A surge in condo construction drove development in Tempe to a near record level last year as developers built upward to make up for a lack of vacant land.
The value of new construction was the second-highest ever for the fiscal year that ended in June. It was the fourth straight increase following a huge downturn several years ago. But last year’s 150 percent jump — driven largely by high-rise and midrise buildings around Tempe Town Lake and downtown — was the largest of the boom years.
“I don’t think two years ago we had any idea this level of activity would occur,” said Chris Salamone, the city’s community development manager.
Tempe recorded $453 million worth of development in the last fiscal year, compared with $497 million in the 1997 fiscal year, the record.
Tempe should have smashed that record last year, said Chris Anaradian said, the city’s development services director.
The developer of Centerpoint Condominiums had planned to get a permit in late June for the second of four towers in its downtown project. The plan got caught up in another agency and will come in soon, Anaradian said.
The first Centerpoint tower was valued at nearly $79 million.
It is the largest single project and part of the biggest segment, multifamily housing. That category included investments totaling roughly $200 million, or 44 percent of the overall development in the city.
Much of the boom is less exciting than the high-rises. Businesses are expanding and redeveloping, resulting in a large number of smaller projects.
The actual value of the development is far higher than the city’s figures because officials used a nationwide industry standard that calculates value based on the type of development and average costs per square foot. The value doesn’t include land, financial fees or quality of development. And because the formula is several years old, it doesn’t include a surge in material and labor costs.
The actual value of the projects is closer to $800 million, or perhaps even $1 billion, city officials said.
Real estate experts and city officials said it’s impossible to predict how long the development craze will continue, but the outlook is optimistic. This year could be strong as well, because Tempe Marketplace permits will show up in this year’s reports.
Also, few projects showed up last year along Apache Boulevard, where the Metro light-rail project is expected to trigger massive redevelopment. City officials have seen lots of real estate transactions in that area in preparation for a future development. Several large projects could come as early as this year, Salamone said.
Greg Coxon, senior managing director for CB Richard Ellis, said Tempe will probably ride the wave for a few more years. The timing is perfect for more high-rise condo projects downtown and at Tempe Town Lake, barring some significant economic shift, he said.
“There’s never been a more optimistic time — and I’ve been in the business for 20 years — than what we’re at right now,” Coxon said.
Tempe’s boom has spread beyond its city limits. Downtown and lake developments are bringing lots of new workers and residents who will want different businesses in places like south Scottsdale, Coxon said. He expects a surge of redevelopment on Scottsdale Road from the Salt River to Arizona State University’s SkySong project.
“There’s a real opportunity for the city of Scottsdale to take that corridor and totally redevelop it,” Coxon said.