Starwood Property Trust Pockets $38M for Phoenix Asset

Kierland Corporate Center. Image courtesy of Cushman & Wakefield

Starwood Property Trust has received nearly $37.8 million for Kierland Corporate Center I, a 109,811-square-foot office center in Scottsdale, Ariz. Yonezawa-Miller Co. (YMC) paid $344 per square foot for the Class A facility. Kidder Mathews arranged the transaction on behalf of the buyer, while Cushman & Wakefield represented the seller.

The four-story building has average floorplates of 27,500 square feet and a parking ratio of 4 spaces per 1,000 square feet. The 2000-built property was 93 percent leased at the time of the deal.

Located at 7047 E. Greenway Parkway, Kierland Corporate Center is part of a business and retail area situated some 20 miles north of downtown Phoenix. Kierland Commons and Scottsdale Quarter, the largest shopping centers in the region, are within walking distance of the property.

Kidder Mathews represented the buyer in three other acquisitions over the past 15 months, YMC President Craig Yonezawa said in prepared remarks, adding that the company plans to expand its portfolio in the state. Earlier this year, YMC paid nearly $22 million to Irgens for two office buildings in Chandler, Ariz.

Steadily growing

Even with uncertainty looming over office markets nationwide, Phoenix’s performance continues to improve, a recent CommercialEdge report shows. In November, office vacancy stood at 14.7 percent, down 250 basis points year-over-year and lower than the national vacancy average of 15.3 percent. Central Scottsdale was the submarket with the highest absorption, with 198,910 square feet of office space leased in the third quarter of 2021 alone, according to a JLL report.

Rents were up 3.2 percent in the 12 months ending in November, the same CommercialEdge report indicates.  Still, Phoenix remains one of the most affordable major U.S. markets, with an average asking price of $28 per square foot, considerably lower than the national average of $38.6 per square foot.

The market’s slow but steady recovery is mirrored by the improving unemployment rate in Greater Phoenix. Data from the U.S. Bureau of Labor Statistics shows that unemployment decreased to 3.8 percent in October, which was 80 basis points lower than the national average.