Phoenix Officials Face Development Dilemma

fromKJZZ

Downtown Phoenix is full of dirt lots. At the peak of the real estate bubble, an acre was selling for about $90 a square foot. Investors and developers thought the city was finally about to grow up. Now, the same land sells for $9 a square foot.

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Go online, look at a satellite map of downtown Phoenix, and there you'll see it - a checkerboard of dirt lots among the buildings. The city estimates that about 11 percent of the urban core is vacant. The commercial real estate market is stagnant, and the city has a development dilemma.

From member station KJZZ, Peter O'Dowd reports.

PETER O'DOWD: Now take that aerial map and zoom in. There is a square on the checkerboard - right here - where Mat Englehorn stands on 14,000 feet of undeveloped dirt.

(Soundbite of music)

Mr. MAT ENGLEHORN (Baron and Counsel Real Estate): This is stuck here. It's annoying because it doesn't look good.

O'DOWD: The dirt belongs to his neighbor. Englehorn owns the adjacent office building and a small parking lot. A few years ago, speculators offered Englehorn more than a million and half dollars for it. The deals fell through. But back then, he says people around here believed a building boom had finally arrived.

Mr. ENGLEHORN: That's what everybody thought, but it was all money. I don't think anybody had ideas. You know, they had some ideas on paper, but - we're going to buy this block; we're going to put a 30-story building on it.

O'DOWD: That really is the story of this empty land. For decades, downtown Phoenix has been the darling of speculators who've tried to assemble large chunks of property, and then sell them at a premium for high-rise condominiums and office buildings. Brokers say dirt that sold a few years ago during the boom for close to $90 a square foot, now goes for as little as $9.

By way of comparison, Colliers broker Mark Tarczynski says empty land in downtown Los Angeles is still worth about 200 bucks a foot.

Mr. MARK TARCZYNSKI (Executive Vice President, Colliers International): We've reached a critical mass now to where we weather the minor bumps in the road.

O'DOWD: And in downtown Chicago, Colliers says empty lots are going for about a 120 bucks a foot. Not so in Phoenix, where broker Kevin Lange says banks have foreclosed on much of the land that sold at the market's peak. Those who didn't sell have little incentive to do so now.

Mr. KEVIN LANGE (Broker): A lot of the groups that have owned their properties for more than 10 or 15 years will end up just passing it down to their children.

Ms. LAURIE CARMODY (Real Estate Investor): It's a philosophy of living. You know, it's urban density versus sprawl.

O'DOWD: Laurie Carmody and her husband, Tom, are downtown real estate investors.

Ms. CARMODY: So we've ended up in this patchwork that doesn't work as a downtown core.

Mr. TOM CARMODY (Real estate investor): It's not so much a matter of blame. It's more a matter of responsibility.

O'DOWD: With the promise of building up now less promising than ever, the Carmodys believe it's the responsibility of property owners like themselves to find temporary uses. Neighborhood organizers have suggested walk-in movies projected onto the broadside of existing buildings.

Kenny Barrett, who helps run a group dedicated to making downtown more walkable, dreams of planting sunflowers in the empty lots.

Mr. KENNY BARRETT: You could walk and walk and walk all day long in New York City but whenever you get to like, a vacant lot or something, like, that's when you feel like you've gone too far, you know. And it's like, with us, that's at like, square one, you know.

(Soundbite of laughter)

Mr. BARRETT: It's like you start at a vacant lot.

O'DOWD: Barrett and his buddy laughing in the background are outside of a start-up community garden - a pilot project, of sorts. Some have also tried to install planter boxes on about 15 acres of city-owned vacant lots around here. But Phoenix deputy director of downtown development Jason Harris says not so fast.

Mr. JASON HARRIS (Deputy Director, Downtown Development, Phoenix): So you put a community garden in, people put their sweat and tears into, you know, toiling the land, and to have that say, well, no, we've got the teaching hospital finally; we need to close this - obviously, a lot of angst and heartaches.

(Soundbite of construction)

O'DOWD: Just like private landowners, Phoenix has other plans. You heard Harris mention a teaching hospital. Well, construction crews are building a 6-million-square-foot bio-medical campus here the only sign of activity on this dusty checkerboard of land. Planners are holding out hope that a hospital will follow. But even the city says it could be a decade or longer before the dirt is gone.

(Soundbite of chatter)

O'DOWD: Landowners like Mat Englehorn realize this. As much as he wants shops, condos and doctors' offices to prosper around here, he's blunt about selling to a developer.

Mr. ENGLEHORN: Should I give mine away? It's good for the community but I mean, I'm not yet charity. I'm, you know, I'm not going to just give the land away.

O'DOWD: Because at nine bucks a foot, it's better to wait.

For NPR News, I'm Peter O'Dowd in Phoenix.

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