The city of Tempe is located just east of Sky Harbor International Airport, south of Scottsdale, west of Mesa and north of Chandler. As one of the metropolitan area’s most prominent cultural and employment centers, Tempe has over 160,000 residents and is home to Arizona State University, the nation’s largest university by enrollment with over 70,000 students and 11,000 employees. ASU’s economic impact is estimated to equal $4 billion, making it one of the state’s most important economic engines in terms of workforce education, cultural contributions, and commercial development. The city crossed by the Loop-101 and Loop-202, two of the greater Phoenix area’s most developed arterial freeways.
The Tempe industrial market is 8.9 million square feet and currently 93.4% occupied. In 2015, 361,000 square feet was absorbed, over 4% of the total market. When combined with the Sky Harbor submarket, the area accounted for 45% of the net absorption in the rapidly growing Phoenix MSA. Rent growth in Phoenix is among the highest in the nation, growing 6% in 2015. CBRE-EA projects rents to continue this trend at 6.1%, 5.4%, 5.3%, 4.2% for 2016 to 2019, making it one of the highest rent projections in all of BKM’s target markets.
The Tempe Class-A office market is composed of 3.9 million square feet and currently 96.0% occupied. In 2015, 596,741 square feet was absorbed, over 15% of the total market. Driven by the lack of availability of large floor plates, the Class-A market has largely been dominated by corporate build-to-suit’s in the Southeast Valley’s peripheral locations such as ASU Research Park, Discovery Business Campus and the Price Road Corridor. The ability to market ‘plug-and-play’ space, in an infill location at more economical rental rate as compared to a build-to-suit is a key strategic appeal that will continue to generate tenant interest and drive rental rate growth at Tempe Commerce Park. CBRE-EA projects the rental rates in the Southeast Valley to continue its rapid growth at a rate of 4.5%, 5.9%, 7.5%, 7.1% for 2016 to 2019, making it one of the highest rent projections in all of BKM’s target markets.