As the Phoenix office market collapses, downtown's share of the smaller pie keeps growing. CB Richard Ellis reported that in the fourth quarter of 2008, downtown Phoenix's office vacancy rate climbed to 12.8%, but that figure still was better than all of downtown Phoenix's major competitors (midtown Phoenix was at 16.0%, the Camelback Corridor had a vacancy rate of 17.8%, and the Scottsdale Airpark and north Scottsdale markets checked in with whopping vacancy rates of 24.4% and 28.8%, respectively).
In the meantime, downtown Phoenix was one of the few submarkets to add space, as Central Park East and the CityScape office tower construction progressed. Downtown is poised to add more than one million square feet of Class A office space, more than double any of the other Phoenix-area submarkets. That construction will help downtown surpass midtown Phoenix in terms of overall Class A office space, and cause downtown to become the third-biggest Class A office submarket in greater Phoenix. In fact, downtown Phoenix would have become the biggest Class A submarket in the Phoenix area had the Camelback Corridor and Scottsdale Airpark not been in the midst of their own office building projects.
While downtown Phoenix has always been a decent office outpost and lagged in commercial and residential options, adding more people to the downtown mix-- even if it's just during the 9-to-5-- is never a bad thing. The big issue now will be finding tenants for all the new office space (especially at Central Park East, which currently has no tenants).
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Doesn't Central Park East have Wachovia (i.e., Wells Fargo)? I heard from one employee of the bank that he expects Wells Fargo to make CPE the next downtown headquarters and for the county to continue leasing space in the old tower a block away.
I used to post at Skyscraperpage.com, which might have the worst forum of any large American city for that site. The cheerleadering for new satellite cores and high rises outside any recognizably urban context continually amazed me. It's probably not an accident that downtown Phoenix is little more than a submarket. Downtown will always be an afterthought until the city can stand up to the free-market zealots, freeway lovers, and zoning attorneys who have wrecked downtown with their ideology of decentralization. The primary impulse in real-estate development here has been the easy score, facilitated by pliable pols and bureaucrats. Fortunately, that paradigm has imploded in the current crash. Still, I doubt we're going to manifest much if any urbanist consciousness in the coming depression.
Government, law, and banking are the three sectors that have remained faithful to the idea of downtown. But for downtown to really be the galvanizing core of this metroplex, it will need a business class who really gets the necessity of an urban core. At the moment, I don't see that happening.
An announcement I was sent this week drove home Walt's point about the business class not seeing a need for a downtown core this week. This international firm celebrated its move into office space at the Esplanade by sending out an announcement to its worldwide affiliates that it was relocating "into the heart of this city's financial center." Ouch.
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