By Gail Kalinoski
Phoenix—The Muller Co. and Harbert Management Corp. are nearing completion of the first phase of their $20 million redevelopment of Sky Harbor Towers, a 13.6-acre, two-building office campus in the Sky Harbor submarket of Greater Phoenix.
The 215,000-square-foot complex at 4605 and 4615 E. Elwood St. will be ready for tenants this spring. The complex, which used to have a third building, is being repositioned as a state-of-the-art, amenity-rich modern office space. A portion of the campus was acquired in 2015 by the Arizona Department of Transportation for a freeway widening project. The Muller Co. decided to demolish the smallest of the three buildings and use the space for more parking in a redeveloped office campus.
The first phase features renovated lobbies and a new pedestrian-friendly courtyard with shaded outdoor meeting areas around a central fountain. The second phase will modernize the fitness center and on-site café for casual inside and outside dining. The joint venture partners did not give a date for completion of the second phase.
“Our goal with the remaining four- and seven-story buildings was to create an engaging campus environment that offers the appointments of a Class A mid-rise office complex and caters to tenants in the new economy,” Stephen Muller, principal with The Muller Co., said in a prepared statement. “This project is surrounded by low-rise ‘call-center’ style properties. Sky Harbor Towers will stand out in the area landscape as offering more appealing workstyle environment with logically-sized work areas, plentiful natural light and an active courtyard with outdoor work areas for an employee-friendly campus feel.”
Colliers International in Greater Phoenix was chosen to market the property with Colliers Executive Vice President Charles Miscio and Vice President Ryan Timpani as the leasing agents.
“Sky Harbor Towers occupies a coveted location at the critical intersection of Interstate 10 and State Route 143, adjacent to Sky Harbor International Airport,” Miscio said in a prepared statement. “More than 300,000 vehicles pass by this property each day, which offers prospective tenants impressive visibility with many signage opportunities.”
Miscio also noted the campus’ location in the heart of the city’s freeway system will enable it to attract workers from throughout the Greater Phoenix region.
The Sky Harbor submarket had a 23.9 percent vacancy rate in the fourth quarter of 2016 while the overall office vacancy rate for metro Phoenix was 17.6 percent, according to Cushman & Wakefield’s Marketbeat Office Q4 2016 report for metropolitan Phoenix. The report noted the overall rate for Phoenix decreased 20 basis points from Q3 2016 and 110 basis points from the18.7 percent vacancy rate at the end of the fourth quarter in 2015.
The region’s economy is also improving with a fourth quarter unemployment rate of 4.5 percent. The Multifamily Winter Report 2017 from Yardi Matrix noted Phoenix added nearly 48,000 jobs in the year ending in September 2016, a 3 percent increase. The data showed education and health services led the employment growth with 13,800 new hires and 8,500 more were expected. Overall, absorption of office spaced totaled about 3 million square feet in each of the past two years in the Phoenix area, according to Yardi Matrix.
Sky Harbor Towers is the second joint venture between The Muller Co. and Harbert Management Corp. The two companies also own the Diablo Technology Park in Tempe, Ariz.
The Muller Co. is a privately held real estate investment, development and management firm that has acquired and operated more than 30 million square feet of office, industrial and retail space in Arizona and California since 1979. Harbert Management Corp. is an independent investment firm focused on fundamentally-based private and public market strategies.