In the News—Week of October 17, 2023
Deal of the Week
A leading multifamily developer and its international joint venture partner closed a construction loan with a New York-based debt fund. The 18-acre project in Peoria, Arizona will feature a 2- and 3-story building with 104 residential units and 5,000 square feet of retail space, and a separate 3-story walkup product with 266 residential units. Delivery is expected in 2025. The $113 million transaction was closed by Sheila Hunter, Vice President and Senior Commercial Escrow Officer, and her Escrow Assistant, Lynsi McArthur, in our Scottsdale office.
Survey says: Austin top spot for commercial real estate investment
Austin, Texas, remained the most promising market in the United States for investing in commercial real estate, Ctech News reports. DLA Piper, a global law firm, surveyed 128 real estate experts for its annual rankings. Nashville and Miami finished behind Austin. Two North Carolina markets, Charlotte and Raleigh, rounded out the top five. Internationally, London was tops, followed by Amsterdam, Sydney, Paris and Mexico City
Landlords, firms need to think of offices as luxury hotels, developer says
New York City real estate developer Michael Shvo says office buildings are going to have to be designed and marketed like high-end hotels, Inc.com reports. “The office is not dead, but the office is changing,” he said. Shvo was speaking at the Fast Company Innovation Festival. Office space is going to need to feel as comfortable for workers as their homes feel. He predicted outdated buildings and low-end offerings would struggle to survive.
Sign of life: San Francisco office tower sells for $61 million
When SKS Partners and Swig Company bought 350 California tower for a quarter of what the seller paid in 2020, the buyers were making a bet on the resurgence of San Francisco, The San Francisco Standard reports. “It’s like going into a cold lake and seeing who’s going to jump in first,” says Paul Stein, managing partner at SKS Partner. “Once somebody jumps in, they all do.” The 22-story building in the heart of the financial district is not the largest or fanciest building. But that somebody wants such a property is a good omen for the City by the Bay.
Los Angeles office-market slump drags on through second quarter
Commercial Edge reports there were no major commercial starts in Los Angeles between April and July. There were only four in the first six months of the year. There were also fewer projects being completed. About 1.4 million square feet of office space was finished in the first seven months of 2023, a 38.7% decline year-over-year. Leasing activity is way down, although the office vacancy rate is 14.1%, much better than other major cities.
Industrial park near airport in Goodyear sells for $184M
The real estate arm of Creation Equity sold the Airpark Logistics Center in Goodyear for $184 million, AZ Big Media reports. Prologis, a San Francisco-based firm that specializes in logistical real estate, bought the 170-acre campus next to Phoenix Goodyear Airport. The deal is believed to be one of the biggest transactions for industrial property in Arizona history. The first phase, with three buildings totaling about 1.4 million square feet of space, was just completed. “The recognition of Airpark Logistics Center’s potential by a logistics real estate leader like Prologis is a testament to the quality of the asset,” says Grant Kingdon, principal of Creation’s Mountain Region. “The center’s strategic location, innovative design and growth potential align perfectly with our vision for delivering sustainable developments that meet the needs of modern logistics tenants.” Creation’s investments include numerous industrial products, tech companies such as Slack and Pinterest, and European soccer clubs.
Newer Class A office space does well, but the overall vacancy rate is 25%
The office vacancy rate in the Greater Phoenix market has reached 25%, AZ Big Media reports. Figures from JLL show 1.5 million square feet of negative net absorption in the third quarter, about twice as much as in the second quarter. Still, there are bright spots. Demand is high for newer class A buildings, properties with a lot of amenities, and certain submarkets, such as Camelback Corridor and Scottsdale, saw strong leasing activity. “The Phoenix economy compares positively against many other U.S. cities,” says JLL Senior Managing Director Ryan Bartos. “That has contributed to a historic rise in the market’s overall direct office rents, which now sit above $30 per square foot.”