WeWork is rapidly expanding in the Phoenix market—and it has officially signed its first lease in Downtown Phoenix. The co-working operator will occupy four floors at SKB's 101 North, located at 101 First Avenue. This is an important move for the emerging downtown submarket. Many companies use WeWork as a validator for a growing market, akin to a Starbucks moving into an burgeoning residential area, and this could be a catalyst for more corporate growth in Downtown Phoenix.
“WeWork goes into the best markets, and they know where the talent is,” Ryan Bartos, EVP at JLL and a broker on the WeWork lease deal, tells GlobeSt.com. “When companies look at Phoenix from other markets, the first question they ask is 'where is WeWork.' They know that WeWork has validated certain markets. They go into the best markets possible.” Bartos' JLL colleagues managing director Andrew Medley and associate Kyle Seeger also represented WeWork in the lease deal, while JLL managing director John Bonnell, EVP Brett Abramson and SVP Chris Latvaaho represented the landlord, SKB.
So far, WeWork has targeted more mature office markets in Phoenix, like the Downtown Tempe and Camelback Corridor. “They are very active, and since they have signed leases earlier this year, we have the comparable lease to provide to a landlord. Landlords have gotten comfortable with that,” says Bartos. Now, it is expanding into new markets, including two more locations in Downtown Phoenix that are currently in negotiation.
This move is another piece of the rapid growth in Downtown Phoenix. A slew of new restaurants and entertainment amenities have opened in the area, and last year, ASU announced plans to expand its downtown campus. “Downtown Phoenix is clearly on the uptick,” adds Bartos. “It has the highest concentration of multifamily development along the central corridor. There is a lot of housing being delivered and it is all being absorbed. Most people also don't know that it has the highest concentration of millennials during the day.”
Alongside this residential and retail growth, tech companies have also migrated to Downtown Phoenix as an alternative to the higher-prices Tempe and Old Town markets. It isn't only lower prices and more options, either. Downtown Phoenix has a valuable talent pool for tech companies. “A couple of years ago, Uber officed 10 people in Downtown Phoenix, and realized the talent pool they could get downtown,” adds Bartos. “Next thing you know, Uber has grown to more than 1,000 people. The rent is still relatively inexpensive when you compare it to those other markets, and there is available space.”
WeWork is clearly a benefit for the downtown hub, but the market could also be a benefit to WeWork. The co-working operator has signed more corporate users in Phoenix than start-up operations or one- or two-person project teams—although it does retain some of that business. “WeWork's model has clearly changed,” says Bartos. “In Phoenix, they are finding that there are a lot of companies that want to move to the city. Those companies can partner with WeWork and test the market without having to take a seven-year lease of direct space. They have seen substantial, high-activity around larger enterprise-level users.”
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Kelsi Maree Borland
