The Wildwood Hills Development Corp. of Redding is holding the title to the AT&T Building, a 26,265-sf single-tenant back office building in the city's north submarket. The sale price equates to $186.57 per sf, perhaps the highest per sf paid this year for back office space.
"The investor was comfortable with the price," Jan Fincham tells GlobeSt.com, who along with Patrick Dempsey and Mark Linsalata, all principals with the Phoenix office of Lee & Associates Arizona, brokered the sale. "We've got some big numbers out there."
Wildwood bought for the long-term investment, Fincham says, and was secure in paying that amount because of the quality of the tenant and the more than five years left on the lease term. The back office building is at 7496 E. Tierra Buena Lane, which is in the Scottsdale Airpark area just south of Frank Lloyd Wright Boulevard and east of Scottsdale Road. Seller Desert Jewel Airpark 15 & 16 LP of Scottsdale built the AT&T Building last year.
"In the long term, the prospects are awesome, but in the short term it's a little soft," Fincham says. There have been some recent purchases of office space in the north Scottsdale area in which the purchase price averaged into the high $200 per sf range and one that surpassed more than $300 per sf for class A office space.
The market has softened somewhat during the first half of the year, but north Scottsdale remains one of the premier locations for office tenants. It is near upscale housing for upper executives and conveniently connected with the freeway system for the first time with Loop 101's completion.
Fincham is hopeful that the more than 400,000 sf of new office space that's under construction in the area will be absorbed when the economy recovers and will not drive up vacancy rates any higher. The Scottsdale Airpark area has a direct vacancy rate of about 13% whereas the Valley's average is 14.8%. The overall vacancy rate, when the sublease space is included, is 19% in comparison to 17.6% Valleywide. Office space in the Scottsdale Airpark is leasing for about $23 per sf.
While few if any institutional investors are poking around the Valley looking for office investments, there are a number of private investors who remain interested in properties, Fincham says. "All the pension funds are the sidelines now," he says. "There has been a decline in activity because the supply of investors has declined, but it has presented a great opportunity for private investors to take down deals that normally they would have to compete for with institutional investors.
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