Monthly Archives: April 2022

Massive Central Station development increases what downtown Phoenix has to offer, mayor says

Article originally posted on The Phoenix Business Journal

Phoenix Mayor Kate Gallego said the upcoming Central Station development in downtown Phoenix is going to be the answer for several things missing from that part of town right now.

The development, which a groundbreaking ceremony was held for on April 13, will be built on 2.6 acres in downtown Phoenix between First and Central avenues and Van Buren and Polk streets. 

Central Station will have housing for students and young professionals, restaurants, coffee shops, flexible office space, and it will be home to primary downtown bus and light rail transit center. Gallego said this project will bring more people to downtown Phoenix.

“There is an ever-increasing interest in the downtown campus from ASU students, and they spend time here and they want to live downtown,” Gallego told the Business Journal. “There are so many amenities and fun things to do, and we are hearing that students want to be in the middle of it all. We need student housing in a wide variety of configurations.”


Central Station, which is being developed by Houston-based Medistar Corp., with GMH Communities and CBRE Investment Management, will have a 22-story student housing tower that will have 655 beds and all apartments will be fully furnished. The tower will have micro-studios for those who want to live alone and up to four-bedroom units for those looking for more of a group living situation.


Second tower

Along with student housing, the development will have a second tower – 33 stories – that will include 362 apartment units.

“We still have a relatively small portion of our downtown workforce that lives downtown, I’m excited for the option to change that,” Gallego said. “This will be the type of project where you don’t need to own a car. There will be one million transit connections in your front yard. I think that will be very attractive.”

The developers said there will be a number of amenities for residents including barbecue grills, fire pits and a resort-style pool. 

The building will also feature 70,000 square feet of state-of-the-art flexible creative office space, something Gallego said is in demand in downtown Phoenix.

“We are very excited about the creative office space,” Gallego said. “We are seeing more and more corporate headquarters who want to be here and they really value high-quality building space that is move-in ready. This will be a great asset for us on the economic development side.”


The Central Station project has been in the works for years and was delayed a bit longer because of the Covid-19 pandemic. Gary Holloway Jr., the president and CEO of GMH said during the groundbreaking that the project will cost more than $300 million to develop and should be finished in about 900 days — or in the fall of 2024.

The project was designed by Gould Evans, and Layton Construction will serve as general contractor.

When originally announced, the city and the developers boasted about a hotel and grocery store being part of the project. The developer has nixed the hotel plans, and Gallego said that the retail options are “still evolving to meet downtown needs.” The ground floor of the project will include 30,000 square feet of retail space that the developers said would focus on “food-oriented concepts.”

The project, which was approved by the Phoenix City Council in 2019, was a result of a request for proposals the city released to redevelop the station. The city will continue to own the land and Medistar will lease it for a 99-year period. Over 99 years, lease payments to the city will generate $171.5 million, city officials said at the time. Interested developers were required to incorporate the transit uses — two light rail stations and a bus station — into the designs. The construction of the project is planned to incorporate those transit elements without interrupting service.

Monzer Hourani, CEO of Medistar said during the groundbreaking ceremony that the Central Station was conceived with the idea of human connection in mind. That the project will connect people together in new ways, he said. How the project is designed and how it will connect to the Civic Space Park and the light rail and bus stations, will make it unique in Phoenix, he said. “This is a new type of product for us in Phoenix,” Gallego said. “I love that there is no back to the building. It interacts with the park. It interacts with the downtown streetscape. It is very active.”

Battery manufacturer moves forward with land purchase in Phoenix metro for future facility

Article originally posted on Phoenix Business Journal


Coeur d’Alene, Idaho-based KORE Power moved forward with buying a large parcel that will house its 1 million-square-foot battery manufacturing facility in Buckeye.

The lithium-ion battery manufacturer paid Glendale-based Mangat Group, a real estate investment and development company, close to $29 million for the 214 acres of agricultural land on the southeast corner of State Route 85 and Baseline Road just west of downtown Buckeye.

County documents show that Project K LLC, an entity connected to KORE Power, purchased the property from Mangat Investment LLC with a down payment of $15 million, on March 31.

KORE Power did not immediately respond to a request for comment about the land sale.

Mangat Group held the property for more than a year after purchasing the site for $15 million in December 2020, according to real estate database Vizzda. Tony Mangat, founder of Mangat Group, said he had an offer for the property for $42 million but gave KORE a discount on the land because of what they’re bringing to Buckeye.

“This is probably the biggest project for Buckeye, bringing 3,000 jobs and revenue,” Mangat said.

KORE Power has previously said it would break ground on the facility in the first quarter of 2022, but it’s unclear what the specific timeline of the project is. The number of projects competing for resources in the Valley and material shortages could also impact the project timeline.

The expected date for starting operations is mid-2023. KORE said it plans to have about 1,500 employees when operations begin and grow that number to 3,000 at full annual production. The city of Buckeye said the nearly $1 billion project could create 10,000 indirect jobs.

The property is also one of the larger pieces of land that the city of Buckeye had presented to companies interested in expanding to the Valley before KORE announced its plans in the summer. San Francisco-based Williams-Sonoma Inc. had also looked at the property before choosing Glendale for its planned project.

News of the sale comes as Buckeye is working to expand with plans for massive industrial growth in areas like State Route 85 and the Buckeye Municipal Airport, which have drawn attention from more investors and developers in recent months.

Rail giant BNSF Railway wins bid for 3,500 acres in far West Valley for potential multi-modal facility

Article originally posted on Phoenix Business Journal

Texas-based BNSF Railway Co. was the winning and sole bidder for a 3,508-acre piece of land at an Arizona State Land Department auction held Wednesday morning.

The giant freight company won the auction at the minimum bid price of $49.11 million, or approximately $14,000 per acre, for the massive piece of land located in the Wittmann area just outside of Surprise. It’s also located along BNSF’s main line and U.S. Route 60.

BNSF said in a prepared statement on Wednesday that is sees Arizona as an important area for economic growth and development and that it determined the land could be a good long-term investment.

“BNSF looks forward to working with state and local governments in Arizona, as well as customers, to determine how best to develop the land into an economic engine in the West Valley,” the company said in a statement. “BNSF is proud of its 125 years of contributing to the Arizona economy and will be working with stakeholders in the following months to develop this property.”

Behind the deal

The winning bid comes after BNSF started the long process to buy the state trust land in late 2020. The company formally applied for the auction about a year ago and received approval from the commissioner in January 2022.

An appraisal was conducted in July 2021 by Scottsdale-based Wayne Harding & Associates, which concluded the minimum bid price after comparing six land sale prices ranging from $8,000 to $25,000 and adjusting for factors like size of the land, site improvements, zoning and market conditions.

Public records show that BNSF wanted to buy the land for a multi-modal rail transportation and shipping facility and a logistics center with associated warehousing, which could be similar to its other inland ports in metro areas like Chicago and Dallas-Fort Worth.

The auction also moved forward on Wednesday after the state rejected more than 30 oppositions it had received from longtime Wittmann residents. Many said they were opposed to BNSF’s plans for the property, which is part of a larger grazing lease, due to concerns about pollution, increased truck traffic, limited infrastructure, safety and the environment.

Some were also opposed to the minimum bid price, citing the recent sale of the Chrysler Proving Grounds for $125 million, or $22,092 per acre, to Apple Inc. But the appraiser determined this sale was less reliable since the property was already incorporated into and zoned by the city of Surprise and has other improvements.

Now, the rail company is a step closer to building a facility similar to what it has envisioned for the Valley since the 2000s, when it wanted to build a rail yard, automotive shipping facility and 16 million square feet of warehouses on 723 acres in the rural community.

The plans proposed in 2007 were also met with backlash from Wittmann residents and ranchers, who protested to the city of Surprise for months. Reports at the time said construction was expected to start in 2012, but the project never came to fruition.

Documents said construction on the new plans could start by 2025 with an opening date of 2028, but BNSF previously said it was “too soon” to know what will be built on the property. To build the facility, BNSF will also have to request a rezone in Maricopa County or a major general plan amendment and rezone in Surprise.

Industrial rents climb 4.4% amid record-setting supply and vacancy levels

Article originally posted on AZ BIG MEDIA 


The national average for in-place industrial rents across the top 30 U.S. markets reached $6.45 per square foot in February, increasing 4.4% year-over-year. At the same time, the average price of leases signed over the same interval was $7.35 per square foot as of February, 90 cents higher than the national average for in-place leases.

Southern California markets led rent expansion across the U.S., largely due to intense activity in the Ports of Los Angeles and Long Beach. Orange County recorded the most significant 12-month change with a 7% hike, reaching $11.65 per square foot. Los Angeles (6.7%) and the Inland Empire (6.5%) rounded out the top three.

On the other end of the spectrum, markets that have higher availability of developable land recorded weaker rent growth in the last 12 months. Newly delivered stock in these markets is helping developers meet demand, while also elevating vacancy levels. Across the top 30 U.S. markets, rent growth was slowest in Charlotte (1.1%), Houston (1.7%) and Indianapolis (2.3.%).


Supply Pipeline Nears 600MSF, Year-to-date Deliveries Already Exceed 44MSF 

Nationwide, 592.5 million square feet of industrial space was under construction by the end of February, accounting for 3.5% of existing stock. The pipeline has expanded by more than 90 million square feet in the last six months. Additionally, some 626 million square feet were in the planning stages.

Developers added nearly 45 million square feet to inventory in the first two months of 2022, pointing toward another banner year for the industrial sector.

Dallas – Fort Worth continued to lead construction with more than 38 million square feet of industrial space underway, accounting for 4.6% of existing stock. Phoenix’s supply pipeline totaled more than 36 million square feet, which represents 12.9% of total inventory and the largest share among the top 30 industrial markets. Chicago rounded out the top three with nearly 26 million square feet (2.6% of total stock) in the development pipeline.

Inland Empire Vacancy Shrinks to a National Low of 0.6%, Columbus Leads Midwest 

As of February, the national vacancy rate averaged 5.2%, marking a 30-basis point (bps) drop compared to January. The Southern California region led the way in terms of vacancy as well: The Inland Empire ranked first with a 0.6% vacancy rate, the lowest across the top 30 U.S. markets.

Outside of California, Columbus led Midwestern logistics hubs with an average vacancy rate of 1.2%. Only two metros of the top 30 markets posted vacancy rates above the two-digit threshold — Cincinnati and Houston had an average vacancy rate of 10.2% and 10.1%, respectively.

National Sales Volume Surpasses $9 Billion in Early Stages of the Year

The average sale price for industrial space was $125 per square foot as of February, as ongoing investor demand continues to drive transaction activity, despite prices rising consistently. The average sale price has been on a steady upward trend for six consecutive quarters, increasing 50% from the third quarter of 2020 until the first quarter of 2022.

As of February, Seattle industrial space commanded the highest sale price, with properties changing hands at $357 per square foot. Consistent with January trends, the Bay Area ranked second once again, with $311 per square foot. Los Angeles came in third with an average sale price of $258 per square foot.

Nationally, transactions amounted to nearly $9.1 billion in the first two months of the year. This strong start is a clear indication that investor interest in industrial properties is anything but abating, given that the first quarter of a year is typically the slowest for commercial real estate transactions.

Five markets exceeded the $500 million mark by the close of February in terms of transaction volume. In the early stages of 2022, Philadelphia led the way with $725 million in sales volume, largely owing to the sale of a 3.8 million-square-foot property fully leased by Amazon. Chicago industrial space ranked second with $689 million in transactions, followed by New Jersey, where the industrial sales volume totaled $603 million.


How housing shortage, affordability concerns could factor into office-space decisions

Phoenix Office Space for Rent

Article originally posted on Phoenix Business Journal on April 01, 2022


Corporate-relocation pitches in cities like Charlotte, North Carolina, have long used affordability as a key reason to convince a company to uproot their headquarters or plant hundreds of new jobs.

With Charlotte having a median sales price of $360,000 in February 2022, the city is still considerably more affordable than several peer cities or coastal markets. But the rate of home-price appreciation — largely because of severely constrained inventory, not to mention insatiable demand from local and out-of-town buyers — means the affordability pitch may get tougher if the current rate of growth continues.

And last month, the Charlotte region only had 0.5 month’s supply of housing inventory, according to Canopy Realtor Association, the local residential real-estate association and Multiple Listing Service.

That extremely tight inventory (six months’ of inventory is widely considered a balanced housing market) has been the primary culprit behind double-digit percentage gains in home prices annually, in Charlotte and other cities. Last month, Charlotte saw a 22% annual growth in median home prices.

Austin, Texas, had 0.4 months of inventory, and a median sales price of $499,995, in February, according to the Austin Board of Realtors. Phoenix, meanwhile, had a 1.14-month supply of inventory and a median home sales price of $449,900 last month, according to the Arizona Regional Multiple Listing Service.

While commercial real estate leaders in Sun Belt cities remain optimistic about their pipeline for office growth, and competitiveness against more-expensive coastal cities, housing affordability and inventory are top of mind.

As companies carefully think about their office footprint — and where they may want to lease or buy space that’ll meet growth needs and attract the post-pandemic workforce — dynamics of the local housing market may increasingly factor into commercial space decisions.

“We always touted affordability,” said Brett Gray, managing principal of several Carolinas markets at Cushman & Wakefield PLC (NYSE: CWK), during a Charlotte Regional Business Alliance panel I moderated. “That was one of our kickers. Fortunately, I think everyone in the Sun Belt is having this problem … and New York is still New York. But it’s becoming less of a competitive advantage for us when we’re competing against other cities in the Sun Belt.”

That’s going to be a tougher sell when companies look to relocate, Gray added, which will require a more holistic view of labor and the real estate market.

Buckhead in Atlanta, long one of the dominant office submarkets in that city, has seen more companies moving out than in recently, according to Jones Lang Lasalle Inc. (NYSE: JLL). Buckhead’s cityhood movement, which failed to materialize, could be contributing to that, but traffic and housing affordability are also weighing on the minds of leaders there.

Beyond affordability, for corporate office markets like Buckhead in Atlanta and Ballantyne in Charlotte, the actual inventory of single-family homes in those suburban, but well-located, parts of town have long been a big draw for company executives.

With currently so little on the market in those areas, and lots of competition at all price points, selling decision-makers on the housing market within or immediately adjacent to office submarkets is becoming tougher.

John Barton, president of Northwood Office LLC, which owns most of the 4-million-square-foot Ballantyne office park in south Charlotte, said three years ago, it was much easier to find a move-in-ready, $1 million home on the market nearby.

“Today, it’s, if you’re all-cash and can do it in five days,” you can get that same house, Barton said. “It’s a very different environment, and I think that is a challenge.”

At Ballantyne, Northwood Office is spearheading some $1 billion in phased mixed-use development, which’ll include residential units for the first time in the corporate park’s history. Barton said the more developers can add housing within new mixed-use projects, the better off a market will be.

The topic of conversions has become a hot one, as cities are now grappling with big blocks of office vacancy in, frequently, outdated office buildings. This has become especially prevalent for second- or third-generation, or older, towers in central business districts, as the flight-to-quality — the newest, most amenitized and wellness-oriented office buildings — theme persists.

Gray said the multifamily market is now more likely to be able to support rents needed for, say, an office-to-residential conversion in a CBD. Not every building will be able to convert, he continued, but some buildings in downtown Charlotte may be able to fit that model.

The housing shortage is acute, and things have to be looked at differently, said Compie Newman, managing director at CBRE Group Inc.’s (NYSE: CBRE) Charlotte office.

“We all have to adapt,” Newman said. “(Conversions are) not out of the realm of possibility. The (Class) B office buildings are going to be tough.”