Lennar Turns Office into Luxury Apartments in Phoenix
The Charlotte-based developer is demolishing two class-A office buildings in Scottsdale to build a luxury apartment community.
“Lennar has had an incredible vision on this site from day one,” Greg Hopley, EVP of Colliers International in Greater Phoenix, tells GlobeSt.com. “Their team has thought though literally every nuance regarding the future of this development. It has been a trail blazing event, and quite frankly, it’s one of the best locations in the entire country for this type of product. This is a prime sight for the live/work/play project. This multifamily development is located in the Scottsdale Airpark, with approximately 3,800 companies employing more than 50,000 workers.”
Lennar plans to create a true live-work-play environment and play off of the surrounding area amenities. The property is located near several major employers, including Vanguard, Bank of America, Republic Services, GoDaddy and JDA Software. It is also located near retail centers Kierland Commons, which has 70-plus stores and restaurants, and Scottsdale Quarter, a retail center with tenants like American Girl Store, to an Apple Store, from Warby Parker to Lululemon.
Redevelopment projects are growing in popularity in Phoenix as the market grows and changes and new demand emerges. “Redevelopment is slowly becoming a trend in Phoenix and the Kierland area in North Scottsdale has been at the top of the list for development projects,” says Hopley. “As an example, a former Headquarters for The Dial Corporation, which sits on approximately 8 acres, was acquired in December 2016, and was redeveloped into District at Scottsdale, which just opened as a 332-unit class-A apartment complex.”
The Phoenix market has changed dramatically this cycle, thanks to a combination of organic growth as well as population growth. “There is tremendous demand for apartment properties,” says Hopley. “Vacancy has remained in the 5% to 6% range for the past several years, even as dozens of projects totaling thousands upon thousands of units have come online. Developers are achieving robust rent growth as well. Year-over-year, asking rents for Phoenix apartments have spiked by 8%, and now, larger and larger companies are moving in to Phoenix/Scottsdale bringing 1000’s of employees with them.”
Specifically, housing demand is concentrated in city centers, which is the opposite of demand in the last cycle. As a result, demand is outweighing the current apartment stock. “During the past housing run-up, Phoenix had become a market where homebuilders just kept building further and further out from employment corridors,” explains Hopley. “Now, the current demand is pushing back in to city cores and there isn’t the housing product, rental or for-sale, to meet this demand. Developers like Lennar, in projects such as this one, are taking steps to meet this heighten demand.”
In addition to the natural demand in the market, Nationwide has also announced plans to move its regional headquarters along with 2,200 employees to the market.