Other major downtown projects include the Thunderbird School of Global Management at Arizona State University, a residence hall at ASU and the Wexford Science + Technology building on the Phoenix Biomedical Campus.

Downtown has matured more slowly than some other Valley submarkets, but public investment, such as the growth and continued expansion of ASU’s downtown campus and the light rail, along with an influx of restaurants, breweries and other attractions in Roosevelt Row have fueled demand for both office and apartment space in the area.

More capital

The activity in downtown Phoenix and the demand for more development has led capital markets to see Phoenix as a safe harbor for investment, according to Nick Wood, partner at Snell & Wilmer.

“Phoenix has become a mainstream name when it comes to high-rise development,” he said. “With all of the investment that has been made by the city and state in downtown, it has drawn high demand.”

Wood worked with developer Geoffrey Jacobs, principal of Empire Group, who is planning to build what would become the state’s tallest tower in downtown near Second Avenue and Van Buren Street. The project, called Astra Phoenix, would include both residential and hotel uses and would reach 535 feet tall at its highest point, with a second tower reaching 380 feet. The Chase Tower on Central Avenue downtown — currently Arizona’s tallest building — is 483 feet tall.

“And that is, I think, evidence that is clear and unequivocal that the equity markets are here, even for hotels, because downtown is headed in the right direction,” Wood said.

The continued growth in activity, and a focus on renovating some of the biggest existing office projects, has also driven a steady flow of office leasing interest to downtown, Andrew Cheney, principal at Lee & Associates, said.

“It’s been more of a steady flow than a snowball, but I think the snowball is going to happen,” he said.

Companies are realizing downtown has all the demographics of other popular submarkets, like Tempe and Scottsdale, including an educated workforce, a walkable streetscape and activities after work, and is less expensive than Tempe, Cheney said.

Cheney oversees leasing for Renaissance Square, the largest office development in downtown, which is in the process of a $50 million renovation. Leasing has slowed down due to the coronavirus, but he said the buildings near First Avenue and Adams Street are competing well after adding collaborative spaces, updating restaurants and upgrading air systems in the wake of the pandemic to install hospital grade filters.

New office buildings downtown such as Block 23 on First and Washington streets have also seen success with absorption, Jeff Moloznik, vice president of development for Red Development, said. WeWork and Ernst & Young have already occupied office space in the building, and transportation technology CVO Holding Co. will open its new office at Block 23 in spring 2021.

“We were fortunate enough to come across a tenant that has a long-term growth plan that our new building, Block 23, fit perfectly with,” he said.

Light rail impact

The continued public investment in downtown, including the extension of the light rail south on Central Avenue, also inspires developer confidence in the area, Moloznik said.

“It just sends a strong message to the financial market about what the citizens of this city are interested in from a long-term perspective,” he said.

Moloznik said when his company was seeking capital for the development of CityScape at Central Avenue and Washington Street in downtown, the first phase of light rail, as well as ASU’s downtown campus, was cited as an example to the capital markets of the investments the city and state were already making in the area.

Mackay said the city will not see the influx of high-rise development along the south-central extension of the light rail that was seen in the downtown core with the first phase. Any new development along the new route will be focused on what is of interest to the community, she said.

However, infill sites in the southern portion of downtown have become popular for developers.

“I’ve seen an absolute renewed interest over the last 45 days in the vacant sites and in some of the vacant buildings that are in the warehouse district,” she said. “Now they’re starting to envision that coming much like you drop that amenity into the core of downtown and midtown.”

Despite the coronavirus pandemic, the Business Journal panel members said they expect people to be interested in returning to higher density areas of the Valley such downtown when it is safe.

“This is where all the fun is, all the sports, all the culture, the entertainment,” Cheney said. “So everyone wants to come back. Our leasing activity inquiries were much better than expected over this entire pandemic so far. So, I’m really positive.”