4 Factors Impacting Commercial Real Estate in Yuma

Jerry LoCoco, Corcol Commercial Real Estate

2018 is the year of development and growth in Yuma!  While we are excited to bring new businesses and employment growth to the city, there are a few factors that may impact the process. Let’s take a look at the top four:

1. The New Tax Plan:

Many argue that the new tax plan will be net neutral for commercial real estate.  However, one fact is clear, the plan will negatively impact states like New York and our neighbors to the west, California.  The limitation of itemized deductions for state, income, sales, and property tax to $10,000 places those in high tax states in a precarious position.  Before the plan Californians (13.3%) were leaving in droves and now the limitation of standardized deduction makes states like AZ (4.3% state income tax rate) look very attractive.  Yuma has already seen growth from the exodus from CA and I believe Yuma will continue to see positive growth in this way in 2018.   This should result in increased demand for residential and commercial real estate in Yuma.

2.     $100 Million AZ Budget Shortfall

The impending $100 Million Arizona budget shortfall negatively effects rural cities like Yuma and counties with smaller populations like Yuma County.   The state put the screws to the City of Yuma and Yuma county during the last shortfall by sweeping HURF and Lottery revenues in addition to the haircut school districts took.  This lack of funding and ability to “sweep” funds at the state level places tremendous pressure on smaller communities to carry the burden of expenses for roadway improvements and funding for education. In fact some funding mechanisms have not been reestablished anywhere else in the state except Maricopa County.  I wonder how that works?!! I digress!  As Yuma residents, we must advocate to protect our interests within the state.  We will be severely punished and pay the price for apathy if we fail to do so.  Being proactive and preventing the state’s desire to unfairly extract wealth from the County is critical to short and long term growth in the commercial real estate market in Yuma County.

3. Yuma’s Vitality Revolves Around the Water

In a January 2018 council session Councilman Thomas asked Chuck Coughlin, President and CEO of High-ground Inc. a blunt question, “will they start trying to come after us for water rights?”  Mr. Coughlin’s, dodged the question with humor and then stated, “I hope we can avoid fights, we’ll have those deliberations.” He then added that “it was great for this city (Yuma) to be part of that discussion.”  Wow!  Who shall we thank for including Yuma County, the county with substantial water rights/priority in the broader water policy discussion in the state.  Agriculture within Yuma County is a $3 Billion industry, which is a major economic driver in our state and local economy.  Yuma County holds some of the most senior water rights on the upper and lower Colorado River basin within the state, however, there has been proposed legislation in the past that has attempted to circumvent those rights and priority. These rights must be protected, we must not even speculate what the loss of those rights/priority would do to the economy and value of commercial real estate in Yuma.  It’s a scenario that must not become reality.   Fortunately, we have several local stakeholders making sure that laws are not rewritten and preventing the state from “sweeping” water rights that legally belong in Yuma County.

4. Billion Dollar Bond Initiative

The Billion Dollar Bond Initiative for higher education passed in May allocated over $1billion to ASU, UA, and NAU.  It all sounds amazing however, reading a December 2017 article published by AZ Big Media (https://education.azgovernor.gov/edu/news/2017/12/az-big-media-how-gov-duceys-1-billion-bonding-bill-will-be-spent)  shows the allocation of funds — leaving ZERO dollars set aside for Yuma; the 3rd most populated county in the state. Yuma is not included in this higher education bond initiative, yet residents will pay for the interest and principal on these bonds.  Whether residents in Yuma County will be upset at this news is yet to be determined.  How could you not be upset and alarmed at the utter lack of interest and quite frankly, respect from state leadership?  Yuma County deserves to be represented and has a great case to have money allocated for higher education as there is a tremendous amount of opportunity within our community to expand and grow industries not currently fostered elsewhere in the state.  Expanded higher education in Yuma is a game changer and must happen if we are to see continued growth as a region and community; its impact on commercial real estate will be exponential!

Yuma County is ready for great things in 2018 as our city grows and prospers with new development. These four factors will have an impact on growth one way or another.  As a community, we can expect to see benefits stemming from the federal tax plan.  However, items 2,3 and 4 are absolute game changers for the region.  The water must stay in Yuma PERIOD!  Higher education would be a positive driver in Yuma County and also the rest of the state. Investment in Yuma is important for all residents and it is our duty and obligation to speak up loudly for those rights when the state develops budgets, addresses water policy, and higher education initiatives.

For more on this and additional Yuma commercial real estate news, be sure to visit: https://yumacre.com/blog/