Marcus & Millichap announced the sale of Denny’s ground lease, a 4,300-square foot net-leased property located in Yuma , Ariz, according to Don Morrow, regional manager of the firm’s Phoenix office. The asset sold for $1,527,300.
Jamie Medress and Mark Ruble, investment specialists in Marcus & Millichap’s Phoenix office, had the exclusive listing to market the property on behalf of the seller, a limited liability company. The buyer, a private investor, was secured and represented by Matt LoPiccolo, an investment specialist in Marcus & Millichap’s San Diego office.
Denny’s Ground Lease is located at 11255 E. South Frontage Rd. in Yuma.
Fennemore Craig, a leading Mountain West regional law firm, announced Graeme Hancock, shareholder in the firm’s Phoenix office, was elected to the Executive Council of The Trial Practice Section of the State Bar of Arizona.
Hancock has nearly 30 years of experience representing manufacturers of a variety of products in tort and product-related litigation. His practice also includes representation of condemnation claims, land litigation, government contract disputes and defense against government fraud. Hancock earned his J.D. and A.B. from Stanford University. Hancock’s community activity has included a lifelong involvement in .
The Trial Practice Section promotes the administration of justice by improving the caliber of trial practice and procedure in the courts of Arizona to afford members of the Bar the opportunity to increase their knowledge and to improve their skills as trial practitioners.
VOIT REPORT: PHOENIX OFFICE LEASE RATES RISE FOR THE SIXTH CONSECUTIVE QUARTER; RETAIL MARKET POSTS LOWEST VACANCY RATE SINCE 2008
By Jennifer Farino
The Phoenix office market continued to convey strong signs of recovery in 2014, and marked its sixth consecutive quarter of rising lease rates. The average asking full-service gross lease rate finished the second quarter at $21.12 per square foot, an increase of 3.23% from 2013’s second quarter average asking lease rate, according to a new Second Quarter Market Report from Voit Real Estate Services.
“This is good news for the Phoenix market overall,” explains Jennifer Farino, Market Research Analyst at Voit. “The rise in lease rates demonstrates that the market continues to improve, which further supports the recovery we’ve been forecasting for the past 12 to 24 months.”
Demand for Office Product Increases
As a whole, the Phoenix office market posted just over 7.1 million square feet of positive absorption since the second quarter of 2011, 5.8 million of that in the last nine quarters, according to Voit’s report.
Another trend to note, according to Farino, is the continued decrease in the amount of vacant and available space in Phoenix. “We should see a very slight increase in construction in the coming quarters, with just under 20.0 million square feet waiting in the wings as planned projects throughout the Valley.”
As the recovery continues, Farino notes that Phoenix is poised for growth in the new niche of high-tech manufacturing. This, in addition to a high demand for back office workers, will help lead the charge of positive absorption in the Phoenix office market.
Vacancy and Availability in Retail Market Reach Pre-Recession Levels
The Phoenix Retail market took significant strides toward continued improvement in 2014 with positive absorption for the year thus far, a twenty-one cent or one and a half percent increase in asking lease rates, and drops in both vacancy and availability, compared to the first quarter of 2014.
“Overall in the Phoenix Retail market over the last two and a half years, vacancy has decreased over 16 percent while availability has decreased 13 percent,” says Farino. “The substantial drops in vacancy and availability are contributing to the gains in asking lease rates.”
Both vacancy and availability continued trending downward throughout 2014. Vacancy ended the second quarter of 2014 at 10.26 percent, a drop just over 6 percent from 2013’s second quarter. Likewise, availability posted a rate of 11.43 percent at the close of the quarter, a substantial decrease of almost 6.4 percent from a year ago.
As lease rates rise, sale prices are also ticking up, notes Farino, who attributes this trend to the diminishing supply of product under construction in the Phoenix Metro area, leaving the existing product to take in new retailers opening businesses.
“Overall, we continue to be cautiously optimistic about the Phoenix Retail market,” says Farino. “We continue to see improvement in both the office and retail markets, and we anticipate positive gains moving forward, provided job creation continues and consumer confidence stabilizes.”
Groundbreaking day has arrived for the first phase of Airport I-10—a Wentworth Property Company/Clarion Partners Class-A industrial project being leased by the Phoenix office of JLL that, at completion, will represent one of the largest Sky Harbor Airport-area speculative industrial developments in Phoenix history.
Located at the northwest corner of 24th Street and Rio Salado, Phase I of Airport I-10 Business Park includes three Class A industrial buildings totalling more than 600,000 square feet (277,954 square feet, 169,109 square feet and 156,000 square feet). Phase I of the project is slated for completion in the fall of 2014. At build out, the 58-acre site will comprise five Class A industrial buildings totalling 920,584 square feet.
“This is the last large, developable parcel left in the Sky Harbor International Airport submarket—an area that consistently ranks among the Valley’s top industrial locations,” said Wentworth Property Company Principal James R. Wentworth. “Airport I-10 is already garnering great interest. With Phoenix’s continued population and job growth, we expect this demand to do nothing but rise in the years ahead.”
According to JLL research, the Sky Harbor Airport submarket absorbed approximately 1 million square feet of industrial space last year—almost 30 percent of the more than 3.5 million total square feet of industrial space absorbed Valley-wide in 2013.
Airport I-10 will offer a modern environment for corporate users and will be fully equipped with state-of-the-art features such as ESFR sprinkler systems, 30- to 32-foot clear heights, cross-dock loading and 140- to 200-foot truck courts.
“About 90 percent of the buildings in the airport submarket were built before 2000 and lack the modern features that today’s users are looking for,” said JLL Executive Vice President Pat Harlan, who serves as an exclusive leasing broker for the project along with JLL Executive Vice President Steve Sayre, JLL Associate Kyle Westfall and JLL Managing Director Mark Detmer. “Airport I-10 delivers those benefits at a central location—a site that is truly at ‘main-and-main’ for industrial real estate.”
“Users are looking for space in the 50,000- to 300,000-square-foot range and there simply isn’t the product to accommodate that demand,” said Harlan.
Capital Markets experts in the Phoenix office of Jones Lang LaSalle (JLL) have completed a $22.1 million sale of Broadway Industrial Portfolio, totalling three Class A buildings and 308,038 square feet in Tempe, Ariz. The deal is JLL’s second investment sale in the area this quarter, accentuating the strength and draw of the submarket’s commercial real estate inventory.
Jones Lang LaSalle Managing Directors Mark Detmer and Bo Mills represented the property seller, San Francisco-based Prologis, Inc. The buyer is DCT Industrial Trust.
Broadway Industrial Portfolio encompasses an 110,000-square-foot building at 1005 W. Alameda Dr; a 96,437-square-foot building at 2910 S. Hardy Drive; and a 101,601-square-foot building at 2925 S. Roosevelt St., all in Tempe. Each building is a Class A, institutional quality asset offering manufacturing, distribution and office space. The properties are also all located directly off of Interstate 10 and fully occupied, with no near-term rollover, to tenants including United Stationers Supply Co., ACI Plastics, Inc., Misty Mate, Inc. and Triumph Group, Inc.
“These buildings are exceptional in that they combine outstanding functionality and full occupancy with a true Class A image in an infill location,” said Detmer. “This includes access—within minutes—to many of the key amenities that a high-end industrial user might need: an extensive freeway network, international airport, deep labor pool and host of retail opportunities.”
In addition, the project is located within the Southeast Valley, an area that over the last decade has remained one of the nation’s fastest growing regions for industrial and technology companies, and according to JLL is well situated for long-term stability.
Jones Lang LaSalle Executive Vice Presidents Pat Harlan and Steve Sayre, and Associate Kyle Westfall, will serve as the exclusive leasing brokers for the property buyer on behalf of DCT Industrial Trust.
This is the second investment sale closed by JLL in the Tempe submarket this quarter. In July, the firm completed a $27.1 million sale of Broadway 101 Office Park, a deal that was driven by high market demand and fundamentals reminiscent of pre-recession transactions.
Jones Lang LaSalle is a leader in the Phoenix commercial real estate market. Employing nearly 400 of the region’s most recognized industry experts, the firm offers office and industrial brokerage, tenant representation, facility and investment management, capital markets and development services. In 2012, the Phoenix team completed 9 million square feet in lease transactions valued at $458 million, directed $63 million in project management and currently leases and/or manages a 19.8 million-square-foot portfolio. For more news, videos and research resources on Jones Lang LaSalle, please visit the firm’s U.S. media center webpage.
Jones Lang LaSalle Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm’s in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether a sale, financing, repositioning, advisory or recapitalization execution. In 2012 alone, Jones Lang LaSalle Capital Markets completed $63 billion in investment sale and debt and equity transactions globally. The firm’s dealmakers completed $60 billion in global investment sales and buy-side transactions, equating to nearly $240 million of investment trades completed every working day around the globe. The firm’s Capital Markets team comprises more than 1,300 specialists, operating all over the globe.
Mark Kranz, SmithGroup
Mark Kranz, AIA, LEED AP, is the design principal and lead designer for the Phoenix office of SmithGroup’s Higher Education and Science and Technology Studios. Mark’s work has been published locally, regionally and nationally.
He speaks publicly about sustainable design strategies for laboratory and academic facilities, and his work is consistently recognized by the design and construction industries. Kranz works regionally within the Western United States with research institutions and institutions of higher education creating laboratory and instructional facilities that elegantly reflect their specific context and function.
He has spent the past 11 years with SmithGroup, creating the vision for some of the most significant architectural contributions for some of the most prominent institutions and public entities in the Southwestern United States including Arizona State University, the University of Arizona, the City of Phoenix, the State of Utah, The City and County of Denver, and the Maricopa County Community College District.
He is currently behind the design visions for numerous landmark projects for clients including the National Renewable Energy Laboratories in Golden Colorado, The University of Hawaii at Hilo, the Joint POW/MIA Accounting Command in Honolulu, Hawaii, as well as Gateway Community College in Phoenix, Arizona.
Topic: Sustainable Strategies for Higher Educational Facilities: A case study of four sustainable educational facilities in four unique settings.
BIG Green Expo
Mark Roddy, SmithGroup
Mark Roddy, AIA, a design principal and lead designer for the Phoenix office of SmithGroup’s Office Workplace Studio, has over 18 years in the architectural field.
Mark received his bachelor degree from the University of Arizona in 1991 and a Masters in Architecture from UCLA in 1996. He has taught architecture design at the University of Arizona, Montana State University and Arizona State University.
His expertise produces civic/municipal spaces that respond to the surrounding community and its culture, while his office/workplace designs are efficient without sacrificing environmental responsiveness. This is most evident in the recently completed Chandler City Hall that is tracking LEED Gold Certification. This commitment to sustainability is also demonstrated in the “green” addition to his historic home in Central Phoenix that has won numerous awards including a Crescordia from Valley Forward. Mark’s work has been exhibited locally, nationally and internationally.
He believes architecture should be expressive and environmentally responsible, but above all it should seek and find a balance between beauty and function.
Topic: Sustainable Office Design, Two Case Studies in Regional Office Design: Strategies and benefits of sustainable office building design, focusing on three main topics — regional design-buildings, performance strategies and employer & employee benefits.
BIG Green Expo
One of the largest accounting and consulting organizations in Arizona, Deloitte LLP, named a new managing principal of its Phoenix office Nov. 15.
Jonas McCormick, principal, Deloitte Consulting LLP, is now managing principal of Deloitte’s Phoenix office. McCormick succeeds Michelle Kerrick, who was recently appointed managing partner of Deloitte’s Los Angeles office.
After graduating from the University of Notre Dame with a Bachelor’s degree in business administration, McCormick has spent the majority of his career serving the Arizona market.
“Having spent the majority of my career serving some of Arizona’s largest companies, I am familiar with this marketplace and the complex business challenges local companies are facing,” McCormick notes. “In my role, I can help align Deloitte’s diverse offerings – which include audit, tax, financial advisory and consulting services – to address the needs of the organizations we serve.”
As a lead client service principal at Deloitte, McCormick helps companies across a range of industries implement operational excellence and performance improvement programs in their organizations. He assists clients in achieving strategic cost reduction and enhancing revenue and performance management with his vast knowledge in the areas of organizational design and development, human resource management and change enablement.
“One of my key objectives as managing principal of Deloitte’s Phoenix office is to build on the momentum we’ve established in Arizona, where we are currently ranked as the largest professional services firm, and grow our footprint in the local market,” McCormick says. “We will maintain our focus on delivering quality and value to our clients, while continuing to invest in our people and the community in which we live and work.”
Tony Buzzelli, vice chairman and regional managing partner of Deloitte LLP Pacific Southwest, commends McCormick for his competent leadership skills and looks forward to McCormick leading the Phoenix office.
“Having served some of the largest companies in Arizona over the last decade, Jonas has demonstrated strong leadership and success in driving value for our clients,” Buzzelli states. “Jonas’s focus on growing our business, developing our people and representing Deloitte positively in the marketplace position him well to serve as managing principal of our Phoenix office.”
The Phoenix office market continued to feel the effects of a sluggish and wavering economy, according to Cassidy Turley BRE Commercial’s 3Q 2010 office market trends report released today.
Economic indicators remain mixed causing uncertainty as to whether our economy is headed into a “double dip” recession or a period of slow growth. The best word to describe market conditions during the third quarter is flat. Net absorption was negative for the second time this year and the overall vacancy rate increased 30 basis points to finish at an all-time high of 27.9%.
Tempe/South Chandler and 44th Street Corridor posted the largest gains in net absorption; collectively they gained more than 257,590 SF in the third quarter. Downtown North and Airport Area were the two submarkets with the largest declines in occupancy; they collectively lost 221,927 SF during the third quarter. The majority of leasing activity has been in space that is an upgrade to the tenant’s prior location, otherwise known as “flight to quality.”
This has been a trend for several quarters, as nearly all positive absorption, both the quarter and year-to-date, have come from either Class A buildings or new construction. Class A average asking rates continue
to decline as landlords compete for tenants by offering heavy concessions and discounted rates. Class A rental rates dropped nearly 2 percent in the third quarter to finish at $25.07.
With the extreme over-supply of space, overall asking rental rates will continue to soften but at a slower pace and should reach bottom within the next 12 months. Office market leasing is likely to remain flat through 2010 and improve gradually into 2011 as businesses start to add jobs and tenants take advantage of reduced rates. Landlords that have weathered the recession, remained financially strong and adjusted to current market conditions should start to see some relief as tenant demand gradually improves.
With large blocks of premium office space available, lower rental rates, a high quality of life, affordable housing and great weather, Metro Phoenix is positioned to attract companies looking to relocate or add to their current operations. These factors should improve leasing and owner occupant demand bringing some relief to the office sector.
The Arizona economy has marked some improvement and is much better than the public perceives, according to the Third Quarter 2010 Economic Outlook released by the Forecasting Project at the University of Arizona.
However, the report also states that will it will take some time for many Arizonans to recognize the improvement in the state’s economy and to repair the damage done by the recession. Estimates are that it will be 2013 or early 2014 before all the damage that occurred during the recession is repaired. The long-term forecast is for nation-leading growth to return to Arizona.
There was also some positive news in the CB Richard Ellis Third Quarter 2010 Analysis of Metro Phoenix Office, Industrial and Retail Markets. Highlights included:
Office: After 12 consecutive quarterly increases, the office market vacancy rate remained unchanged from the second quarter, at 25.9 percent. While the full service average asking lease rate for office space has leveled off in 2010, it has fallen 12.5 percent in the past two years, from $25.44 per square foot in third quarter 2008 to $22.25 per square foot today.
Absorption for the year is 147,610 square feet, with gross activity of 4.3 million square feet. This compares with negative absorption of 897,916 square feet and gross activity of 2.9 million square feet at the same time last year. An increasing supply of office sublease space continues to impact the absorption of direct space. There was 2.2 million square feet of available sublease space at the end of the third quarter compared to 2 million square feet one year ago.
Industrial: Through the first three quarters of 2010, the Metro Phoenix industrial market had positive absorption of 2.6 million square feet. Leading the way was the Southwest submarket, with more than 3.4 million square feet of positive absorption year-to-date. The industrial market vacancy rate decreased for the second consecutive quarter, dropping from 16.4 percent at the end of the first quarter to 15.3 percent today. One year ago the vacancy rate was 15.8 percent.
The net direct average asking lease rate for existing industrial product remained relatively unchanged during the past three months, ending the third quarter at $0.54 per square foot. However, in the last year the rate has dropped 5.3 percent. While there is 619,800 square feet of industrial product under construction, it consists entirely of build-to-suit projects. No speculative developments broke ground in the third quarter. This trend is expected to continue due to the challenging financial market and the glut of space.
Retail: The retail market experienced positive absorption in the third quarter, posting 83,491 square feet. This was the first time in seven consecutive quarters that the metro area reported more retail space was gained than lost. Vacancy increased slightly in the third quarter, from 12.2 percent to 12.3 percent. In comparison, the retail vacancy rate one year ago was 10.9 percent.
The average net asking lease rate for existing retail centers has declined 9.4 percent since the end of 2009, dropping from $17.33 per square foot to $15.71 per square foot at the end of the third quarter. The large supply of available big box space continues to weigh heavily on the Phoenix area retail market. Currently there are 303 spaces greater than 10,000 square feet, totaling 8.2 million square feet. The majority, 34 percent, can be found in the Mesa/Chandler/Gilbert submarket, with 2.8 million square feet of space.
Most Arizona employers associate the Family Medical Leave Act (FMLA) with employee time off to care for an ailing parent or spouse or to tend to a newborn baby or newly adopted child.
Since early this year, the list of reasons for granting extended employee leaves has become longer, and in some cases, so has the permitted time off.
As of Jan. 28, when President Bush signed the National Defense Authorization Act of 2008 into law, the FMLA extends coverage to employees who are caring for a spouse, child, parent or “next of kin” injured while on active military duty. It also covers unpaid leave “for any qualifying exigency” arising from a spouse, a child or parent of the eligible employee being on active duty (or being notified of an impending call or order to active duty) in the armed forces.
It is well documented that military members who are injured in battle are surviving in record numbers, leaving active duty and requiring short- and long-term care to convalesce. This law recognizes this new fact of life for military families.
Companies with 50 or more employees must now grant up to six months of leave in a 12-month period to an eligible employee who is caring for a wounded service member, and 12-weeks leave to an employee helping a relative with a pressing need related to getting his or her affairs in order in preparation for military service.
The two provisions for military families represent the first expansion of the FMLA in the nearly 15 years since it was enacted. The expansion is expected to have significant impact on companies covered by the FMLA as long as overseas deployment of troops — and resulting casualties — continues.
The law is causing confusion in the business world, especially with regard to the definition of an “exigency.” We believe the intent behind this provision is to offer assistance to families who must now prepare for, and deal with, the service member’s deployment. That could include time off for an employee helping to arrange for childcare, attending pre-deployment briefings, handling legal, economic or financial-planning issues, paying bills, or providing emotional support.
Another area of confusion surrounds certification. What information can an employer properly require, for example, regarding the service member’s active duty status and the employee’s “next of kin” status?
The U.S. Department of Labor has promised to issue regulations to clarify the confusion, but they are not expected before this fall. Until then, employers are required to provide leave to employees caring for wounded relatives and are not required but are being encouraged to provide leave for qualifying exigencies.
We advise employers to amend their FMLA policies and practices immediately to reflect these significant changes in the qualifying reasons and duration of protected leave. In addition, as we await final DOL regulations, employers must proceed with caution in addressing an employee’s request for military-related leave.
Employers with questions about employee-leave rights should consider contacting experienced employment law counsel.
Mark Ogden is the managing shareholder of the Phoenix office of Littler Mendelson, the nation’s largest employment and labor law firm representing management. He can be reached at 602-474-3600 or email@example.com