Q3 2026 Case Study: Value-Add Execution at Hohokam Business Park

BKM Capital Partners

Sep 15

3 min read

Get an exclusive look into BKM's impressive property transformation at this 257K SF asset in Tempe, AZ.

To download and view the full case study, click here.

Hohokam Business Park spans 256,920 square feet across 18 buildings on nearly 17 acres of industrial-zoned land in Tempe, Arizona, serving as a cornerstone of the thriving Phoenix industrial market. Strategically positioned in Tempe’s Northwest submarket with prominent frontage on SR-143, near I-10, Sky Harbor International Airport, and Arizona State University, this multi-tenant light industrial park offers highly functional small-bay space to a diverse tenant base.
Phoenix’s industrial market is driven by advanced manufacturing, aerospace, technology, and regional distribution. Its metro population of approximately 5 million has grown 17% over the past decade, supported by a young, educated workforce anchored by Arizona State University. As one of the nation’s fastest-growing metros and a key logistics gateway to the Western U.S., the region continues to attract major employers such as Amazon, Intel, and Honeywell, driving durable demand for infill industrial space.

Aesthetic Appeal:

The property originally lacked a modern design concept, allowing BKM to enhance its visibility and appeal.
Cosmetic upgrades included a refreshed paint scheme, updated tenant and monument signage, drought-tolerant landscaping, and parking lot resurfacing.
Overbuilt, office-heavy units would be reconfigured into smaller, more functional industrial suites, reducing the office buildout and broadening tenant appeal.

Financial Appeal:

Acquired at a 60% discount to replacement cost with stable in-place cash flow from 89% occupancy.
Opportunity to mark over 50% of NRA to market within the first two years of the hold.
24% below-market in-place rents, offering strong rent growth potential.
Average unit size of 3,172 SF across a diversified base of 66 tenants, with no tenant exceeding 4% of NRA to limit cash flow volatility.

Small-bay continues to command a strong rent premium. Spaces <25K SF are averaging $16.68/SF compared to the metro-wide average of $12.92/SF, roughly a 29% premium. With small-bay rents up about 50% over the last five years, there’s also a meaningful opportunity to bring older leases closer to current market rates.¹
Vacancy is much tighter in the smaller size ranges. While overall market vacancy sits at 15.1%, spaces <25K SF are only at 5.5%.¹
Demand is decisively outpacing new supply. Phoenix absorbed 4.2 million SF against just 1.9 million SF of new deliveries, pushing vacancy down to 8.7% — a fifth consecutive quarterly decline and a drop of 220 basis points year over year.²
The market has a deep and diverse demand base. With a population of 5.3 million and the 13th-largest manufacturing employment base in the country, the metro has a strong industrial foundation that supports continued tenant demand.¹

¹CBRE, U.S. Small Bay Industrial Trends, H1 2026, pp. 70–72. ²Colliers, Phoenix Industrial Market Report, Q2 2026.

The BKM team seeks to continuously diversify its tenant mix, aligning with its growth strategy to mitigate risk and hedge against industry-specific volatility.

BKM planned a comprehensive capital program to reposition the asset, including $1.09M in cosmetic upgrades (paint, signage, and drought-tolerant landscaping) and $1.02M in structural improvements.
To unlock rent growth, the team aimed to roll under-market leases to market, targeting over 50% of NRA within the first two years of the hold and capturing the 24% gap between in-place and market rents.
This approach required active property management and ongoing tenant improvement and leasing investment to enhance marketability and justify market-rate rent premiums.

34 of 72 units rolled over to-date, allowing BKM to mark nearly 40% of the park’s square footage to market.
4 months average downtime since acquisition.
84% increase in property value over the hold, growing from $29.1M at acquisition in 2020 to $53.6M in December 2024.
32% average leasing spreads achieved across the hold, or 26.9% when including quarters with no leasing activity.
$2.1M in capital improvements completed across cosmetic and structural upgrades, including paint, signage, landscaping, spec TI, HVAC, roofing, and parking improvements, helping reposition the asset to drive rents and occupancy.