One Hot Market: Desert Hot Spot

Scottsdale’s downtown booms with tourist traffic and more permanent residents.

By Lisa Bertagnoli, Contributing Editor -- Chain Leader, 12/1/2007

For years, it’s been famous as a winter getaway. Now Scottsdale, Ariz., is cultivating another reputation: that as a place to live year-round.

With more permanent residents, the city center (ZIP code 85251) has "transitioned from being a seasonal tourist destination to a 12-month, 24-7 downtown," says John Little, executive director of Downtown Scottsdale, a booster organization.

"It’s unbelievable," says Sam Fox, president and founder of Fox Restaurant Concepts, a Scottsdale-based concept creator. "Scottsdale and Camelback [downtown’s main intersection] has become Main and Main." Both Fox and Little say that close to $3 billion have been poured into developing Scottsdale’s downtown over the last few years.

A substantial portion of that has gone toward residential development. In the past couple of years, downtown Scottsdale’s housing inventory has tripled, with 2,500 condos, lofts and townhouses added to the mix. And they’re not cheap: Home prices range from $600,000 to upwards of $4 million, with prices as high as $1,000 per square foot.

Retail and restaurants are booming along with the residential growth. Downtown’s focal point, from which much of the growth radiates, is the Arizona Canal. The 50-mile canal was dug in the late 19th century as part of a larger water distribution project.

Old Meets New

Scottsdale’s downtown still has an Old West flavor, with plenty of Native American jewelry shops, Western-wear clothing boutiques and old-time saloons. Downtown’s flagship hotel is the Hotel Valley Ho, a circa-1956 building that was restored to its midcentury splendor in 2004.

More recent retail developments are bigger and more contemporary. The northwest quadrant of downtown’s main intersection, North Scottsdale Road and East Camelback Road, is home to Fashion Square, a 2-million-square-foot mall housing Macy’s, Nordstrom, Neiman Marcus and assorted other retailers.

Kitty corner from Fashion Square lies SouthBridge, a 115,000-square-foot mixed-use complex featuring high-end fashion retailers and a group of independent restaurants. SouthBridge opened this past spring; to date, two of the seven planned restaurants are open.

Green Space

Following a development plan established 20 years ago, Scottsdale is intent on keeping its downtown as "green" and pedestrian-friendly as possible. The city has spent $22 million on public trails, art and landscaping, plus a trolley bridge and walkway that connects the north and south sides of the canal.

Another city initiative, The Preserve, is designed to keep the city green—and, perhaps unintentionally, real-estate prices high. That initiative calls for one-third of Scottsdale’s open space to stay undeveloped. Setting aside open space "brings the population down, and so there’s less stress on the land," Little says. "This is the only place I know that’s made that level of commitment."

From the Street

Area Scottsdale, Ariz.
Population 232,929
Median Income $68,053
Average Home Value $525,000

Commercial Real Estate
Rents from $19 in historic downtown to $90 to $100 per square foot in regional malls

Notable Developments
SouthBridge, a 115,000-square- foot development comprising upscale retail, residences and restaurants. Upcoming: The Rose Garden, another mixed-use development by SouthBridge developer Fred Unger, plus new hotels including The One Hotel and Residences, and Waterview.

Operator Perspective
With more residents around, “our business is more consistent,” says Sam Fox, president and founder of Fox Restaurant Concepts, a Scottsdale concept creator whose portfolio includes Sauce, an eight-unit pizza chain, and North, a five-unit, full-service concept serving American cuisine. The company’s best-performing Sauce, which grosses $2.2 million a year, is in downtown Scottsdale, as is Olive & Ivy, an upscale “seen and be seen” restaurant. Next up: Modern Steak, an upscale, female-oriented steakhouse slated to open in fall 2008. Scottsdale’s only minor caveat is the city’s dedication to “smart growth,” which can mean restrictions on exterior design. “We’ve been able to work through any issues we’ve had,” Fox says.