5Qs for Diversified Partners’ Walt Brown Jr. on how new construction happens
In the 80s, Walt Brown played football for the University of New Mexico Lobos as a nose tackle — the big, strong, smart, and relentless guy that clogs the center, disrupts run plays, and rushes the quarterback. The head-on-the-game and head-to-head battle kind of player who welcomes adversity.
Not bad training for a career in real estate development.
Walt started in the industry with Terranomics Retail Services and Mahler & Company in California before moving to Arizona and founding Diversified Partners in 1996. Since then, he and his partners have leased, sold, and/or developed more than 5,000 commercial properties and 12 million sq. ft. of retail properties.
The slowdown in retail real estate construction continues to linger on, but the old gridiron line-buster and his fellow Diversified teammates are among the most active private real estate developers in the Southwest with $4 billion in transactions planned in 2026.
We caught up with Walt on the phone at one of his construction sites to learn how rough the game has gotten, and what moves and strategies must be employed to win it.
Nearly every developer I spoke with at ICSC Las Vegas this year told me retailers were very concerned with getting the spaces they needed and not very concerned about tariffs. Same situation in your booth?
We didn’t see any trepidation over tariffs in our meetings because, in the end, even with costs rising, they’re achieving their net sales and profitability goals. This year’s Las Vegas show was one of the best we’ve had. Very productive. We didn’t have 100 meetings, like we usually do. We had 27 super-productive meetings and we left there smiling ear-to-ear, knowing what we had to accomplish to help them hit their goals.
The news we see regarding retail real estate is more positive than negative. Interest rates remaining in the 4% range, private capital flowing into the sector...
Yes, interest rates have settled down a little bit. Construction delays are still a problem. Waits for equipment purchases can be lengthy. We cut national account rates with both Trane and Lennox for HVAC units. Same thing with SES (Standard Electrical System) boxes. You can wait a long time for them. We did a deal and ordered 40 of them.
Is it easier to obtain incentives from municipalities eager to boost their sales with additional retail space?
No. It’s tough to get incentives. Almost impossible. We work closely with the cities, but we’re no longer seeing the incentives that were awarded us 20 years ago. Quantifying what off-site construction is going to cost is a big problem, as well. It takes longer than it used to and, in some cases, has absolutely killed deals because the off-sites ended up being too expensive. Not long ago, traffic lights used to cost $150,000. Now they're $200,000.
The great majority of new builds are happening in Sun Belt states. Do you see it remaining that way for some time to come?
We analyze markets and capitalize on the ones in which we have the best ability to sell. If you look at cap rates nationwide, there are no better places to build than in Arizona, Nevada, and Colorado. We’re fortunate enough to operate in those markets.
Still, tariff turbulence promises to roil the economy for some time to come. What’s your economic forecast for the rest of the year?
We think that interest rates are going to get better in 18 months and that we’ll be increasing our involvement with top retail companies. We need a lot of time to coordinate with them—quantifying off-site costs, working with architects, keeping retailers updated. They’ve got goals they’ve got to hit, and they have no choice but to hit them.
