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PHOENIX-Pent-up demand and low supply for class A office space in the Camelback Corridor prompted Hines and a capital partner advised by Morgan Stanley US Real Estate to add to its building collection on 24th and Camelback.

With its first building now fully leased, Hines will break ground in the spring on a second one on a 10-acre development site at 24th at Camelback, which also boasts a residential condominium tower. The project cost isn’t available for the 300,000-sf, 11-story structure.

“We’re developing this on a spec basis, given the vibrancy of the market. The Camelback Corridor submarket is enjoying very low vacancy rates right now,” William Olson, vice president in Phoenix for the Houston-based Hines, tells GlobeSt.com. “Rental rates are climbing and there’s a lot of pent-up demand.” The building will debut with a quoted rate of $40 per sf, full service.

The prized office corridor’s occupancy hovers 90%. The last office building, the 233,000-sf Esplanade V, was completed in 2002. “That was finished when the market was down and space was available,” says Pete Bolton, senior managing director in CB Richard Ellis’ Phoenix office. But these days, the entire Esplanade Center–22.5 acres with 1.8 million sf of mixed-use space–is fully leased and it’s right across the street from 24th at Camelback. “You can’t find anything there these days,” Bolton tells GlobeSt.com.

It’s much the same story elsewhere in the submarket. “It’s harder to find larger blocks of space, whereas two years ago, it was no problem,” CBRE’s research director Jeff Cooledge says. “If someone came up and said they’d need 30,000 sf somewhere in the Valley, anywhere, we could show them 10 to 15 sites. If they said they needed that same space in the Camelback Corridor, we could show them maybe two.”

As a result, Cooledge and Bolton believe the new Hines building is coming in at the right place and the right time. “I don’t think it’ll be much of a challenge to lease this up,” Bolton adds. “It’ll be a very successful project.”

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