By Ken Sain
City officials say demand for office space is down, reflecting the pandemic’s impact on business prospects, as many employees who used to work from home resist returning to offices.
“We haven’t seen a lot of new office development proposals,” said David de la Torre, the city’s planning officer.
The Chandler City Council approved a change to the New Square development at the northwest corner of Chicago Street and Arizona Avenue downtown that reflects this drop in demand.
The project was first approved in 2018 and has already seen the construction of a three-story office tower and the Hilton Garden Inn hotel.
Council approved changes to a portion of the plan that calls for a four-story office building at the corner of Chicago and Oregon.
Now the plan calls for commercial and multi-family development. Kim Moyers, the city’s director of cultural development, said the developer decided to switch to condominiums due to declining demand for office space. The Moyers office is responsible for the development of the town centre.
Nationally, Moody’s Analytics found that the office vacancy rate in the first quarter of this year was down 18 basis points – or 0.18% – from a year earlier, the first decline annually in five years.
Moyers said the city wanted to work with the developer. Adding more multi-family development has become a priority for this council as it seeks to address the lack of affordable housing.
“We signed a development deal with Spike Lawrence in 2018 and they’ve fulfilled all of their obligations and been a fantastic partner,” Moyers said, referring to the New Square developer.
The New Square development was to be built in two and a half phases, she said. Phase 1a included the three-story office building that sits directly across from City Hall.
Phase 1b was the Oregon Hotel which is near the main town square. After the construction of these two projects, the pandemic hit, forcing delays.
“With the office market trying to decide what it wants to be, they’ve suggested and asked the city to consider a change,” Moyers said.
Now, Spike Lawrence will build a four-story building with shops on the first floor, then three floors with a total of 34 condos. This change will still have to go through the normal approval process, including verification by planning staff and review by the Planning and Zoning Commission before Council can approve it.
Moyers said the new building will have a similar design to others in the New Square development and there will be underground parking for 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 does,” he said.
He said most of the applications they see recently are for multi-dwelling and industrial/flexible buildings.
But De la Torre said there was still hope that the office sector will improve.
“It’s not completely dead,” he said.
In fact, commercial real estate technology platform VTS said visits from new office tenants were 20% higher in March than the previous month. This is an increase of 8% over the previous year.