Colliers International in Arizona has released its Greater Scottsdale Airpark 2030 Report, which highlights market conditions and predictions for the popular Scottsdale Airpark submarket. The area has become an “18-Hour” city with a growing mix of apartments, modern retail, hotel amenities, and traditional commercial space.
“The Scottsdale Airpark has experienced a renaissance of sorts, formulating its own urban character that is proving very attractive to employers,” says Jim Keeley, SIOR, CCIM, founding partner of the Scottsdale Office of Colliers International in Arizona. “Job seekers, employers, and entrepreneurs are seeking live-work-play environments throughout the nation. The Scottsdale Airpark has expanded far beyond its light industrial roots to become a community where people live, walk their dogs, visit a great restaurant, and also work in a multitude of different industries.”
Highlights of Scottsdale Airpark action in 2019 include Tesla’s opening of its new, 40,000-square-foot service center; Optima adding two more multifamily properties; Silicon Valley ed-tech company Shmoop University, Inc. moved to the airpark, and Whish Body Products expanded its presence on Greenway-Hayden Loop.
Once a commercial submarket focused on light industrial and manufacturing space, the area’s popularity has ostensibly priced itself out of that product type. “We really need more office/warehouse space to satisfy pent up tenant demand,” says Keeley. “Land prices have escalated so much in the Airpark that developers can’t rationalize building that product type here anymore.”
Retailers have been taking occupancy of spaces in Scottsdale Airpark. Some non-functional space built in the past decade has been renovated to meet current tenant needs, often scooped up by specialty boutiques.
According to Keeley, “The self-storage segment of the market is likely over its skis at this point. We have nine projects with more than 500,000 square feet in the market already. Two more are under construction, and three additional self-storage projects are planned. This pipeline will probably exceed demand and create an over-supply of storage space.”
Demand for office space in the Scottsdale Airpark has outpaced supply, and the area needs some new development. The Axis Raintree is underway and will bring approximately 175,000 square feet of new space just west of the Loop 101 at Raintree. Cavasson’s 134-acre project at Hayden and the Loop 101 will bring 500,000 square feet of office space for Nationwide Insurance Company and a Choice Hotel. Approximately 800,000 square feet of new office space is on the horizon for the Airpark, but that new inventory will not fully satisfy demand. More new office developments will likely be announced this year as the expanding economy leads more businesses to the area.
Rental rates in Scottsdale Airpark have not yet risen to the level of 2008, but building sale prices have exceeded those achieved during that time. During 2019, 41 different projects in the Scottsdale Airpark were sold. Approximately half of those were office properties, selling for an average price of $233 psf, compared to an average $219 psf for office sales in 2018. Low-interest rates and low CAP rates are working in favor of the real estate investment market. National leaders in commercial real estate are predicting stable or lower interest rates during 2020, as well as compressing CAP rates.