A developer plans to break ground on a 10-story office tower along Tempe Town Lake this year in what is one of the first major office projects to be built in the East Valley since the recession began four years ago.
Sunbelt Holdings and Ryan Companies said Tuesday that despite high vacancy rates across the Valley, the demand for office space in Tempe has been growing. They plan a mid-rise office at the northwest corner of Rio Salado Parkway and Mill Avenue, at Hayden Ferry Lakeside. That complex’s two towers are 94 percent leased.
Valley office vacancy rates are at 20.6 percent, while Tempe is at 16 percent. Mayor Hugh Hallman said it’s no surprise that construction is returning to Tempe faster than other parts of the Valley.
“We did say in 2008 that we were poised to be the first to recover, and we’re seeing that happen now,” Hallman said.
Hayden Ferry Lakeside is owned by Sunbelt, which will sell land for the new tower to Ryan. Construction should begin later this year when about 50 percent of the 250,000-square-foot tower is pre-leased, said John Strittmatter, southwest president of Ryan. The $50 million tower will take one year to build.
The area is a hot market for office leasing among tech companies because they tend to locate near businesses in their industry. Hayden Ferry tenants include Microsoft, Citrix, Morgan Stanley and Silicon Valley Bank. That complex and its competitors are running out of office space for new tenants, Strittmatter said.
“This has developed into a high-tech park and there really isn’t the space available for the high-tech market now,” he said.
The only other recent East Valley office project to begin is a 92,000-square-foot building at Allred Park Place in Chandler. Under construction now, it’s the Valley’s first speculative office building since late 2009.
The new Tempe tower will likely house 1,000 employees said Micah Miranda, an economic development specialist with Tempe. The building could help fill more moderately priced offices within a few miles because tenants at upscale projects like Hayden Ferry tend to have back-office uses like call centers located nearby, Miranda said.
The office tower will help connect the downtown with the lake, Hallman said. Also, he noted that Tempe is two months away from opening a public plaza at the historic Hayden Flour Mill that is just south of the planned tower.
Completing the mill and the office tower will fill a gap and encourage more pedestrian use, he said.
“It’s the missing tooth in the smile,” Hallman said.
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