Experts say Yuma poised for commercial boom

Mar. 31st, 2012
Mark Knaub

Investing in commercial real estate is becoming safe for Yuma investors, according to Michael Hall, broker of ERA Matt Fischer. “It’s a safe investment compared to the stock market. We’re seeing people who are transferring to the real estate market, for example, buying an office complex. “Property values have declined. They’re able to buy and rent it out and own their own piece of real estate.” The residential real estate market is “slowly” improving, with commercial real estate following suit. “Commercial real estate always seems to lag a little bit behind residential, but it’s slowly been pulling itself up,” Hall said. “New businesses are coming in and people are starting to make improvements. We’re seeing some sales.” Although one would expect a lot of vacant space after a recession, local experts note Yuma really doesn’t have a significant amount of inventory. Although Yuma County saw increased interest by prospects in 2011, it struggled with a shortage of viable buildings. Prospects tend to choose locations that have existing buildings that meet their size and utility requirements over locations where construction is necessary. “In today’s market, companies are primarily focused on existing buildings due to the fact that build-to-suit options reduce working capital and financing institutions are very restrictive on new construction loans,” said Greg LaVann, senior project manager of the Greater Yuma Economic Development Corp. GYEDC’s prospects typically seek industrial space that requires industrial zoned land (LI or HI). “The size varies from project to project, but I would estimate the majority of our prospects need between 50,000 to 100,000 square feet of space.” They prefer higher ceiling heights for stacking of inventory, multiple truck dock doors and open layouts. “We have received a large number of inquiries lately requesting rail service to site along with easy access to interstate and highways.” LaVann said ample power, with a minimum 480 amps, is almost always a prerequisite as well. For call centers in particular, a “plug and play” center is usually demanded. This consists of adequate IT infrastructure within the building, open layout, multiple offices for training, ample parking and a backup generator on-site for power outages. Rob Ingold, owner of Yuma Commerce Park at 32nd Street and County 7E, agrees that Yuma doesn’t have an abundance of commercial properties. He saw the need 10 years ago and decided to build the complex, which at 180 acres is the area’s largest industrial park. Today it houses a glass company, window manufacturer, Southwest Gas, General Services Administration and various other tenants. Ingold has only one vacancy. He wishes he had more competition. “I wish we had more buildings in town. If I see the market going up, if I see some activity, I might be tempted to build again,” Ingold said. Although he also owns buildings in San Diego and Orange County, he strongly believes that Yuma is a good place for businesses that want to serve the markets of San Diego and Los Angeles without actually being in California. “A warehouse in Yuma can serve southern California, southern Nevada, west Texas, New Mexico.” Some businesses look to Arizona because of cheaper fuel costs. “Transportation in California has been a problem,” he said. And historically Arizona has been considered more business-friendly than California, with its higher taxes and fees. “But with the recession they lowered rents way below our rents. Before, we were the lost cost providers.” Another obstacle to a flourishing commercial real estate market in Yuma have been “high” hookup and impact fees, said Ingold. “They’re out of line, too high.” But the city recently lowered impact fees by 40 percent, which Ingold believes will “dramatically” help the market. “Hookups are still an issue, but we’re working on it.” Nevertheless, Ingold thinks that with the economy improving, businesses will start looking at Yuma. “It’s got advantages over other places. The climate is good here. We complain when it’s hot, but we’ve never had to shut down production because of the weather. “For consistency, it’s a pretty good place. There’s plenty of power, excess water, lots of natural gas. Commodities, as far as utilities go, are reasonably priced.” Competitive utilities prices allow companies to invest more into their business, he added. “Businesses who move here tend to save money. That’s a real plus for us,” he said, noting businesses can save about 40 cents a foot per month. “That’s a good savings.” Hall sees the commercial real estate market opening up in the near future, and ERA Matt Fischer’s focus for the next couple of years will be on that aspect of real estate. Right now his firm has a $1.7 million listing for a restaurant and office complex on 4th Avenue, a mobile home park for $1.7 million, a condominium complex for $1.7 million and a 16th Street 5,000-square-foot, fully leased building for $660,000. “For investors, this is great. They don’t have to find tenants,” Hall said. Investors typically look for fully leased buildings with a strong rental base that translates into steady income. “They want solid tenants with a history of paying rents,” he said. Then there are the “flippers” who want a vacant property they can fix up, sell and make money quickly. Ingold sees Yuma as a warehouse and distribution center. “The raw materials are here. The big cities are a few hours’ drive. If a product is already made and they want to store it for transport, we handle that very well, we’ve been very successful in doing that.” Yuma, located on Interstate 8, is poised to fulfill that demand. “Even in a recession, people still need things,” he said.

Mark  Knaub
Sun Staff Writer
Yuma Sun
Mar. 31st, 2012