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February 25, 2014
The Next Spec Building?
Could this be the year Parkway Properties breaks ground on the third Hayden Ferry tower? (It's technically the year of the horse but we can make exceptions.) If Parkway has its way, you can bet on it.
Parkway's Matt Mooney tells us the owner is looking to start Hayden Ferry III, a 260k SF, 10-story tower in the Hayden Ferry office park. And it could be done largely on spec.
Matt says the Tempe submarket area is as tight as it's ever been, with vacancy rates below 4% and rents shooting up (Parkway just did a $35/SF gross renewal, almost up from an average of $10/SF less two years ago). “There's just nowhere else for tenants to go if they want to be down here,” he says. Parkway is completing final approvals and anticipates breaking ground in the next 60 days, given the tremendous demand from high-quality tenants in the submarket, Matt says.
Don't Let Those Cranes Alarm You
There may be up to 5,000 multifamily units in Phoenix's hopper this year, but it's no cause for panic. Fundamentals certainly support the new construction, according to JLL VP Charles Steele. “Historically, Phoenix absorbs one multifamily unit for every nine jobs created,” he says. So if the city continues to generate 45,000 jobs annually, it'll easily absorb all the units slated for delivery. (Though from this picture, his daughter appears to be skeptical.) He says Phoenix is building to a solid equilibrium, and as a whole, the multifamily market's 95% occupied (and up to 97% for the best product in best locations). The hottest markets: Downtown Tempe, Tempe Town Lake, South Chandler (specifically the Price Road Corridor), North Scottsdale, and Downtown Scottsdale.
Rents are rising but at a sustainable pace, says Charles. The first new multifamily projects to deliver in these hot areas have fared well—in some cases even snapping up higher rents than previously achieved. He says to keep an eye on projects like Alliance Residential and JP Morgan's Broadstone Waterfront (pictured) and TDI Real Estate's Jefferson at One Scottsdale (both in Scottsdale) and Hanover Co's yet-to-be-named project on Mill Avenue in Downtown Tempe. Charles isn't just casting his rod for multifamily investors; the avid sportsman always finds time for fishing while on vacation, whether fly fishing in the San Juan Mountains, sport fishing in the Keys, or in Ontario looking for northern pike. He grew up fishing with his dad and is happy to continue the tradition with his three kids.
Rough Road To Easy Street
An area developer is looking to dust off plans for the $90M, luxury Easy Street condo unit in Carefree. But the path to getting a construction loan will be anything but. (Irony is not just a way to describe tainted water.) Butte Development's Ed Lewis tells it will be an uphill battle to get construction financing for the mothballed project by year's end. But the plans are grand: Ed hopes to lure the Phoenix Art Museum for a 10k SF satellite location (part of its 50k SF of retail), with the city's support. He'll clearly need presales, but the percentage will depend on how much equity he's willing to put up.
Not that he's worried about the target audience for the 2,500 SF condo units, which will cost an average of $1M each. “Our client prospects for this are from North Scottsdale and Cape Creek, where there are more than 20 private country clubs,” Ed says, and the project will focus on empty nesters or residents looking to downsize. Overall, he says the timing is right to restart Easy Street, because if he waits until the market is really strong and booming, he may miss the peak by the time the units are ready for sale.
YOU SAID IT: Bring Fido to Work
Wow. Now we know what topic really gets people excited. Over 900 readers responded, with 54% in favor of welcoming pets in commercial buildings. The reasons? They boost morale, increase productivity, and allow employees to worklonger hours without worrying about leaving Fido home alone. "Our office campus in Dallas has a campus dog and everyone loves it," says one respondent. "Tenants can schedule 'office visits' with him." The rest gave a resounding "no," citing allergies, uncleanliness, unwanted distraction, and potential aggression. One landlord says some of the early adopters of the "pets allowed" policy, including large Silicon Valley employers, are having second thoughts after discovering the responsibilities involved. (Dog bytes man?) We'll have full survey results in Friday's national Property Management e-newsletter (subscribe).
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