The Galleria, the most sought after office address in Downtown Scottsdale, just got a little roomier. The property has newly available space that will offer relief to an office market that is currently the tightest in the metro Phoenix area.
Galleria can now accommodate users with requirements greater than 50,000 sq. ft. This new availability at the office project marks the first time in more than eight years that Downtown Scottsdale has had an available contiguous block of space larger than 50,000 sq. ft. Formerly home to Le Cordon Bleu culinary school, the 52,000 sq.-ft. area has been reimagined as high-end office space, which is sure to attract more tech-centric companies hungry to expand or land in Downtown Scottsdale.
Additionally, with one of its largest tenants, McKesson, announcing plans for a new suburban build-to-suit project to accommodate the company’s major growth plans, by November 2017 Galleria will be able to offer another large block of space – nearly 100,000 sq. ft. – to office users looking to break into Downtown Scottsdale.
“McKesson and Le Cordon Bleu were two of the first tenants to locate to the project in the early 2000’s well before the transformation of the surrounding area,” said Dan Michaels, managing director at Stockdale Capital Partners, which owns the Galleria. “Downtown Scottsdale has become a hot bed for companies looking to attract the most talented millennial workforce and Galleria is right in the center of it all.”
Michaels points to drivers like the thousands of urban multi-family units and dozens of restaurants and bars that have been added in the last few years, as well as downtown’s proximity to ASU, a leader in producing the area’s highly sought after workforce.
“We’ve been anticipating this day for quite awhile, and we’re excited about the opportunity this new availability brings,” continued Michaels. “We have seen a lot of users over the last couple of years want to locate in the project and we have been unable to accommodate them until now. We continue to drive our modernization initiatives and remain focused on targeting those growing organizations who enjoy high employee retention rates given all the amenities Galleria’s location offers.”
The Galleria is currently 100 percent leased, but by the end of 2017 the project will be able to accommodate users up to 200,000 square feet. The adjacent 210,000 square foot planned Marquee at The District also provides tenants with additional expansion opportunities.
No matter a user’s requirement, the one constant of a Galleria tenancy is a highly amenitized environment both on-site and in the immediate area. Ownership has invested nearly $7 million in significant renovations to the lobby and common areas, as well as a state-of-the-art conference center. What’s more, Southern California eatery Comoncy recently took up residency as well, offering tenants a unique hand-made menu steps from their office doors.
According to CBRE Research, South Scottsdale remains the tightest office market in metropolitan Phoenix. Overall, the submarket’s vacancy rate stands at 8.3 percent, with class A and B space at 8.5 and 5.9 percent, respectively.
“Office tenants want to be in Downtown Scottsdale, but until recently quality available space has been hard to come by,” said CBRE’s Bryan Taute, who along with Krystal Dill, oversees leasing and marketing for the property. “The Galleria’s newly available space should absorb much of that demand and offer great opportunities for the next wave of office users looking to relocate and expand in the Valley.”
Old Town Scottsdale’s emergence as a tech-hub in recent years is a key factor driving vacancy rates down and rental rates up. However, Taute points out that for those tech companies looking to expand in the Valley, Old Town represents a significant value alternative to the high-cost of hiring and growing in Silicon Valley.
“The Valley is one of the most cost-effective markets for tech companies to operate in and their employees to live,” said Taute. “Companies like Weebly, Yelp, and, most recently ClearLink, have already recognized the value of growing in Old Town and specifically at the Galleria.”
CBRE’s annual report scoring tech talent markets ranks the Valley 26th in an analysis of estimated one-year costs in terms of wage and rent obligation for a sample tech firm with 500 employees and 75,000 sq. ft. of office space. This makes metro Phoenix a cheaper alternative to markets like Seattle, Denver and Austin, among others. Additionally, the Valley’s wage-to-apartment ratio is just 12.8 percent, making it the fifth most affordable tech talent market for employees.
According to Danielle Casey with Scottsdale’s enonomic development office, inquiries from office tenants are at an all-time high.
“We’ve seen a tremendous amount of activity and desire from office users who want to be in Downtown Scottsdale, but haven’t had any options for the larger users. This new opportunity at the Galleria is an exciting chance to grow our employer base.”
Scottsdale Galleria’s current tenant roll is highly concentrated with tech firms, and Taute expects the newly available space in the property to attract a similar profile and therefore lease quickly.
“There has been a lot of pent up demand in the South Scottsdale area for the last several quarters, and the Galleria’s new space should absorb much of that demand and offer great opportunities for the next wave of tech companies looking to relocate and expand in the Valley.”