The University of Arizona is looking for a new development partner to help it build a $40 million office building at its nascent tech park at Kino Parkway and East 36th Street, after Pima County voters rejected a bond that would have paid for half the building.
The UA’s latest master plan for the UA Tech Park at The Bridges, including the planned Innovation and Technology Building, was approved by the Arizona Board of Regents on Nov. 16.
The UA says the planned multistory 120,000- to 180,000-square foot office and lab building is needed to attract tech-oriented companies and would initially become the home for Tech Launch Arizona, the schools’ technology commercialization arm, and related programs.
But as originally proposed, Pima County would have paid for $20 million of the new building’s cost through bond funding, with the UA ponying up the other half with its own bond funding.
The county bond issue that included the Innovation Building funds, along with other bonds that together totaled nearly $800 million, was soundly defeated by voters in November.
With the county’s bond plans now up in the air, the UA is looking for a private development partner, said Bruce Wright, UA associate vice president for Tech Parks Arizona.
“We’re looking at different funding options for the building, and we’re talking to some private developers now,” Wright said, adding that the UA also is meeting with two organizations that help universities finance development projects.
UA will Gauge interest from developers
The UA plans to issue a “request for interest” on the Innovation Building project sometime in January or early February. Based on the response, the university could issue a formal request for development proposals later this year.
While the county would have split the development costs under the bond proposal, private developers may have different needs, Wright said.
“Different private developers and groups are going to require a different threshold as to what will kick-start the building,” Wright said.
Wright said he’s a strong proponent of Pima County bringing the economic-development bonds back to voters, contending that the potential economic stimulus from the projects — especially the building at The Bridges — would be very beneficial to the local economy.
“It really is foundational. It will provide some basic infrastructure that will help attract and grow high-tech companies in the local regions, so I hope it would be a candidate if there’s any decision to move forward with another bond,” Wright said.
“In the meantime, we’re going to go out and see if we can find alternative funding sources and see if we can keep the building moving forward.”
David Allen, UA vice president of Tech Launch Arizona, said development proposed at The Bridges is a potential “game-changer” that will provide office and lab space just a few miles from the UA campus, while providing a visible presence for Tech Launch Arizona.
Tech Launch currently houses a core staff of 31 people in the former Tucson Electric Power Co. headquarters building on West Sixth Street, which was built in 1967.
“We think it will be a high-profile location,” Allen said of the site at The Bridges, noting that Kino Parkway is a major route to Tucson International Airport. “My view is, this becomes the physical manifestation of Tech Launch Arizona.”
“By being in a spot where people are going by every day or coming and going to the airport, I think it’s going to be a growth pull, an attraction,” he said. “We want to have a lot of vibe there, the presence of creative energy there.”
3 development “precincts” planned
The Innovation Building is already part of a plan B for The Bridges, which was originally planned as a multiple-use office, retail and housing development oriented toward the biosciences, called the Arizona Bioscience Park or the Bio Park.
The UA won a $4.7 million federal grant that paid for site infrastructure, and retail spaces were built out with a Costco and a Walmart Supercenter. But land slated for office and lab buildings remain empty and a planned housing development hasn’t yet materialized.
In 2014, the UA broadened the property’s focus from the biosciences to technology and renamed it UA Tech Park-The Bridges.
Besides Tech Launch Arizona, the proposed Innovation Building would initially house a workforce development center, possibly in partnership with Pima Community College or the Joint Technical Education District, and a branch of the Arizona Center for Innovation, a high-tech business incubator at the UA Tech Park on South Rita Road.
Under the master plan, the 65-acre site at The Bridges would be divided into three development “precincts.” The southernmost precinct would be home to the Innovation and Technology Building, an adjacent hotel and conference center, commercial office and laboratory buildings and parking.
A second precinct immediately to the north is earmarked for commercial office and laboratory facilities, including multi-tenant and single-tenant buildings, while the northernmost zone is slated for UA uses including potential office, classroom and laboratory space.
Wright said he still thinks The Bridges site can be attractive to bioscience firms, citing the area’s proximity to the UA and noting that several interested firms have been turned away for lack of ready office and lab space.
He said he isn’t dissuaded by the lagging commercial real-estate market in Tucson, where the office vacancy rate in mid-2015 was estimated at 13 to 20 percent, depending on various industry sources, compared with about 16 percent for the U.S. overall.
“We’ve done a lot of market analysis; we’ve met with a lot of technology companies over the last two or three years,” Wright said. “The kind of space that would be available in the Innovation and Technology Building is not really available in Tucson.”
Office market is weak
Mike Hammond, president and CEO of the commercial real-estate brokerage Cushman Wakefield/Picor, said the office market in Tucson looks weak right now.
But Hammond — whose firm handles leasing for the UA at the Tech Park on Rita Road — said much of Tucson’s office space consists of older buildings that are functionally obsolete, and there are always prospective tenants who want the aesthetics and technology of a new building.
The chance to align with a major university can be a major draw, said Hammond, who says he’s a minor investor in Arizona State University’s SkySong, a tech-oriented mixed-use development in south Scottsdale. Built with ASU as the anchor tenant, the 1.2-million-square-foot project began in 2008 and is now in the last of an initial four-phase development plan, featuring Class A commercial office space, ASU’s SkySong business incubator and apartments.
“The image of being associated with the UA is strong — I’ve seen it with SkySong,” Hammond said.
Meanwhile, the UA is trying to drive new development at the UA Tech Park on South Rita Road, a former IBM manufacturing plant acquired by the university in 1994. That park is mostly leased, with tenants including IBM, Raytheon, Citi and OptumRx.
A master-plan update for the Tech Park, also approved by the Board of Regents in November, includes a focus on new development on parcels northwest of the existing park.
By late January or early February, Wright said, the UA plans to put out a request for interest and qualifications to develop the Village at the Tech Park, planned as a mix of hotel, residential and retail properties.
