John Baumer grew up working with his father on construction sites and aspired to get a real estate license before he was hired at the Arizona Legislature as a page.
His experience at the Legislature eventually led him into lobbying and his current position as director of government relations with NAIOP Arizona, the commercial real estate development association.
Baumer sat down with the Arizona Capitol Times to discuss his career, the commercial real estate market in Arizona and what people misunderstand about commercial real estate development.
How did you end up working as a lobbyist?
I started working as a page my last year in college down at the Senate. I did that for a session, and they invited me to come back after the summer, so I did that for part of the fall, and then was offered a position to be the legislative assistant. So I did that for a couple years, and then got into contract lobbying and have been lobbying for 10 years now.
What attracted you to commercial real estate?
I’ve always been interested in real estate development. My dad is a tile contractor. So I grew up spending summers doing odds and ends jobs and stuff, and so I’d always had an interest in development and in real estate. And before I actually got the job as an assistant in the state Senate, I was actually going to pursue getting a real estate license and going that route. But then life had a different plan. I ended up going into lobbying. And so I got contacted by a mutual acquaintance with Suzanne Kinney, who is president and CEO of NAIOP and they said that they were looking to bring their lobbying services in house, and wanted to know if I would be interested in interviewing for the position. So we got to talking, and it was a perfect marriage of me doing public policy and public affairs, but in representing commercial real estate development, which I have a personal kind of interest and passion for.
So what are some of the areas that commercial real estate covers?
Commercial real estate includes everything besides single family residence. Office, industrial properties, warehouses, manufacturing, retail, social, convenience stores, malls [and] shopping centers. We also include multifamily and that sort … the apartment buildings that you’ll see, the multifamily components not for sale. So it’s truly kind of all encompassing of all types of development, besides the single family.
What are some of the biggest issues that you all have been following at the Legislature this session?
This year we were working on some construction defects reforms, specifically to address the missing middle housing shortage. So anything that has an attached wall component to it, there’s a significantly high insurance premium that goes along with anything that has a shared wall, attached wall component. So we were looking to address some of those issues legislatively because we have a very large segment of our membership that does either multifamily or this type of housing units in other states, and they like to develop that type of housing product here, but can’t because of the way that the construction defect laws are written. Unfortunately, that bill did not make it out of the first phase this year, so that’s on pause for right now, but something that we’re definitely going to be pursuing in the interim into next year.
We’re also really active on following water policy conversations, for obvious reasons. Our members don’t do any single family home developments, but as the state looks to address and reform how we manage and conserve water, we want to make sure that we can be a part of the conversation, so that whatever policy path we choose moving forward, it’s feasible, it’s economical and it actually accomplishes the goal of better managing and conserving water versus trying to slap existing regulatory structures on different types of development that don’t necessarily make sense to fit into that mold.
Another big issue — and we’re not necessarily getting in front of the subject because there’s other organizations and entities that are more on point for it — but energy is a huge conversation for the development world. Summer of ‘23 into ‘24, water was probably the biggest talking point that you came across if you’re a developer. Now, it’s energy. Can you get enough power for your site? Are you going to be delayed and getting connected with whatever your utility provider is? And so we’re supportive of the policies that are being pursued by the major utilities in the state to figure out how we can continue to serve residents and businesses and keep Arizona’s grid reliable, because that’s something that’s always been a huge selling point for Arizona to attract businesses.
We’re also very interested in the air quality conversations that are going on, specifically with Maricopa County being in severe nonattainment for particulate and ozone matter. Ultimately, that’s going to put a freeze on manufacturing in the Valley. So the big EPA standards from the previous presidential administration, they’re kind of in limbo right now. But without any reforms to those guidelines or the interpretations, we’re going to see just like a complete stop of the ability for new manufacturing to come online in the Maricopa attainment area.
What do you foresee in the coming years in terms of commercial real estate development and growth in Arizona?
Arizona is going to be a great place for commercial real estate in the next decade and beyond. We continue to grow. We have a very business- friendly environment, whether it’s TSMC or Intel — all these businesses continue to come to Arizona or expand their operations in Arizona. So we’re going to see a lot of positive growth when it comes to commercial real estate. We’re just a very attractive place. If you can weather the heat for a little bit during the summer, it’s a great place to live and work and play. So we’re going to see a lot of continued growth in really all parts of the state, but the Valley and greater Phoenix area specifically are going to continue to have a much better outlook than a lot of other segments in the nation.
Is there anything that people may misunderstand about commercial real estate development?
I would say the biggest misconception about commercial real estate is the financial component involved in any project. I think there’s a misconception out there that a commercial developer just has a big bag of cash, buys a piece of land and builds it. When in reality, there’s what’s called a capital stack, which is how you finance a deal. There’s debt involved, there’s investors, there’s gap financing, if that’s needed. It’s a very complicated structure, and so everything that goes into building something ties back to that capital stack, that financial component. So if it takes too long to rezone property that means you’re pushing back your timeline to pay investors and to pay back the debt that you’ve taken out.
So that’s been something that we’ve been working to educate policymakers at the state and local level on … the complexities that go into financing commercial development require a nuanced understanding. If we want to continue to grow and to develop these types of projects, if your community wants retail, office, multifamily, any of these things, it’s a complicated financing mechanism to come to fruition. So we want to make sure that policymakers understand that so that we can have a meeting in the middle when it comes to any of these policies that are going to impact how something actually goes from concept to physical structure that’s completed.
Even in the capital stack conversation, there’s hard costs and soft costs. So [the] hard cost is obviously something like the price of the land or the structure itself. And then I’m going to do my best as a developer to estimate labor costs and supply costs. But if factors change, inflation continues to go up, tariffs impact the imports for whatever the supply is, those things go into it. So again, timing is a huge aspect of financing. It’s a constant struggle to make sure that you can be successful in financing itself. It’s a risky business for sure, and it’s not for the faint of heart.
What do you enjoy most about your job?
I really enjoy the members that make up NAIOP, and I also really enjoy the legislators and the lobbying core. I think it’s … very interesting — one of the biggest small towns there is. Everybody knows everybody, and everyone’s connected. And it’s just an incredible opportunity. We’re a very … merit-based industry, and state. It doesn’t matter, necessarily, who your family is or where you came from. It’s ‘can you do your job well?’