https://www.bizjournals.com/phoenix/...-in-tempe.html
It only took about two decades for Tempe Town Lake to become a success in development circles.
“It can be frustrating sometimes, but top-quality development doesn’t happen overnight,” Guiliano said.
Lately, that high-quality development has come in large quantities. According to CBRE Group Inc. research, the lakefront is now home to 3.1 million square feet of rentable area, while commercial buildings along the lake have a vacancy rate of just 1.2 percent. Another 450,000 square feet of space is under construction around the lake.
Developers and real estate experts agree there is steady appetite for more commercial space along the man-made lake, even as rents begin to escalate.
“We’re seeing nothing but continued demand for space,” said Mike Strittmatter, a vice president at CBRE who has handled leasing at many landmark projects in Tempe.
Development ramps up
The lake, which opened in 1999, cost about $45.5 million for initial construction, $26.9 million of which was paid for by private developers in the community facilities district around the lake, according to the city of Tempe. Those districts allow cities to levy special fees to fund infrastructure, and developers often sign on with the promise of benefiting with better values for their properties.
During the 19 years since the lake was finished, close to $3 billion worth of construction has been concentrated along its shores, one-third of which has come online during the past three years alone. The largest development is Marina Heights, the 2 million-square-foot State Farm campus, which was built on land owned by ASU.
Even with another $150 million worth of projects scheduled to come online next year on the north shore, Giuliano said the lake is not even halfway to the economic impact ultimately envisioned for the area.
The demand along Tempe Town Lake is begetting more demand as users are thirsty for high-quality developments, Strittmatter said. Even as Tempe’s rent has grown faster than every Valley submarket save one, the lake’s proximity to ASU, easy access to Loop 101 and 202 and central location stave off any worries of a downturn.
“People want to be located in Tempe, and those reasons aren’t going to change,” he said.
Tempe was forward-thinking early onin encouraging and requiring only high-density, well-designed projects on the lake, he said.
“The city of Tempe recognizes that lakefront property is limited, so the focus is on getting premier developments there,” he said. “Tempe wants to make sure the lake is framed by premier projects.”
Building on spec
Buying into the speculative nature of Tempe Town Lake, Fenix Development broke ground on what will be the tallest development on the lake so far, and second biggest in terms of acreage, during summer 2017. The $150 million Watermark Tempe, on the lake’s north shore and west of Scottsdale Road, will be a 15-story, 265,000-square-foot Class A office building, and include 44,000 square feet of restaurant and retail space.
“Our interest in Tempe and Tempe Town Lake started in 2010,” said Mike Loretz, project manager for Fenix Development.
What’s next
Much of the commercial development along the lake has taken place on the southern side, closer to ASU. But Loretz hopes the Watermark will set the standard for development on the northern bank.
“The north side of the lake is changing,” Loretz said. “We are setting the precedent for others to follow.”
While it might be challenging for a developer new to the market to build on lakefront land, Strittmatter said many developers, like Fenix with the Watermark, have the ability to expand their developments to more phases, adding coveted space to the submarket.
The lake will have no shortage of development in the near- or long-term. ASU has plans to construct a 350-acre development, called an “innovation zone” on the north side of the campus, including several parcels that front the lake. In total, the development, called Novus, will include 10 million square feet of mixed-use space.
Marina Heights was the first phase of Novus, and the Sun Devil Stadium renovation was the second phase. The third phase, which will include multifamily housing and office space, among other developments, will begin construction next year.
The area is also a draw for residential development, ranging from high-end for-purchase options, such as condos, to multifamily apartments, Giuliano said.
“We always said the lake shouldn’t be for just one group of people,” Giuliano said.
Long article, but a great read highlighting the growth tempe town lake can expect in the coming years ranging from office to residential. I hope future proposals will aim to activate the lake front and create a walkable frontage with retail/restaurant space facing the lake and more activities in the vicinity.
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