Trammell Crow wraps Sprouts-anchored Phoenix development

Corporate office demand is being rebuilt one headquarters at a time, and Phoenix just got a model: Trammell Crow Company has completed an eight-acre, Sprouts Farmers Market-anchored mixed-use development at CityNorth, near 56th Street and Loop 101. The project pairs a 145,000-square-foot Class A office building that will serve as Sprouts' new corporate headquarters with a 25,000-square-foot flagship grocery store and roughly 11,000 square feet of additional retail; the store opened last month, and the office tower is now complete and ready for occupancy.

Unlike most suburban office product, this one was not built on spec: Sprouts occupies its own headquarters, and the design is unmistakably branded, with a community garden, rooftop deck, fitness center and culinary kitchens that wrap the workplace around a grocer's operating culture. The grocery store at the base does real work as a daily foot-traffic generator, keeping the development alive after 5 p.m., the problem that has long shadowed suburban office parks.

At 145,000 square feet, the office is small by suburban standards, but the credit quality of the tenant is the point. A Sprouts covenant likely made the construction financing a more routine conversation than a multi-tenant spec tower would have produced, and the same logic will apply when the asset is refinanced or sold; it is the kind of asset underwrite desks can model without inventing a lease-up timeline.

The project team included U.S. Realty Advisors, RSP Architects, Wespac Construction, Keyser and JLL; the Phoenix completion lands days after Trammell Crow and Daiwa House broke ground on a second speculative phase in Fort Bend County, Texas, a venture this publication has tracked past two million square feet. The two projects are mirror images: one a speculative bet on owner-occupant demand, the other a headquarters anchored by a grocery chain's own balance sheet.

For investors watching office find its clearing price, a credit tenant's own headquarters is about as close to de-risked office as the sector offers, and this building will likely command a different cap rate than the same space with vacancy. The first office assets to trade at a cleared price will be the ones with a user attached; Sprouts HQ is now the Phoenix comp against which appraisers and buyers will measure.