The city of commerce & cachet - East Valley Tribune: Phoenix & The Valley Of The Sun

The city of commerce & cachet

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Posted: Sunday, December 5, 2004 6:39 am | Updated: 5:01 pm, Thu Oct 6, 2011.

December 5, 2004

Neils and Nella Schwarz, and their white Shih Tzu named Rome, are playing the Scottsdale version of house hopscotch.

A few months ago, they bought a "starter home" for $440,000 in a cactus-studded north Scottsdale development.

The couple, who work in the semiconductor and banking industries, chose their 2,300-square-foot home in the Winfield community partly for its rural beauty, but mostly for its investment potential.

In two years, they’ll move into a new urban loft that is being built in downtown Scottsdale, where art galleries outnumber saguaros.

Neils, 40, and Nella, 46, are a different breed of settler today than the retirees who came to populate Scottsdale a few decades ago in search of open spaces and a siesta lifestyle.

The national image of Scottsdale may still be one of sun-drenched golf courses, sunset dinners and snowbirds, but it’s fast becoming an urbanized community with powerful job centers, populated by the working wealthy and growing families.

"When I first moved up to this area seven years ago, all of my neighbors were retired," Nella said. "There used to be only second homes, but now people are moving here full time."

As one business leader put it, Scottsdale was a "one-horse town" just a few decades ago. That horse was tourism. Today, the city is a diverse center of commerce that exports jobs to the rest of the Valley.

Scottsdale is changing, from its boulder-choked tip whose character will be shaped by the future success of the environmental preservation effort to its aging southern end that is banking on biotechnology.

The Tribune has examined how and why Scottsdale is changing through the eyes of residents, merchants and civic and business leaders. The findings show a city in the midst of a remarkable transformation, shaped by tremendous physical and economic forces that have come from far beyond Scottsdale’s borders.

Construction of the Pima Freeway stretch of Loop 101 has done more to change the city than any municipal planner would have hoped, helping the Scottsdale Airpark become the Valley’s thirdlargest employment hub. Farranging legal and political battles over tens of thousands of acres that crown the northeastern edge of the Valley will dictate how Scottsdale grows in the future.

Tension between the rural Western lifestyle and today’s more urbanized movement is still tangible. Hummer-driving entrepreneurs share the road with a shrinking cowboy and boot crowd. Stuccoed developments have overtaken many of the open spaces and horse ranches.

"Scottsdale for the last 15 years has been blessed with open space to drive growth. Now we need to embrace redevelopment and revitalization," said Scottsdale Area Chamber of Commerce president Virginia Korte. "We need to transform to a redevelopment environment, honoring our history and culture, but maintaining the cachet of Scottsdale."

MASTER-PLANNED GROWTH

In the 1970s, the big news in town was a road expansion that extended Hayden Road north to McCormick Ranch.

That master-planned development — with its larger homes, landscaped corridors and upscale physical ambiance — was a blueprint for northward sprawl.

Developments such as Grayhawk, McDowell Mountain Ranch and DC Ranch brought a wave of upper middle-class couples and families to the area.

Larry Gabriele saw it coming.

At a time when Los Arcos Mall in south Scottsdale was preparing to open, he and his Chicago law partners bought 100 acres some 20 miles north in what was then unincorporated Maricopa County land.

They paid $1,100 per acre in 1968. By 1972, they sold it for $4,000 per acre.

"We thought we were brilliant," Gabriele said. "I’ve seen land up here go for well over $100,000 an acre."

He eventually moved to the upscale community of Desert Highlands with his wife and three children in 1990.

He was 47, which was a youthful age compared with most residents in the guarded and gated communities of north Scottsdale.

But those days are changing. And he’s witness to it personally. Two of his children met their spouses in Scottsdale, and have since gone on to raise families of their own within the community.

"So, I got to see these youngsters moving into town," said Gabriele, now 62. "It was no longer just the retiree, second-home kind of person. Now we began to form a community."

The percentage of families and family size is growing in Scottsdale, according to the U.S. Census Bureau.

In 2000, Scottsdale families — or those households with two or more related people — made up about 75 percent of the population, compared with 63 percent in 1990.

Family size has grown from 2.24 people to 2.79 people during the same time.

Yet it is still among the oldest Valley cities, with a median age of 41.

That could be a symptom of the cost of living and an aging baby boomer demographic.

People who can afford Scottsdale are generally older and near the peak of their earning potential, said Don Hadder, a Scottsdale senior planner.

WORKING WEALTHY

Gabriele, who is building multimillion-dollar homes in the last undeveloped section of DC Ranch — called Silverleaf — is seeing a majority of buyers who can be termed "the working wealthy."

He rattled off a list of occupations: Doctors, lawyers, smallbusiness owners, CEOs, real estate developers.

"And some have (financial) help from their families," he said. "We’re talking to people in the 45-to 50-year-old category, maybe even 40."

The Schwarzes fit that profile. Unlike the retirees who flocked to Scottsdale decades ago, they have to work to afford their lifestyle.

Neils owns a company that manufactures and sells semiconductor equipment, putting him on flights to Asia and Europe three weeks each month.

Nella works for a lending institution that finances telecommunications companies.

The couple purchased their downtown loft for $535,000 to be closer to restaurants, art galleries and entertainment venues. Though they are doing quite well for themselves, Neils still reels at the price of real estate in Scottsdale.

"It’s a tremendous place, but it’s way expensive," he said.

At nearly $572,000, the median price of a new Scottsdale home last quarter was more than three times as expensive as the Maricopa County median of $177,500.

And homes are getting larger, too.

The average size of a custom home being built in Scottsdale this year is 5,076 square feet, compared with 4,575 square feet in 2000.

Production homes are also expanding. The average home was less than 3,000 square feet four years ago, while today they average 3,700 square feet.

It’s a trend directly attributable to the Scottsdale buyer. Several of the biggest master-planned communities in Scottsdale were originally approved for more, smaller home sites than they built, said Harry Higgins, a senior planner for Scottsdale.

"They found the market saying, ‘We want a larger product and a larger lot,’ " he said. "A lot of the standard homes in Scottsdale would be considered custom homes elsewhere."

ROAD TO PROSPERITY

The frenzied pace of development in the 1990s brought with it a huge population surge.

In 1990, there were 130,000 residents. Today, there are about 220,000 — the Valley’s fourth most-populated city.

It was a boom that allowed Scottsdale to shed its bedroomcommunity label as retail followed the rooftops.

Once a sleepy resort town whose economy ebbed and flowed with winter residents, Scottsdale has been transformed into a center of commerce. Today, businessservices is the No. 1 employment sector; hospitality ranks fourth.

As population spread northward, so did the city’s business core.

Many of these new companies landed in the Scottsdale Airpark, which has grown over the last two decades from an industrial region to a high-powered business center.

The renaissance was led by the entrepreneurs and executives who lived in the Scottsdale area and wanted to work nearby. High rents in Phoenix also prodded corporate decision-makers to choose the burgeoning area.

But the airpark would not be the hub of activity it is today without the Pima Freeway.

The addition of the Loop 101 stretch through the heart of Scottsdale profoundly changed the lives of the residents who live here, and brought economic prosperity to the region.

"What was a physically remote area in the Valley suddenly became connected," said Dave Roderique, Scottsdale’s economic vitality director. "It has been huge in terms of the employment. Who would have ever thought we’d be talking about 45,000 people working in the airpark?"

Today, small-business owners share land with publicly traded companies, such as Dial Corp. and JDA Software.

Businesses range from the country’s top-selling Lamborghini dealership to an international gourmet tea company.

"Small businesses located in the airpark for the owners’ personal reasons — because it was where you wanted to be," said Dan Schweiker, co-founder of China Mist Tea Co. "It’s a quality-of-life issue."

Others saw it as a way to develop their businesses in an environment that was more affordable and attractive than big cities.

"It doesn’t cost $25 to park. It’s still affordable," said Mike Reagan, executive vice president for Kahala Corp., which owns Surf City Squeeze, Samurai Sam’s, Taco Time and other fast-food chains.

The company relocated to the airpark from California.

"And the benefits are so impressive — the resorts, restaurants, atmosphere. When we entice people to move, it’s easy because we have Scottsdale to offer," he said.

OLD VS. NEW WEST

Tony Nelssen didn’t move to Scottsdale; it moved to him.

Twenty-two years ago, he bought land near Jomax and Scottsdale roads a week before the city announced it would be annexing him.

Nelssen and his family built their home there, despite the fact that there was no running water, sewer services or paved roads. A telephone call to downtown brought a long-distance charge.

With four mules and a horse, Nelssen is among the old guard in Scottsdale.

Though development battles with "rural versus urban" overtones have come and gone, there is still a tension that exists between the two lifestyles.

"The city, as it relates to the equestrian lifestyle, economy and general issues, does a good job of talking the talk, but they walk the other way," Nelssen said. "The city is doing some good things, but if you dig a little deeper than what they are doing on the surface, they are undermining the equestrian lifestyle."

The city seal has a bucking bronco. A cowboy cutout greets visitors to Old Town. And, of course, the city slogan is "The West’s Most Western Town."

Yet for all of its iconic reminders of the Old West, Scottsdale is fast becoming an urbanized city.

Rawhide Western Town and Steakhouse, the 1880s faux Western town in north Scottsdale, has been sold to a development group that plans to build homes on the land.

Multistory lofts and nightclubs share downtown with Indian jewelry stores and shops that sell Southwest merchandise.

A movement to remake downtown with an Old West theme failed a few years ago. Instead, trendy hotels and plans for 13-story condominium towers have taken hold.

John Berry, 47, a real estate attorney who has represented some of Scottsdale’s biggest projects, said the days of vitriolic fights over the two sides appear to be waning.

The city lost out on new projects because of a past reputation for being a difficult place to do business, he said.

"Capital fled — literally fled — to other communities. Those years of community angst and outrage are well-documented," said Berry, whose family settled in Scottsdale when he was a toddler. "At some point, people realize there has to be a balance in the community and that all two-story buildings with a watering trough and a hitching post do not make for a 21st century economy."

Perhaps the struggle is best documented in how differently outside groups market the city.

While the city holds on to its Old West slogan, executives at the chamber of commerce have testmarketed phrases, such as "Best of the New West" and "Southwest Sophistication." The group wants to create an image of a city on the move, rather than one that harks back to the Old West.

The Scottsdale Convention and Visitors’ Bureau scrapped its trademark red Stetson cowboy logo years ago. Its current campaign, "Bring Your Passion for Life," is targeting a cosmopolitan visitor.

"It worked. It helped create the cachet Scottsdale has," Korte said of the Old West motto. "But I tend to believe it has outlived its usefulness. It may be a tag line, but not a current moniker."

The state’s official historian, Marshall Trimble, said losing those Western symbols or the city’s motto would have an effect on the tourism economy.

"You have to remember that we are a tourism state and tourism is a major part of our economy," said Trimble, a Scottsdale resident. "If we want to be the ‘West’s Most Western Town,’ then let’s be it. It’s a great motto."

PRESERVING THE DESERT, BUILDING THE FUTURE

Scottsdale is the second major Valley city to become landlocked, and buildout is less than 20 years away. The housing boom has gone from a sprint to a sputter.

Little vacant and developable land remains in this battleshipshaped city that stretches 30 miles from north to south.

Like most cities in the Valley, Scottsdale grew with annexation. The city evolved from one square mile in the 1950s to 185 square miles today.

Scottsdale is being forced to look inward when it comes to new development.

Estimates of vacant and developable land range from roughly 4,000 to 14,000 acres. Even at the high end, this represents only 12 percent of the city’s land area. Scottsdale’s aggressive desert preservation program is by far the most significant reason that little developable land exists.

Voters have opened their wallets time and again since the 1990s to fund the McDowell Sonoran Preserve, which calls for a 36,400-acre open-space system. That would be the size of three Manhattan islands.

Yet funding sources needed to buy the remaining 20,000 acres will almost certainly fall short of the estimated cost of $500 million.

A legal and political tug-of-war over the amount of state land that can be purchased for preservation purposes also has the potential to drive up costs, and force the city to compete with deep-pocketed developers at land auctions.

"It’s going to be very tough if the city has to compete with private buyers," said Eneas Kane, vice president of DMB Associates, the developers of DC Ranch and the planned Stacked 40s retail and residential project at Scottsdale Road and Loop 101.

Kane is a past member of the state Land Department’s preservation advisory board. He sees "record-setting" land values within the boundaries of the city’s planned preserve.

A lack of places to sprawl means Scottsdale must decide whether tall buildings and dense developments will play a role in its future.

South Scottsdale, which is banking on the creation of the $300 million ASU Scottsdale Center for New Technology and Innovation at the former Los Arcos site, will undoubtedly face new projects as the area ages.

Scottsdale officials predict downtown’s influx of planned residential projects will continue. A few condominium projects recently approved are set to permanently change the skyline.

Some business groups, such as the chamber, are forecasting taller buildings and more density at the bustling airpark as it continues to fill up.

The Stacked 40s project is envisioned to have up to 1.8 million square feet of retail and office development, as many as 1,100 homes and a possible hotel.

Phoenix has big plans across the street. That city has zoned 500 acres to the west for commercial uses, including a large mall.

"What does that do to a community that up to now has been basically a single-family residential community?" Gabriele said. "We’re going to become more urban. It is no longer just a resort place where people come to play golf in the winter."

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