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Block 23 development may bring grocery store, housing to downtown Phoenix

New development plan to go before Council Oct. 5

Gabriel Atwood, of Phoenix, waits to be picked up in a parking lot on the corner of First and Second streets and Washington and Jefferson streets on Monday, Sept. 26, 2016. The parking lot is the proposed site of a Fry's Foods grocery store and a high-rise residential complex.
Gabriel Atwood, of Phoenix, waits to be picked up in a parking lot on the corner of First and Second streets and Washington and Jefferson streets on Monday, Sept. 26, 2016. The parking lot is the proposed site of a Fry's Foods grocery store and a high-rise residential complex.

An empty asphalt lot in downtown Phoenix may be developed into a grocery store, housing development, retail and office space thanks to a new development proposal.

While the lot has entertained development proposals in the past, the City of Phoenix’s Community and Economic Development Director Christine Mackay said this proposal in particular shows every indication of future success.

“I will be incredibly, incredibly surprised if this project does not come out of the ground in early 2017,” Mackay said.

The department is working with RED Development, the commercial real estate company that created CityScape in 2010, to bring the project to fruition.

RED Development’s experience with Arizona development projects set it apart in being able to complete the $160 million project, Mackay said, because it has the resources to find tenants for the completed space.

She said Phoenix is partnering with a private development company because the project will help accomplish some of the city’s goals, such as revitalizing the downtown area and bringing new economic opportunities.

“(RED Development has) a very strong portfolio of tenants that are interested in being in their developments,” Mackay said. “They’ve got a very strong reach in being able to attract new tenants in the market.”

What you'll see

Called Block 23, the area is located between First and Second Streets, and Washington and Jefferson Streets.

The empty lot was government property since 1874, and proponents of the project say the development will earn tax revenue for Phoenix and create new jobs.

RED Development plans to create 300 high-rise residential units, 150,000-square-feet of office space, 1,000 parking spots and 50,000-square-feet of retail space including the proposed grocery store, according to the proposal.

Fry’s Foods would charge the same prices at its downtown Phoenix location as it does in stores throughout the state, Mackay said.

“The Fry’s grocery store is a critical, critical component of creating a livable downtown because people who don’t have a grocery store in their neighborhood don’t see themselves living in that neighborhood,” she said.

Providing an office space with an open floor plan will attract technology companies to downtown Phoenix, increase tax revenue and create jobs in Phoenix.

The retail space will be designed to enhance the pedestrian experience by creating restaurants with outdoor, sidewalk dining, and trees will be used to create shaded areas, according to the proposal.

The Phoenix City Council will review the proposal at its Oct. 5 meeting. If approved, Mackay said RED Development plans to begin excavation immediately.

The city will use the lot to hold events during the Final Four basketball tournament in April 2017, and RED Development expects to complete the project within 18 months of the tournament, Mackay said.

Cost and access

Still, some believe the new, high-rise housing units may be adding to a growing concern of expensive housing downtown.

Nursing freshman Olivia Cunningham lives in Taylor Place, the downtown Phoenix campus dorms, and said living there is extremely expensive. Taylor Place is currently one of the most expensive dorms at the University.

"I definitely think the dorm facilities are over-priced," she said.

The average cost of rent in Phoenix rose 3.2 percent from last year, according to a 2016 report by real-estate agency Colliers International.

On average, Phoenix renters pay almost $14 per square-foot each year, according to the report, which amounts to almost $600 per month for a 500 square-foot apartment.

For the highest quality properties in the area, the average renter pays over $1,300 each month, according to the report.

Cunningham said she plans on moving into an apartment or house next year, but has not seen many housing options available downtown.

She does not have a car so she relies on her parents, who live 45 minutes away, to take her to the grocery store during the weekend, she said.

"It is kind of a hassle but it's easier than walking all the way to a grocery store and walking back," she said.

In fact, access to grocery stores has long been a discussion for students at the Downtown Phoenix campus.

In 2015, the Undergraduate Student Government Downtown implemented a student shuttle to take students to the Safeway grocery store at McDowell Road and Fifth Street.

Just over one mile away, Safeway is the closest grocery store to Taylor Place. Fry’s Foods, if built on Block 23, would be about half a mile away.

ASU nutrition junior Madison Dehaven lives at Roosevelt Point, a high-rise apartment complex in downtown Phoenix.

She said she pays more than $750 each month for rent and relies on her roommate to drive her to the grocery store.

“I’m still financially supported by my parents,” Dehaven said. “I have a few friends that live downtown without their parents supporting them, and I know it’s hard for them.”

Dehaven said she would like to see a grocery store built downtown, and the store would be especially beneficial for those living in the city long-term.

As a student, living in downtown Phoenix without support from her parents would be difficult, she said.

To create the complex, RED Development is hoping to enter into a tax incentive agreement with the city of Phoenix.

The agreement, called the Government Property Lease Excise Tax, would allow RED Development to lease the property from the government and pay taxes based on the property’s size and use, rather than on its value.

Past, present, future

Currently, Block 23 is tied up in two property agreements — one from 1991 and the other from 2007.

The original agreements required a $39 million investment into the project from the city of Phoenix, a 75-year-long tax incentive agreement and ownership would transfer to the Barron Collier Companies after a final payment of less than 1 million dollars, Mackay said.

Yet, because no development was ever built on the property, the Barron Colliers Companies negotiated a new deal with RED Development and the Community and Economic Development Department.

“We think what we’re bringing to you today is an agreement that is in a better interest of the city and will get this property under development in very short order,” Mackay said during the Downtown, Aviation, Economy and Innovation Subcommittee meeting.

The proposed amended contracts would reduce the tax incentive agreement lease term by 33 percent from 75 to 50 years, and are expected to earn the city about $74 million in tax revenue over the course of the lease term.

The developers gave the Phoenix City Council a notice of intent, and spoke before the City Council and the Downtown, Aviation, Economy and Innovation Subcommittee to explain the plan.

The subcommittee approved the notice of intent unanimously Aug. 31, and the council approved it by a 7-2 vote Sept. 8.

Reach the reporter at or follow her on Twitter @emikamezaki

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