HQ Lease in Phoenix Foretells the Viability of the Market

CVO Holding Co. has signed a new lease in for its headquarters location at Block23 in Downtown Phoenix. The firm started the lease transaction before the pandemic, but put the deal on hold at the start of the outbreak. Ultimately, the company resumed negotiations months into the pandemic, and signed a lease at the same rate and with no concessions. The deal is indicative of traction in the Phoenix market and the potential for a swift rebound. “

“This is the newest asset in Downtown Phoenix since 2008, so it is the only new building in 12 years,” Ryan Timpani, managing director at JLL, tells GlobeSt.com. “We are basically at ground zero as it relates to location, and we are the most heavily amenitized building. Those things, in our opinion, were deemed more important as we come out of this pandemic as it relates to hiring talent and retaining the best employees. We these drivers in the last 36 months, and if anything, they are going to be accelerated as the workforce returns to the office.” Timpani and senior associate Nick Bialkowski represented the landlord RED Development in the lease agreement. Chuck Nixon of CBRE represented CVO.

Office will certainly change following the pandemic, and many businesses are deciding how to move forward. One possibility is a hub and spoke model that relies on smaller regional offices with less density. “I think the hub and spoke model is certainly going to prove true, and I think that is going to be a big boon for Phoenix,” says Timpani. “A tech company in the Bay Area might not need to have 8,000 people in the campus. Maybe they open several regional offices with 500 employees throughout the Sunbelt region. That is a trend that we are seeing.”

CVO wasn’t the only company that paused lease transactions at the beginning of the pandemic. However, like CVO, most companies have already resumed lease transactions. In the last month, transaction activity and demand has rebounded. “Unequivocally, everything paused,” says Timpani. “Every single transaction that we are working on paused. We were able to resuscitate a portion of those, one being this lease deal, and that even stopped and started numerous times. We saw that corporate America was caught on its heels. They were worried first and foremost about their employee base and their response to the virus. No one was worried about new office space. Over the duration of the shelter in place, which lasted 75 days, we started to see companies pick up real estate negotiations again.”

For many of these transactions, rates and square footage has remained unchanged. In the case of CVO, the square footage actually increased to accommodate social distancing. “The tenant didn’t decrease their footprint from when they initially toured to when the lease was signed, and if anything, they took more space to adhere to social distancing, at least in the near term,” says Timpani. “On all of the transactions that I have been working on, we have not seen companies cut their footprint.”