Downtown project plan change reflects lower office demand - SanTan Sun News SanTan Sun News

Downtown project plan change reflects lower office demand

June 6th, 2022 SanTan Sun News
Downtown project plan change reflects lower office demand
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By Ken Sain
Staff Writer

City officials say the demand for office space is falling, reflecting one way that the pandemic impacted businesses’ outlook for the future as many employees who worked from home are resisting a return to offices.

“We have not seen many new office development proposals,” said David de la Torre, the city’s planning manager.

Chandler City Council approved a change at the New Square development at the northwest corner of Chicago Street and Arizona Avenue in downtown that reflects that decreasing demand.

The project was first approved in 2018 and has already seen construction of a three-story office tower and the Hilton Garden Inn hotel.

Council approved changing part of the plan that calls for a four-story office building at the corner of Chicago and Oregon.

Now, the plan calls for a retail and multi-family development. Kim Moyers, city cultural development director, said the developer decided to make the change to condominiums because of the lower demand for office space. Moyers’ office is in charge of downtown development.

Nationally, Moody’s Analytics found the office vacancy rate in the first quarter of this year was down 18 basis points – or .18% –  from the previous year, the first annual decline in five years.

Moyers said the city wanted to work with the developer. Adding more multi-family development has become a priority of this council as it seeks to address the lack of affordable housing.

“We signed a development agreement with Spike Lawrence in 2018 and they have met all their obligations and been a fantastic partner,” Moyers said, referring to the New Square developer.

The New Square development was scheduled to be built in two-and-a-half phases, she said. Phase 1a included the three-story office building that is directly across the street from City Hall.
Phase 1b was the hotel on Oregon that is close to the city’s main square. After those two projects were built, the pandemic hit, forcing delays.

“With the office market trying to decide what it wants to be, they suggested and asked for the city to consider a change,” Moyers said.

Now, Spike Lawrence will build a four-story building with shops on the first floor and then three floors with a total 34 condos. That change will still need to go through the normal approval process, including vetting by planning staff and a review by by the Planning and Zoning Commission before the Council can approve it.

Moyers said the new building will have a similar design to the others in the New Square development and that there will be underground parking for the condo owners.

De la Torre said the city’s General Plan is flexible enough to allow for any changes in market conditions. “It has the flexibility to follow what the market is doing,” he said.

He said most of the applications they are seeing recently are for multi-housing and industrial/flex buildings.
But De la Torre said there is still hope that the office sector will improve.

“It’s not completely dead,” he said.

In fact, the commercial real estate technology platform VTS said new tenant tours for office space was 20% higher in March than the previous month. That’s an 8% increase over the year before.