Published May 19, 2024
DESERT DREAMS: How a state land auction will reshape the future of Phoenix
DESERT DREAMS
How a state land auction will reshape the future of Phoenix
For years, North Phoenix was expected to become a sea of sprawling homes as a continuation of the Valley's suburban growth.
By all accounts, that vision has now expanded.
Arguably the most notable swath of undeveloped land in that part of town is Biscuit Flats, which spans about 12,000 acres from Carefree Highway down to the Central Arizona Project canal west of Interstate 17. That's close in size geographically to the densely populated 14,500-acre island of Manhattan in New York.
The future of Biscuit Flats was permanently altered in 2019 after one of the world's most prominent companies, Taiwan Semiconductor Manufacturing Co., started eyeing 1,000 acres in Phoenix for a manufacturing complex that will eventually support thousands of jobs.
The city partnered with the Arizona State Land Department to set up a 3,500-acre tract of raw desert state land in Biscuit Flats for a future technology-centered employment hub now called the Sonoran Oasis Science and Technology Park. The site is going to be modeled similar to the Hsinchu Science Park in Taiwan, which encompasses 500 tech companies, academic institutions and 150,000 jobs.
"When we worked with TSMC, one of the things they really enjoy in Taiwan is their facilities don't just stand out by themselves, their facilities are located in the middle of science and tech parks," said Christine Mackay, director of Phoenix's community and economic development department. "That was something the city committed to as we were working to bring them to Phoenix."
The state owns and manages millions of acres across Arizona; and it often works with cities to identify future areas of growth and the infrastructure needed to support that vision. Since the arrival of TSMC, the partnership between the state and cities in metro Phoenix has accelerated development opportunities in the northern part of the Valley.
As the city established zoning for the new tech park, TSMC formally announced its planned investment in Phoenix that has now ballooned to $65 billion across three microchip fabrication plants while Phoenix has committed to $205 million in infrastructure for the company's site. Already, the megaproject has had a profound impact on the Valley, drawing 40 suppliers to expand in and around Phoenix.
That's just the start of what's to come.
State land auction to spur thousands of acres of development
The state is partnering with Phoenix and Peoria to position 17,000 acres around the semiconductor campus for manufacturing sites, commercial development, an airport, master-planned communities and more. This includes 3,800 acres around TSMC for the Sonoran Oasis Science and Technology Park, master-planned communities across 6,000 acres and the proposed Peoria Innovation Core across another 6,000 acres, according to the State Land Department.
The first chunk of land up for sale is 2,300 acres encircling TSMC that will hit the auction block May 29 after New York-based Mack Real Estate Group filed an application to bid on the site. Still, the developer could face a bidding war as Phoenix-based ViaWest Group and an entity connected to the Wolfswinkel family also applied to take part in the auction.
Most state land auctions only require bidders to perform due diligence on a site beforehand. But the auction, with a starting bid of $56.28 million, comes with a binding contract that requires the winning bidder to meet development milestones and invest hundreds of millions of dollars in infrastructure to support the buildout of a science and technology park. Only entities that met experience and capital requirements could apply and participate in the auction, limiting competition for the site.
"The reason we put those specific requirements in is ... from an economic development standpoint we feel like it is the time for that particular property to move forward," Mackay said. "The last thing you would want is for the developer to buy it and then just sit on it for a couple of decades while they wait for the land to appreciate."
Those requirements are also important, Mackay said, because moving forward with the development of Sonoran Oasis will help open more parcels for auctions and development. Over multiple decades the Sonoran Oasis park will be built out with a cluster of manufacturing, research and innovation uses to the west of TSMC and with mixed uses such as multifamily, retail, hospitality and office to the east of the semiconductor campus along I-17. Sonoran Oasis Science and Technology Park could eventually generate up to 100,000 jobs and become the third-largest employment corridor in the state, according to Mackay.
After the winning bidder buys the land and installs the required infrastructure, they can develop the site for sale or lease or also sell portions of the site to developers for vertical construction. Costs of infrastructure like roads, water, sewer and power in the Biscuit Flats area will be shouldered by the development community, Mackay said.
"As we are in most areas of Arizona, development really pays for itself," she said. "At this time, the city does not have a plan to put in any additional infrastructure."
And even beyond Biscuit Flats, Mackay said the city is working with the state land department to identify future megasites north of Carefree Highway and east of I-17 for economic development.
Biscuit Flats could see tons of new housing
The May state land auction includes another important stipulation.
The winning bidder will be required to rezone and create a master plan with the city of Phoenix for an additional 1,200 acres of state land west of the technology park near Deadman Wash. The site is expected to benefit from the infrastructure improvements made at the Sonoran Oasis park.
Some of the land west of Deadman Wash is slated for residential but Mackay said those 1,200 acres could turn into an extension of the tech and science park.
About 6,000 acres of state land remains south of the Loop 303 that has also yet to be developed. To further support TSMC and the growth of other industries in north Phoenix such as the planned Discovery Oasis medical campus, this area will likely be turned into master-planned communities with housing, commercial and services, Mackay said. By some estimates, the site could fit nearly 20,000 residential units.
Phoenix staff has had conceptual discussions with PulteGroup Inc. for a proposed mix of land uses and open space preservation, but the homebuilder has not made a formal submission to the city, according to a spokesperson for the city of Phoenix.
Pulte in 2021 started the process for a land auction for those 6,000 acres south of the Loop 303 for a master-planned community but the application is currently inactive, according to State Land Department public records. Brookfield Residential had also been eyeing this area for an auction back in 2017 but the case is also inactive, land records show.
Lennar Corp. developed a 70-acre community along Interstate 17 just south of the Loop 303 nearby Taiwan Semiconductor Manufacturing Co.
LENNAR CORP.
Lennar Corp. (NYSE: LEN) has not applied for a land auction for the 6,000 acres but has expressed interest in participating in future auctions in Biscuit Flats. Already, Lennar Homes has bought other parcels near TSMC such as 80 acres that Lennar won in a bidding war in January for 300 new homes. It has also developed the Middle Vistas community with 228 homes on 70 acres it acquired south of TSMC.
"We're certainly very excited to see more land come available for homebuilding opportunities in that north Phoenix area," said Jeff Gunderson, Lennar's senior vice president of land operations. He said the state land department has shared information about the future opportunities with homebuilders.
Jeff Gunderson, senior vice president of land operations for Lennar Corp.
LENNAR CORP.
Gunderson expects it will take at least a few years of master planning for the 6,000 acres before an auction could be scheduled.
"It's a good enough location in the Phoenix metro area where there's going to be a lot of interest," Gunderson said. "There are other areas in the Phoenix metro that are great growth areas as well but definitely this is an area of focus."
Phoenix's neighboring city, Peoria, will only add to the growth in the northern Valley. The city recently unveiled its plans to work with the state to set up 6,700 acres for the Peoria Innovation Core, which would include a new $150 million airpark that could create thousands of jobs.
The innovation core would also help attract other manufacturers alongside the planned $2 billion Amkor Technology Inc. semiconductor packaging plant.
SVN DESERT COMMERCIAL ADVISORS
Planning for all of these sites will likely take years but infrastructure work on the land around TSMC could start as early as 2025. Once TSMC starts full production at its Phoenix plant, even more suppliers and ancillary companies will expand in the area. Between three fabs, the semiconductor project is expected to employ more than 6,000 workers.
The amount of workers and people moving to Phoenix because of TSMC and the growth in the area will continue to create demand for housing and other uses, said Jonathan Levy, senior adviser for SVN Desert Commercial Advisors.
"That's been a big driver, not just on a national level but on a global level," Levy said. "It certainly put Phoenix and the state of Arizona on the map for advanced manufacturing."
