Union at Mesa
Lincoln Property Co. pre-leased space in its class A office development union before the groundbreaking ceremony. The developer signed a lease with WageWorks for 150,000 square feet in the 1.3 million square foot Mesa project. The new lease is an extension to WageWorks, which is currently located in Tempe and will bring 1,000 jobs to the market.
“We were delighted to have a pre-let tenant who confirms the location. WageWorks is currently in Tempe and wanted a new location to double in size. So that suited them well and was a good price. " David Krumwiede, EVP at Lincoln Property Co., tells GlobeSt.com.
Suits are not uncommon in Phoenix. In fact, most of the new office buildings on the market after the recession were bespoke as the market did not support speculative building. As a result, many tenants are conveniently looking for a suitable building long before their lease expires. “During the first part of the restoration, there was no speculative building, and suits became the norm. This included anchor tenants or a building that was 100% occupied, ”says Krumwiede. “It was basically the only option in Phoenix. As the office market stabilized and recovered, there was a more speculative building that presented an alternative for tenants who either didn't have time to wait or couldn't get through the process. "
However, the bespoke option won't work for everyone as it takes time. "You have to be 18 months to two years before your lease expires, so this is a good alternative for tenants who have a little more time," says Krumwiede. "So pre-leasing is just an alternative, but I wouldn't call it a trend."
Lincoln is developing Union in partnership with Harvard Investmentsand plans to lay the foundation stone in the first construction phase – a 232,000 square meter office building – this summer. The property is on the border with Tempe but offers discounted rentals. As a result, developers are anticipating strong interest, and this early lease helped prove the theory. "Tempe has recovered – it was the first submarket that really took off," says Krumwiede. “Several companies came in and really put Tempe on the map with other major destination cities. There aren't many websites available anymore and it's expensive to be in Tempe. Mesa is the beneficiary of all of this success. We are literally next door. "
While office pre-letting isn't necessarily a widespread trend, it is a sign of a healthy market where supply meets demand but does not exceed demand. "Depending on the location and submarket, the market is in a very good balance," adds Krumwiede. “The Tempe, Mesa market is in high demand and limited supply of real estate. It feels really healthy and it's the market that we love to be in. It is currently a good market for renters and landlords. "