(Source: EastValleyTribune): Wayne Schutsky – Driven largely by demand from companies in the technology industry, Chandler real estate is becoming hard to come. Seeing low vacancy rates in both office and industrial space, is an indication that the city is a prime spot for new development.
Those low vacancy numbers have fostered a competitive real estate market in Chandler as businesses considering locating in the city vie for remaining space.
“The amount of skilled labor out there in tech and financial services makes it a place where a lot of employers are looking to find a home,” said Sven Tustin, Conor Commercial Real Estate vice president.
Demand for space in the Valley was concentrated primarily in Chandler and Tempe as the two cities combined to account for 50 percent of the office market’s total net absorption in the third quarter, according to CBRE’s most recent Phoenix Office MarketView report.
Chandler’s industrial market has seen a similar level of activity.
During the third quarter, developers in the Valley delivered 2,152,175 square feet of new industrial space, over 90 percent of which was preleased. Cushman & Wakefield’s most recent MarketBeat Phoenix Industrial report noted that Chandler was one of three submarkets – the only in the East Valley – leading that development.
Currently, the vacancy rate for office space in Chandler is 11 percent, and the vacancy rate for industrial space in the city is even lower at 5.9 percent, said Micah Miranda, Chandler economic development director.
Both figures are well below market averages.
The overall office vacancy rate in the Southeast Valley is 15.3 percent, according to the CBRE report.
The overall vacancy rate in the industrial market in Phoenix Metro is 8.3 percent, according to Cushman & Wakefield.
With demand for high-end office and industrial space on the rise throughout the East Valley, developers are making investments in mixed-used properties in Chandler to meet that pent up demand.
“Why (new development) is important is because 85 percent of the prospects and leads we talk to require existing building space,” Miranda said.
One such project is the Price Corporate Center, located within the Price Road Technology Corridor at Price and Germann Roads, which recently received zoning approvals from the Chandler City Council.
The 55-acre site features the combination of two parcels – a 15-acre parcel and a 40-acre parcel – that had received zoning approval in the recent past, according to a City of Chandler Development Services memorandum concerning the project.
The City Council recently approved a zoning amendment that will allow buildings with heights of up to 150 feet. That overlay previously applied to only the 15-acre site.
The project is expected to have an office component along with space for manufacturing operations, said Erik Swanson, Chandler senior city planner.
“What we are looking for are users in accordance with the Price Road Technology Corridor, such as knowledge-intensive industries and corporate campuses,” Swanson said.
Chandler also will be home to another mixed-use business park called Lotus Project on land previously owned by the city at Loop 202 and Kyrene Road.
Illinois-based Conor Commercial Real Estate recently purchased the city-owned lot for $15 million with plans to develop 53.6 acres into a business complex featuring office and light industrial space.
The project is geared for supply chain companies within the technology industry and knowledge-based research and development companies, Miranda said.
“We are big believers in the Southeast Valley generally and Chandler specifically,” Tustin said. “It is where we are seeing lots of population growth.”
Conor Commercial is still working on designs for Lotus and plans to adopt an aggressive development timeline.
“We plan on closing on the land in the second quarter of (2018) and starting construction pretty quickly thereafter,” Tustin said.
He added that the company plans to deliver the first phase of the project – which will include 450,000 square feet of light industrial and advanced manufacturing space – in the second quarter of 2019.
The plot was originally acquired by the city in 1998 for the future construction of a wastewater treatment plant. However, the city no longer had a need for a plant at that location and made the site available for commercial development.
“The city had the site for a number of years and, given the fact that we are in such a strong real estate market here in Chandler, deemed this a good time to look for development,” Miranda said.
When the city decided to sell the parcel in early 2017, it issued a request for qualifications to find a developer for the site and eventually chose Conor Commercial from a field of four candidates.
Proceeds from the sale of the property will go to the city’s Wastewater Fund, which was originally used to purchase the parcel.