Victoria Properties, a Victoria, Canada-based developer, has begun construction on the first phase of the Freeway Executive Center, a two-building office complex located near Elliot Road and Interstate 10 in Phoenix. Development costs for the first phase total $5 million, say Victoria Properties representatives.

Set inside the 60-acre Phoenix Tech Center, the Freeway Executive Center includes two 42,000-sf, two-story buildings. Both buildings are for sale or lease and Phase one is already 50%pre-leased. San Francisco-based Critical Path Inc., an Internet company, has signed a seven-year lease for 21,000 sf in phase one.

Phase one is scheduled to be complete this summer and construction is planned to begin on phase two later this year.

That sub-market of the Valley has been one of the most active for new office development in the past few years. During 2000, nearly 500,000 sf of new office space was brought to the market, second only to the Scottsdale Airpark submarket in new development. Another 615,000 sf of new office space is currently under development, according to a survey by CB Richard Ellis.

The south Tempe/Chandler submarket has a vacancy rate of nearly 42%, the highest vacancy rate for office space of any submarket in the Valley, but much of the tallied inventory is less than Class C property that has become obsolete and is awaiting redevelopment.

Tempe and Chandler have been two of the fastest growing cities in the Valley during the past decade, but Tempe is becoming increasingly tighter for space. Tempe is bound on all sides by other suburbs.

Freeway Executive Center is being built by Layton Construction and was designed by architect Patrick Hayes of Scottsdale.

Victoria Properties purchased the land, an eight-acre parcel, for $2 million from private investors John and Eileen Huarte of Tempe.

The land purchase was negotiated by the Phoenix office of CBRE, with brokers Mark Krison and David Carder.