While Southern Arizona’s cities and towns may engage in a bit of healthy economic rivalry, industry experts believe the real battle for attracting business is against bigger cities out of state.

The greater Tucson area has a lot going for it, with the University of Arizona and Pima Community College pushing out top-notch talent every year. This is important, since companies choose their location largely based on their “human capital,” according to Barbi Reuter, president of the commercial real estate firm Cushman & Wakefield.

Reuter, along with Matt Siegel from CBRE and Alan Tanner from Bourn Companies, provided insight into Southern Arizona’s economic potential as it pertains to real estate during a July 24 luncheon hosted by the Arizona Association for Economic Development. They believe there are currently limited options for companies who are thinking of expanding or relocating to Southern Arizona. 

Siegel said Tucson has seen over 90 percent growth in tech industry jobs in the last five years, but that growth is hindered on a lack of available office space.

“The economics of new development and low construction costs are that major challenge for new office space,” he said. “So I think people in the business community and the real estate community are finding it very challenging to form a solid office market inventory.”

One of the major drivers of business to Southern Arizona was the recent introduction of opportunity zones. These are federally-designated regions that experience minimal commercial investment and have low-income populations.

The Tax Cuts and Jobs Act of 2017 allows companies who set up operations within those boundaries to receive reductions on capital gains taxes relative to the number of years they’ve invested there.

“The intent is for these zones to increase investment in underserved areas, there’s some debate as to whether it’s more driven by the tax benefits or it really will have the intended result of improving the areas,” Reuter said.

According to Cushman and Wakefield, the capital inflow to opportunity zones are expected to range between $100 billion and $6 trillion.

Tanner, with Bourn Companies, said his organization already has two active projects that fall within an opportunity zone. One is The Bridges, with 112 acres of commercial space near Interstate 10 and Kino Parkway, and the other is The Landing, with about 13 acres of mixed-use development at Interstate 19 and Irvington Road.

“We have been contacted by several different users specifically focused on opportunity zone investment, so I think that will be a catalyst and Tucson has a number of areas that benefit from this,” Tanner said.

Much of the growth Southern Arizona has seen lately comes from businesses that expand their operations here. Tanner noted that GIECO recently brought 1,500 jobs to The Bridges complex with their expansion. 

In the past few years, Tucson has seen high demand and high investment in industries like aerospace, aviation, logistics and mining. Hexagon Mining recently relocated to an office building downtown, after considering a move to Denver.

In order to retain this growth that’s taking off, Reuter, Siegel and Tanner agree that Southern Arizona needs to come together and create more dynamic environments where residential, retail and commercial building uses combine to create a community.

“All of the segments from employment to services to retail, they’re all really chasing the same thing, they’re trying to be convenient, highly accessible, strong exposure, and getting closer to the customer base,” Tanner said.

Tanner believes growth will most likely come from outside of the local Arizona market, since the current level of economic activity coupled with high construction costs do not justify growth from within. He says “upward pressure” is needed to take Southern Arizona to the next step.

With a strong labor pool already in place, these developments with multiple uses could be the key to keeping young professionals here as well as making Tucson more attractive to site selectors.

“We as a community have to do a much better job of retaining our young talent,” Tanner said. “Our focus is to create these mixed-use environments.” 

The adaptive reuse project at the Foothills Mall, for example, is 51 acres of mixed-use land that was fully entitled before talks with tenants ever began. Tanner said this is crucial for bringing in national companies, since they don’t want to wait around for paperwork to process. But it takes collaboration between the private and public sectors to do so.

“I would hope that we will see more outside employment come into our market,” Tanner said. “I think it’s going to take collectively all of the different municipalities to help expose the opportunities that Tucson offers.”

“The lone ranger strategy doesn’t work, we can’t be out there isolated trying to bring business here,” Reuter added. “It’s the collaboration between all the stakeholders in economic development. It’s our partnerships with Sun Corridor, SALC, Arizona Commerce, the chambers, the cities and the counties and the private side that is working together better than it has in my number of years in this business, so that we can create these places that are a destination and a place that people want to be.”

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