Arizona State University queried its audience at a recent luncheon about various aspects of the Arizona economy. Among these were the rank of Arizona among the states in per capita income and the average employee wage as a percentage of the U.S. average. The state ranks 39 lowest among 50 in per capita income and 92% of the U.S. average in the average employee wage.

This is no surprise as the state is a poor 2nd to California’s coastline in attracting existing business, institutes of higher education and high income residents. These numbers are disappointing as Arizona looks for a business niche where it can dominate – other than copper, citrus, climate, cotton and cattle. The idea here is to establish a solid middle/upper middle class so that its average resident can afford a home and the middle class accouterments for themselves and their children. And then growth is just more likely to follow growth naturally, it is thought, like California’s resilience. It doesn’t want to rival Las Vegas – its ambition seems to be more to establish a Boston, New York, Seattle type character based on the great industries of the coming period- among them biotech and nano tech – and do it organically through the University of Arizona and Arizona State University. It missed connecting as the home of any of the last great wave of industries as IBM, Intel, Motorola, Boeing and others came and went to offshore outsourcing without establishing a home base in Phoenix. The 1st and 2nd wave of High-Tech businesses have remained in Northern California under the Stanford University influence. No other leaders of the economy or economic sectors have chosen Phoenix as a headquarters either nor, to my knowledge, are any planning to move to Phoenix in the near future.

It’s surprising how much money has been invested in land for residences and business in anticipation of this growth. I can count about 1 million residential lots in preparation for a market which has never exceeded say generously 60,000 new homes annually. Retailers flood this market with 1/4 more space than the national average citing tourism but really just looking for more rooftops in a hurry for sales. Speculative office and industrial projects in amounts with no local historical perspective are underway.

I see economic danger to current real estate investors in Arizona. I don’t mean just the housing interests which are obviously suffering at this date, but also the participants in developing the other aspects of future cities. Time will tell, but I’ll bet that the period until 2010 will be rocky and it may not be heaven in eleven either. 
 

 

Be Sociable, Share!