Metrocenter Demolition Set to Start this Spring Ahead of Major Redevelopment

Article originally posted on Phoenix Business Journal on February 20, 2024

The former Metrocenter mall is now expected to be demolished by the spring of 2024 after the developer pushed back the timeline for its major redevelopment project amid a high interest rate environment.

The development team — comprised of Concord Wilshire Capital, TLG Investment Partners, CDS International Holdings Inc. and Hines — had previously expected to start demolition work immediately after acquiring most of the former mall property for nearly $50 million in January 2023.

The 65-acre property includes a majority of the former 1.4 million-square-foot mall, except for the Walmart Supercenter and self-storage facility, both of which will remain in place.

The developers previously expected to start demolition by early 2023 and take about a year to complete the work. Now it’s expected to kick off in the second quarter of 2024 with vertical construction slated to start two years later. Infrastructure work on the site is expected to start following demolition.

Steve Betts, a consultant for the project and managing director at Tucson-based Holualoa Cos. said they pushed back the demolition date because of high interest rates and an oversupply of multifamily product nationally.

“Market conditions have put a pause on most multifamily development projects,” Betts said, adding that the higher interest rates have “impacted the viability of new projects.”

More than 20,000 units were estimated to deliver in the Valley in 2023, compared to Phoenix’s normal average of 8,000 units delivered per year. Since 2019, metro Phoenix has averaged 12,000 units delivered annually, the Business Journal previously reported. Phoenix was a top market for units delivered nationally in 2023.

Metrocenter aerial view

But that doesn’t mean the economy has slowed down in the Valley, Betts said. Interest rates are also expected to start declining while the oversupply is expected to be filled over time, creating new demand for units.

“We have a huge quantity of jobs coming to the Valley, courtesy of our economic development strategies, that are going to need this exact kind of housing,” Betts said. “We’re supremely confident that the project is needed and will be very successful. It’s just in a pause, like many multifamily projects.”

Project expected to take seven to eight years to complete

Each vertical building in the project is expected to take two years to complete, while the entire project is expected to be delivered in the next seven to eight years, according to the developers.

“We believe this project is almost the definition of skating to where the puck is going,” Betts said.

The timeline for demolition is still on track and will be within the city’s required deadline to start demolition by early 2025, according to a development agreement between the city of Phoenix and the developers.

In June 2023, Phoenix City Council approved an amendment to its development agreement with the developer of the project, Phoenix IG LLC, to facilitate bond financing through the Phoenix Industrial Development Authority for the redevelopment of the mall. This is expected to be paid back through the property’s sales and hotel tax revenue.

The agreement also included the addition of public amenities, including the expansion of a public plaza on the roof deck of the proposed parking garage and a shell office space for the Phoenix Police Department.

The project, one of a handful of regional mall redevelopments across the Valley, could be a defining project for the Interstate 17 corridor and provide housing for workers moving to Phoenix for huge employers such as Taiwan Semiconductor Manufacturing Co.

The future Village project will also connect to the latest expansion of Valley Metro’s light rail system, which opened in January and includes the first elevated rail station across I-17.