The Valley of the Sun is becoming increasingly attractive to tech firms and real estate developers alike. Over the last few years, market analysts have been closely following the transformation of Phoenix as a tech hub that may one day rival California's Silicon Valley, and recent news developments suggest that this Arizona metropolis is headed in the right direction.
In late July, the Phoenix Business Journal published a news story about MDSL, a leading software developer based in the United Kingdom. Sumeru Equity Partners, the investment capital firm that owns MDSL, announced its acquisition of Telesoft, a developer of expense management solutions based in Phoenix; along with the acquisition, Sumeru also directed MDSL to establish an American headquarters office in Arizona for the purpose of expanding from its current London head office.
It is important to note that MDSL is a high-caliber tech firm that could have easily established its headquarters office in Silicon Valley; however, its decision to stay in Phoenix speaks volumes about the Valley of the Sun as it seeks to establish itself as a major tech hub.
The MDSL Expansion in Phoenix
Sumeru has big plans for the MDSL-Telesoft operation in Phoenix as it will operate within two lucrative markets segments: one will be dedicated to providing Software-as-a-Service platforms to businesses around the world. The other segment will cater to the American enterprise sector, which often requires customized or hybrid solutions that must be delivered on-premise in order to comply with regulatory or operational requirements.
The decision to combine the MDSL and Telesoft investments came naturally to Sumeru executives; in the wake of the Brexit referendum that will see the United Kingdom leaving the European Union in the next few years, tech firms based in London have been actively seeking new locations for their offices. While many London financial services companies are setting their sights on Amsterdam, Frankfurt and Paris, quite a few technology firms have expressed interest in emerging American tech hubs such as Phoenix.
Why Tech Firms Are Moving to Phoenix
As with other American metropolitan areas such as Austin and Miami, Phoenix is ripe with business opportunities for tech startups and entrepreneurs. In the past, the Valley of the Sun was mostly known for its agricultural, financial and hospitality industries; in recent years, however, business growth has largely shifted to the tech sector.
A current trend among Arizona entrepreneurs is to call up a large Phoenix moving company and set up shop at the old Warehouse District, a place that has been transformed into a promising campus for tech startups. Large warehouse complexes built at the start of the 20th century have been renovated and taken over by various tech firms that offer shared working spaces for tech entrepreneurs. One of these companies is Galvanize, which is dedicated to electronic medical records solutions but is also interested in other promising fields.
The Phoenix Proposition
Not long ago, commercial real estate analysts in Phoenix believed that the Old Warehouse District would take the gentrification route as owners of trendy art galleries, nightclubs and cafes consider moving into the area. To this effect, residential developers entertained the idea of building luxury condominium towers near the district; nonetheless, plans have changed with the arrival of the tech sector.
Over the next three years, real estate developers intend to add 5,000 housing units near the Old Warehouse District. These units will be mostly apartments that middle-class families and single professionals working in the tech sector can reasonably afford. There will be some luxury condominium projects, but not as many as originally planned because developers do not want to take their chances of becoming stuck in another housing bubble.
In the end, Phoenix will probably continue to attract tech firms and entrepreneurs due to its high quality of life and the available talent graduating from the nearby University of Arizona.