After years of rampant housing growth, some East Valley communities are playing catch-up when it comes to providing basic business services, such as medical offices.
That demand coupled with low interest rates has translated into big business for some office condominium developers, despite a slowdown in the commercial real estate market.
Gilbert-based UTAZ Development recently reported a 200 percent spike in escrow activity in the first few months of 2008.
“It’s not slowing down,” said Terri Tobey, the company’s senior vice president of sales and marketing. “We get calls every day.”
Services are lacking in areas, such as Queen Creek and parts of Pinal County, Tobey said. UTAZ is currently planning more than 90,000 square feet of office space at Gantzel and Combs roads near the future Banner Ironwood Medical Center. The developer is always looking for locations in growing areas, she added.
“I think it takes a company to have a vision to see what’s going to be out there,” Tobey said.
UTAZ also started construction last month on Vista Quinta Professional Village at Greenfield and Baseline roads in Gilbert. Roughly 10,000 square feet of office space have already been pre-sold there, Tobey said.
Low interest rates have also driven demand for office condos, though sales aren’t as rapid as they once were, said Greg Hopley, senior vice president at brokerage Colliers International.
“The money is still cheap,” he said.
At one time, interest rates were as high as 16 percent or 18 percent, said Hopley, who’s been in the business 20 years. In today’s market, small businesses can secure loans at 8 percent or less, he said.
For companies that are financially solid, the advantageous rates may outweigh concerns about the lagging economy, Hopley said.
Mesa-based Canyon Communications recently shelled out $3.5 million for 13,500 square feet of office space at a new complex on Val Vista Drive. Commitments currently being negotiated with businesses will bring the project, called Val Vista Gateway Center, up to about 53 percent occupied, Hopley said.
LOCATION IS KEY
While more than 3 million square feet of office condo space have been built across the Valley in recent years, Hopley said, not all projects have been successful.
“It really does boil down to location,” he said.
Proximity to freeways and other major roadways is important, said Steve Beck, principal at Mesa-based COBE Development. These buyers understand real estate and that it has a direct impact on the success of their businesses, Beck said.
Like UTAZ, Beck said his company, which builds office condos, has seen a lot of buyer interest lately.
COBE plans to break ground this summer on two new office complexes in the Queen Creek area. That area has a need for all types of businesses, from insurance firms to real estate agencies, Beck said.
The developer has also seen interest from physical therapists, dentists and other medical office users, he said. Whether they are looking to expand or plan on starting firms, they recognize these areas are primed, Beck said.
“The (doctor-to-patient) ratios just flat-out call for it,” he said. “People have to drive quite a ways to get the medical services they need.
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