Targeting Urban Density: Development in the Central AvenueCorridor
On March 3, 2011, PCA hosted a Central Avenue Committee meeting focused on development in the corridor. PCA Members, Tyler Wilson and Scott Baumgarten from Cassidy Turley/BRE Commercial, LLC provided PCA members and businesses trends they have discovered in the current office market.
What is happening in Downtown North?
Many 5-year leases are up for renegotiation and tenants are finding similar rental prices for office space closer to amenities. Wilson called the trend, “Flight to Quality” Hear more about Flight to Quality and read bullet points regarding Downtown North.
- Owners that have focused on rehabbing their buildings providing more amenities and common space are experiencing 80-85% leasing.
- There is a 27% Vacancy rate in this sub-market and the rate is expected to go up to almost 32%. Wilson and Baumgarten predict a steady decline in the future until the market recovers.
- Wilson said that approximately 800,000 square ft of office space is evaluating their real estate needs and determining whether they are going to stay or move on.
- Downtown North is losing many of its tenants to areas with higher number of amenities (restaurants, retail, and gyms) like Downtown or Camelback Road because the price is similar to their current leases. This submarket is seeing the most flight. For future success, Cassidy Turley recommends the building owners reinvent themselves by adding more amenities and renovate for smaller organizations and users.
- Light rail has helped this region keep some renters, who find it easy now to access Downtown, the courts, the airport, or other cities because of light rail.
- Buildings like One Lexington have helped take building space off of the market and manage supply. It would be good for the market to see more office space converted to other means like affordable housing.
- Owners from 3003 and Phoenix Plaza have created new common areas and amenities (restaurants, gyms, etc.) to entice new users to their building.
- Migration patterns of DT North: Of the users that are leaving DT North, 60% are moving to DT South, 30% to Camelback Road area, 5-10% moving outside into Tempe or Scottsdale or going away all together.
Downtown South Central Avenue is seeing a much more positive story.
- Leasing is steady and in the average of 60-80%.
- CityScape has helped the area by increasing the amenities offered.
- Because of more space efficiency, law firms are leasing smaller spaces (leasing 70,000 square foot areas over 100,000 square foot areas) but keeping similar rental rates. Offices are being more efficient (smaller offices for partners, no more law libraries, less storage and conference room space).
- In Downtown South, vacancy rates are trending down so Cassidy Turley predicts rental rates are going to increase.
Central Avenue as a whole needs to reinvent. What are some strategies to increase Central Avenue viability in the future? Here are a few discussed at our meeting but we would love to hear your ideas!
- As new companies rise from the downward economy, Wilson believes that Central Avenue will always be a viable area for office space because of its location between the east and west valley. However, owners must give the tenants higher quality and new amenities. He also suggests focusing on small-users that need smaller floorplates.
- As gas prices continue to rise, Central Avenue would be an excellent area for more housing because of its location near light rail. There are a several office buildings in the area that could be candidates for housing conversion.
- Focus energy on improving amenities in and around an existing asset, like Park Central.
- Many of the buildings have their front entrances in the back of their buildings, providing little to no pedestrian traffic on Central. Because of light rail, the owners should rethink the entrance access points on Central Avenue.
Phoenix Community Alliance is a 501c3 non-profit dedicated solely to the revitalization of Greater Downtown Phoenix. Learn more at www.phoenixcommunityalliance.com