The economic downturn caused by the coronavirus pandemic could halt Scottsdale’s development boom, though a number of high-profile new projects show no signs of slowing down.
From the Nationwide Cavasson project in the north to Entrada and Papago Plaza in the south, Scottsdale’s major developments appear to be moving ahead in spite of the downturn, which has caused many local businesses to close and unemployment claims to soar.
“There is no impact at this time. Still pushing forward with vigor!” Papago Plaza developer Lee Mashburn told the Progress via email.
Just west of Papago Plaza, the Entrada mixed-use development appears to be moving forward on land that used to house an auto mall at 64th Street and McDowell Road.
A spokesperson for the development declined to say if the project was impacted in any way by the pandemic, but Banyan Residential and Bridge Investment announced they had broken ground on Entrada on March 19.
It is still unclear how the economic slowdown will affect the hotel building boom in Scottsdale as the tourism industry is decimated by stay-at-home orders and social distance.
In 2019, the Progress reported there were 10 hotels in various stages of development south of Camelback Road.
Experience Scottsdale reported that occupancy rates at hotels in the Scottsdale area dipped to 10.5 percent on March 21 – down 89 percent from last year.
One major project, the Caesars Republic Scottsdale hotel next to Scottsdale Fashion Square, is delaying construction due to the governor’s March 30 stay-at-home order.
“Construction is held up for the month of April to accommodate the governor’s order of stay at home,” said a spokesman for HCW Development, the company building the Caesars hotel. “HCW cares very much for the welfare of all people during this crisis.”
Ducey’s order excluded construction.
But it still required those businesses to abide by social distancing protocols, stating that “Businesses and entities that remain open shall implement rules and procedures that facilitate physical distancing and spacing of individuals of at least six feet.”
Workers are still on site at the Canopy by Hilton hotel in downtown Scottsdale, located across the street from Scottsdale’s Museum of the West and directly adjacent to the forthcoming Museum Square development.
On March 30, the Progress witnessed dozens of closely-grouped construction workers in walking across Marshall Way towards the site from a nearby parking lot.
Workers on the building itself looked to be more spaced apart, in line with requirements in the executive order.
Ryan Companies, the general contractor working on the hotel, did not respond to a request for comment.
Two days later on April 1, similar activity was witnessed at the Cavasson development from Nationwide at Hayden Road and Loop 101.
The Progress witnessed dozens of workers at the Cavasson site that appeared to be closely congregated in groups of three or four, seemingly in conflict with the six-feet-of-separation rule.
A spokesperson for Nationwide declined comment on the project’s status but said that Nationwide is expecting contractors to abide by social distancing guidelines while working on the site.
“Safety is our first priority,” said Carli Lanfersiek, director of marketing for Nationwide Realty Advisors. “We expect all of our contractors to follow the required social distancing protocols and safety requirements.”
A spokesperson for Layton Construction, the general contractor working on Cavasson, said the company has enhanced its safety protocols in line with social-distancing guidelines.
“The health and safety of our employees, clients, and partners is our number-one priority…Social distancing is required on all active job sites, and anyone who enters our sites must complete a comprehensive health checklist,” said Layton spokeswoman Jessica Pantages.
Pantages said she would follow up with the on-site project manager to ensure all workers were abiding by those policies.
There is a chance some commercial and residential developers in Scottsdale and throughout the Valley could be having second thoughts due to the uncertainty caused by the coronavirus.
“This is so early on and the duration is unknown that you may see people tapping the brakes just to try and determine what the duration might be and if they have the ability to do it, said Mark Stapp, the Fred E. Taylor professor in Real Estate at the W. P. Carey School of Business and director of the Master of Real Estate Development program.
Stapp said you could also see lenders tighten their purse strings and pull back on loans that have not yet been closed.
However, existing financial commitments could be the driving force keeping certain developers from pressing pause on their projects.
“Take the Papago Plaza project that is under construction…assuming they have loan dollars involved, those are committed dollars,” Stapp said. “It may be more difficult to stop construction than it would to continue, because by stopping you could be in default unless there is an agreement.”
“You don’t want to leave a half-constructed project; its value is so much less,” Stapp said.
Conversely, Stapp said projects that have not yet broken ground may be in a better position to pause or reverse course.
“I can see rational decision making being let’s just wait; let’s put it on hold for 30 days,” Stapp said. “Let’s wait a little bit here to see if we have a better understanding of what the future is.”
Residential developers, who have been active in the East Valley over the past several years, could also be significantly impacted as the virus essentially halted migration into Arizona.
“Well, people aren’t moving right now,” said Lee McPheters, research professor of Economics in the W. P. Carey School of Business. “There has been pent-up demand for housing, but I think that with in-migration grinding to a complete halt, it will have an effect on construction.”
It is still too early to tell how social distancing will impact the housing market.