Mesa developer’s new tactic: Build jobs, then homes

The Arizona Republic |
Jun. 18, 2012
by Catherine Reagor

It will be another year before houses go up on one of the last large pieces of residential land in Mesa, even though the developer bought it six years ago.

The former General Motors Co. proving ground in east Mesa sold at the height of the housing boom amid a fanfare of development plans and with images of the site becoming a new city at the metro region’s eastern edge.

Today, the site has become a case study in post-boom housing business and the search for new jobs and new industries in post-recession Arizona.

The push to grow new jobs — and the delay in building housing — has been planned, but this wasn’t the original plan.

When Scottsdale-based developer DMB paid GM $260 million for the 3,200-acre property in 2006, new housing subdivisions were already springing up on surrounding parcels.

In summer 2007, a town-hall meeting in downtown Mesa focusing on the proving-ground redevelopment drew hundreds from the real-estate industry. At the event, excitement over the project was most apparent among homebuilders, who asked about design requirements and when the first lots would be for sale.

By the end of that year, the picture had changed for homebuilders.

In 2008, developers and homebuilders began giving land back to the banks or going out of business. Privately held DMB suffered, too, slowing its projects and eventually laying off a third of its staff. The long-standing model of building new homes farther and farther outside metro Phoenix stopped working.

As the housing market went from slowing to a crash, it became clear to the developer that Arizona’s model of building homes was broken.

The developer began focusing on the future of the surrounding area.

DMB’s Eastmark community is part of Mesa’s Gateway area, already home to an airport and a rapidly growing Arizona State University campus.

An existing commercial base on Power Road lies a few miles west. And just east is a huge piece of vacant state land already planned for development.

“Building homes dropped on our priority list in Eastmark during the crash, and building a bigger regional economy became the obvious priority,” said Drew Brown, a founding partner and chairman of DMB.

During the recession, DMB shelved its plans for homes and began working to draw big employers to the Gateway region, keep other large firms in the area and work with other communities in the southeast Valley to build the infrastructure needed to support future growth.

“DMB is taking the responsible approach to developing Eastmark, instead of incrementally building subdivisions,” said Mark Stapp, director of the Master of Real Estate Development program at the ASU’s W.P. Carey School of Business and a former developer.

“The company is trying to raise the economy for the entire region and thinking about the last parcel it sells, instead of the first parcel,” Stapp said.

DMB realized in 2007 that to fill a large development far from metro Phoenix’s core with as many as 100,000 people, its east Mesa community would first need much more than housing.

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