On Feb. 13, Creation broke ground on a 144,885-square-foot Class A industrial facility in Southern Tempe. Located in one of the most sought-after regions in the Valley, Source Logistics Center features HVAC throughout the entire building, 3,000 square feet of spec office, a six-acre yard and access to a Union Pacific rail line. Construction is slated to finish in mid-2026.
“It’d be challenging to identify a 145,000-square-foot building with a contiguous six-acre yard anywhere on the West Coast, let alone in a premier infill submarket like the Tempe corridor,” explains Grant Kingdon, principal of the Mountain West Region at Creation. “If a tenant has 300 truck trailers they need to store at night, we have six acres for them.”
Prior to Source Logistics Center breaking ground, the parcel was owned Brenteson Wholesale since 1969. The company operated as a Christmas tree wholesaler, which built a 1,950-foot airstrip so the owner could fly to meet with growers in the Pacific Northwest. That continued until APS built a power transmission line nearby that made it unsafe to take off and land a plane.
Rather than being something to be worked around, Kingdon says that the “funky shape” of the site creates a clear differentiator in the market, going as far as to call it the “most compelling reason” to pursue the project. The availability of additional outdoor storage space and parking are features users are often looking for.
“We can’t develop into the southern six acres of the site, but that creates an advantage for tenants,” Kingdon explains. “They want this excess yard space, but that means developers have to over cover the site to make the pro forma work. To find an opportunity where a developer can get the project to underwrite and reach a certain return threshold while also providing site features tenants want is unique.”
What makes the offering even more distinctive is that Source Logistics Center has a coveted Tempe address.
“Typically, facilities [with excess yard space] are on the outskirts where land is plentiful and cheaper,” Kingdon says. “But then you’re away from retail amenities, quality labor and all these other critical variables tenants are looking for. Having a site like this in the middle of town with nearby skilled labor, retail, access to the I-10 and a big yard — it’s like finding a needle in a haystack.”
Hemmed in
As big as the impact Tempe has on the Valley, the municipality’s physical footprint is small — about 40 square miles. The City of Phoenix, stretching over 517 square miles, could fit nearly a baker’s dozen of Tempe-sized landmasses within its boundaries. Even Tempe’s smallest neighbor by area — Chandler — is about 50% bigger.
“We’re a city that mostly does redevelopment projects,” explains Mike DiDomenico, economic development director for Tempe. “If you’re in Mesa or Peoria, you can get a company that needs 100 acres and build something wonderful. We can’t even talk to them.”
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Despite the high barrier to entry, David Sellers, founder of Creation, says that Source Logistics Center is one of two developments Creation is spearheading in the submarket.
“This is one part of a broader vision we have for this area,” he says. “When you combine the two projects together, they represent a nearly $100 million investment from Creation and CrossHarbor Capital Partners. That shows our commitment and trust in Tempe as a logistics and technology hub.”
The dearth of greenfield sites left in Tempe means that success in the landlocked city relies on have a keen eye for spotting suitable redevelopment prospects.
“You have to find sites like [where Source Logistics Center is located] and tear stuff down. There was just a hodgepodge of buildings here before,” he continues. “The other project we’re doing on Elliot Road was a two story, 180,000-square-foot office building that was functionally obsolete. Those are the opportunities you have to look out for.”
