example, are hard to find, the expected wage inflation in those fields hasn’t materialized, said Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W.P. Carey School of Business at Arizona State University. Instead, the state typically sees about 2 percent an­nualized wage inflation, he said.

Arizona isn’t unique in having relatively flat wages. It has been happening nationally for years.

Bright spot: It is hoped that as jobs in health-care services and the financial sector continue to grow in Arizona, that growth will help lift the average wage profile for workers here. CEOs increasingly cite Arizona as a desirable place to do business, in part because of relatively low taxes and low worker costs, McPheters said.

3. Construction hasn’t recovered

No industry personifies Arizona’s boom-to-bust character better than construction. The field peaked at 244,000 workers in mid-2006 and today employs 118,000. The loss of its relatively good wages also has rippled through the wider economy. “The big surprise has been that construction is dead in the water, and that’s been one of our drivers,” McPheters said.

Murthy said hopeful near-term signs in construction are still hard to find. Permits for residential construction have picked up recently, suggesting more work may come in the months ahead, she said. But construction of non-residential buildings in particular has fallen off.

4. Spending is low

Not surprisingly, a weak job market and relatively flat wages have hurt Arizonans’ buying power. Per capita spending remained lower in Arizona in 2012 than it was in 2007, even after adjusting for inflation. Only Nevada fared worse. It takes money to spend; too many Arizonans have too little of it.

Bright spot: While spending figures aren’t great, they are improving. Retail sales have been steadily rising, and sales of autos in particular have grown sizably in recent years. Vehicle sales are back to 80 percent of pre-recession levels.

5. Education still matters

Arizona ranks 29th in the nation in the percentage of adults with four-year college degrees or more and eighth in the U.S. for the percentage of adults with less than a ninth-grade education. Add to the data a troubling reputation as a state that spends relatively little on primary education. States that tend to have greater shares of college-educated workers tend to have higher incomes.
And when considering whether to relocate to a new state for work, executives and other college-educated parents also consider education quality.

Bright spot: While the educational picture at the state level isn’t great, college attainment in the Phoenix area generally matches the U.S. as a whole. However, compared with other metro areas, Phoenix still lags in four-year degrees.

Categories Economy, Narrative

Phoenix Housing Double Dip Recession?

No recovery is smooth. There are fits and starts. There are blue skies and cloudy. The Phoenix housing market, which in past years has driven the office market, has cooled off and is pulling back. Nobody thinks this will be a full recession, but there are clear signs that all is not peachy in Phoenix. I believe this to be true in most markets. Job creation, still anemic, is what drives people to buy and the job market is still lagging. See below for some key data, a few highlights, and some anecdotal stories from the trenches.

I remain bullish….We need continued and sustained job growth to bring the market back.


In Phoenix, a Realty Check as Market Moderates
From Bust to Rebound to a Return to Normal as Sales Cool


By: Nick Timiraos

Updated Aug. 18, 2014


To understand why the U.S. housing market this year isn’t providing the lift many economists expected, look to Phoenix.

Among the cities most battered by the 2006 bust, Phoenix was the first to snap back in 2011. Prices, off by 56% from peak, then rebounded sharply, trimming that drop by a third. The number of homes in some stage of foreclosure has fallen to about 4,300 today from more than 50,000 four years ago.

Now, prices and sales are cooling off. Inventories of homes listed for sale have climbed to their highest level in three years while the number of houses sold in June fell 12% from a year earlier. The rebound during the past two years “gave people a false sense of how quick we would recover,” said Jim Belfiore, who runs a local home-builder consulting firm.

Sales in other once-hot markets also are slowing. Inventories in Washington, D.C., rose by a third in July from a year earlier, while sales were down 8%. Listings in Sacramento were up 44%, as sales dropped 11%. In Las Vegas, sales slid 10%, while the number of listings without offers rose 53%.

Economists predicted double-digit gains in home sales nationally this year would help spur economic growth, but sales are down more than 5% over last year.

“There appears to be a conservatism among consumers and their willingness to take on big-ticket purchases,” said Doug Duncan, chief economist at Fannie Mae, whose view of the housing market has deteriorated recently. In a report Monday, Fannie cut its national housing forecasts for this year and next.

Fannie now expects new-home sales of 431,000 this year, down 11% from last month’s forecast, which would represent a gain of just 0.6% from last year.

While activity is expected to pick up next year, it still won’t be “the breakout year some are expecting,” said Mr. Duncan, who cut the 2015 forecast for new-home sales by 14%.

As the foreclosure boom that fueled much of the recovery fades, income and population growth are reasserting themselves as drivers of the housing market in places such as Phoenix.

Meanwhile, lingering scars from the bust are playing out as some of the country’s hottest housing markets struggle to pass the baton from bargain-hunting investors, who typically pay cash, to traditional buyers with mortgages.

The good news in Phoenix, as across much of the country, is that the foreclosure crisis largely has faded. That drop-off was a big driver behind the surge in prices as more buyers, especially investors, chased fewer homes. Rising prices have led homeowners to test the market and investors to retreat, a trend playing out nationally.

Home prices are up nearly 46% from the 2011 low. Investors accounted for nearly 15% of homes bought in June, down from about one-quarter last year and one-third of sales in June 2012, according to Mike Orr of Arizona State University’s W.P. Carey School of Business.

In Phoenix, slow job and income growth are among the reasons builders aren’t benefiting from the drop-off in foreclosures, especially as investors and foreign buyers have pulled back.

Employment in Phoenix, after expanding at an average annual pace of 2.6% and 2.8% in each of the last two years, is up just 1.5% so far this year, state figures show.

“If people don’t have jobs, they’re not buying homes,” said Greg Markov, a local real-estate agent.

The sluggish local economy is compounded by consumers still too battered from the bust to think about getting a loan. Some don’t have sufficient equity to turn a house sale into an adequate down payment on their next purchase. Others suffered credit blemishes or income hits that make banks reluctant to lend.

“It is taking longer for folks who went through the downturn to re-emerge,” Mr. Belfiore said. “Traffic at new-home developments is strong, he said, but “people are not pulling the trigger.”

David O’Hagan needed three months and two price reductions to find a buyer for his five-bedroom home in the Phoenix suburb of Peoria. The sale is set to close this week for about 5% less than the $259,000 he initially asked, though in four years he will have turned a sizable profit.

“I had hoped to see more traffic. It was a little disappointing,” said Mr. O’Hagan, who is a transportation manager for a food company and is moving his family to Maine.

Phoenix stands in contrast to other cities such as Houston, Dallas and San Francisco, where better job growth is fueling stronger demand.

Mr. O’Hagan, 39 years old, recently sold a separate rental home in a Dallas suburb in just days after 65 buyers showed an interest. It was “a complete polar opposite” from Phoenix, he said.

Builders, who paid premiums to buy land last year in anticipation of a rebound, have raised sales prices aggressively. “Maybe a little too much,” said Michael IlesCremieux, vice president of land acquisitions at Scottsdale-based Meritage Homes Corp.

The increase in inventory has been great news for buyers like Rose Eltanal, a 39-year-old attorney who started house hunting in 2010, but twice shelved her search. Last month she negotiated to buy a four-bedroom ranch-style home, initially listed at $599,000, for $515,000. She says she was tired of “throwing the money away” on rent.

Some early investors, meanwhile, are cashing out.

Jon Mirmelli, a real-estate agent, last year sold seven homes he had acquired since 2010 as rentals. He is now selling two dozen more homes for a national investor that he declined to name.

But he doesn’t see a big risk of further price declines because other investors are still combing the desert for deals. The discounts of years past are “something I’m not going to see again in my lifetime,” he said. “We have a normal market again.”