Discovery Business Campus: From Industrial Campus to Mixed-use Business Park
By: Alison Melnychenko, owner of Scottsdale, Arizona-based Word Games
Discovery Business Campus is a 1.9 million-square-foot mixed-use, multitenant business park in Tempe, Arizona. Internationally acclaimed sculptor Ilan Averbuch was commissioned to create custom works of art that are located throughout the campus.
Photos courtesy of Wentworth Property Company
A nearly vacant semiconductor campus is transformed into a vibrant mixed-use business park that is attracting new users to its Tempe, Arizona, submarket.
WHAT HAPPENS WHEN a developer decides to take a chance and purchase a half-vacant, dilapidated semiconductor campus in an unproven location while the market is still heavily impacted by the recession? Wentworth Property Company (WPC), along with financial partner Northwood Investors, took that opportunity to transform the property into a modern, multitenant mixed-use business campus.
In June 2010, WPC first toured the former Motorola/Freescale Semiconductor campus, which consisted of four industrial buildings totaling about 770,000 square feet (451,000 square feet of which were occupied) and three ancillary buildings totaling 50,000 square feet. On paper, this property looked like a clear “no.” Nothing about it — its outdated design, aging infrastructure and unknown demand in the submarket — seemed to make sense.
But Jim Wentworth Jr., principal with WPC, saw a blank canvas and an opportunity. He recognized the value of the property’s location in Tempe, Arizona, adjacent to the Loop 101 freeway at a full-diamond interchange, as well as its size (136 acres) and proximity to a large, educated workforce. Wentworth knew that translated to three of the top “wish list” items for a corporate user: access, parking and labor. WPC committed to utilizing the existing buildings, believing that the structures could be redeveloped into modern office space. Staying true to that belief, WPC and Northwood purchased the property in June 2011, exactly 12 months after that first property tour, and immediately renamed the project Discovery Business Campus.
WPC and Northwood added a 16,000-square-foot retail center with five restaurants to Discovery Business Campus.
Within 12 months of purchasing the property, WPC had invested $15 million in site improvements and building upgrades to begin to transform the former semiconductor facility site into an attractive, vibrant multitenant business park. Those improvements included a new campus entrance with a monument sign and sculpture as well as a ring loop road. As part of this first phase of transformation, WPC also started renovations on the original buildings, adding glazing, new exterior insulation and finish systems (EIFS) skin, aluminum accent bands, architectural entry features and skylights. Inside the buildings, the developer demolished obsolete tenant improvements implemented by the previous occupants.
Over the next three years, WPC spent more than $30 million more to complete the transformation of Discovery. Because the original site was built over a span of more than 30 years, and because many of the existing improvements and underground utility work had not been documented, WPC had to do extensive work on electrical, natural and industrial gas, data and voice fiber optic networks as well as additional utility work to redevelop and replace outdated and obsolete systems throughout the campus. It made these upgrades in conjunction with Salt River Project (SRP, the local power and water provider) and Southwest Gas.
Throughout the process, WPC also worked in conjunction with the city of Tempe, under a development agreement that covered all master plan entitlements and included increased density, height, hotel and retail uses, and freeway pylon signs. The new zoning and entitlements allow WPC to grow the project from a single-user, 820,000-square-foot campus into a 1.9 million-square-foot mixed-use, multitenant business park.
Additionally, WPC met with representatives of the adjacent residential neighborhood’s HOA dozens of times to solicit input. The developer worked with the neighborhood to improve pedestrian connections between the campus and the neighborhood, and agreed to limit the types and amount of retail space it planned to add at the campus. WPC also agreed to push the new density away from the neighborhood.
One of Discovery Business Campus’s original industrial buildings, 2118 E. Elliot Road, underwent a major renovation into office space and is now home to a Fortune 500 insurance company.
WPC then focused on redeveloping the existing structures into buildings designed to appeal to a 21st-century workforce, with open floor plans, an abundance of natural light, access to the outdoors and customizable floorplates that enable companies to create both individual and collaborative workspaces.
To create a parklike environment, WPC planted over 900 trees at Discovery and built an on-site lake using nonpotable water from the irrigation canal, rather than the city’s drinking water, preserving millions of gallons of fresh water each year. The existing campus already had two 19-megawatt, fully redundant SRP substations when WPC and Northwood purchased the site. These provide enough power to meet the needs of today’s data center and manufacturing users. Discovery also has electric car-charging stations on campus.
Initial leasing activity at Discovery was slower than WPC and Northwood would have liked, but Jim Wentworth attributes that to the challenge of communicating WPC’s vision to prospective tenants. “I can understand why it would be hard for a tenant to look at the site in the state we purchased it and be able to see the campus we were building,” he says. “Once we were able to start the renovations and site work, we were able to gain credibility with the brokerage community and tenants, and lease up progressed very quickly.” Tenants now include a Fortune 500 insurance company that leased two of the original buildings that WPC renovated as 300,000 square feet of office space in 2014 and Ditech, which leased 171,000 square feet in 2016. All of the existing space has been leased.
New construction began as the updated existing facilities leased up. The Northern Trust Regional Operations Center at Discovery Business Campus is a $95 million office complex that will eventually include three built-to-suit office buildings and bring over 1,000 jobs to the Tempe location for the 125-year old global financial institution. According to Karsten Peterson, managing director with JLL, “Northern Trust conducted an exhaustive search throughout metro Phoenix, but ultimately selected Discovery over two other sites for its strategic location and access to a large and educated workforce.” After selecting Discovery in 2014, work quickly began on the first, approximately 150,000-square-foot build-to-suit structure, and Northern Trust moved into the building in 2015.
The operations center is designed so that at build-out the three buildings will interlink through a series of active and passive outdoor spaces and take advantage of Discovery’s lush outdoor landscaping. Northern Trust’s first office building was constructed to LEED Silver standards and is in the process of receiving final certification. It, like the two office buildings that will follow, is designed to be the next step in corporate office environment design with large, efficient floorplates; innovative hardscape design; outdoor meeting areas; increased amounts of glass and higher ceilings; and wide entries to accommodate a dense employee population.
Discovery Business Campus is bounded by Loop 101 to the east (right), Elliot Road on the south (bottom) and Shutterfly way on the west (left). The main entry and monument sign are along Elliot Road, just west of the Northern Trust Regional Operations Center.
WPC also developed a roughly 237,000-square-foot built-to-suit operations center at Discovery for Shutterfly Inc. that allowed the company to combine its operations from three different locations. The reinforced concrete tilt-up constructed building includes about 157,000 square feet of warehouse space and about 80,000 square feet of office space that house over $70 million of high-tech, mission critical equipment. The warehouse includes a state-of-the art, integrated forklift for accessing materials and a humidity control system to protect the paper stored there. The structure has a mezzanine, 24-foot clear height ceilings, 42-by-50-foot column spacing and LED lighting. Over 15,000 amperes serve the building from two main electrical rooms, distributed via an overhead cable tray system. This design allows Shutterfly to easily plug-and-play equipment as it ramps up production or upgrades equipment.
WPC strategically designed the facility with the ability to expand by about 90,000 square feet with no disruption to service or operations. The building includes a predesigned structural grid so that the tilt panels can be “picked” and reused. The expansion area will follow the same grid line for maximum efficiency, with minimal impact to existing improvements. In December 2015, WPC and Northwood Investors sold the Shutterfly building to Watumull Enterprises for $43 million.
Catalyst for a Submarket
Shutterfly combined three Arizona locations into one 237,000-square-foot build-to-suit operations center at Discovery Business Campus that includes a 157,000-square-foot warehouse and 80,000 square feet of office space.
Discovery was the catalyst for establishing the Price Corridor office submarket, and predates nearly every other development in the area. Historically, the corridor had only seen industrial development and was known as an aerospace and microchip hub. No one considered this submarket for traditional office users. But WPC knew that by delivering large floorplates and a first-class campus environment, it could attract tenants — including financial, insurance and technology companies — that once would have looked elsewhere.
As Peterson points out, “Discovery was one of the first business campuses along Tempe’s Price Corridor, and its success has set the stage for a number of other new developments in the submarket.” Those new developments include the GoDaddy Headquarters, Allred Park Place, Continuum, Chandler 202, Amkor Technology, Nexus and ConneXion. Over 617,000 square feet of new multitenant office buildings have been built in the corridor since 2012.
Discovery Today And Beyond
According to Wentworth, WPC and Northwood Investors shared a long-term vision for Discovery Business Park. “We took a conservative financial, long-term approach with this project, and after four short years we are nearly built out.”
Discovery now includes three multitenant office properties — the 166,000-square-foot 2118 E. Elliott Road, the 133,000-square-foot 2104 E. Elliot and the 171,000-square-foot 2100 E. Elliott — as well as the two new built-to-suit structures, the flex office/industrial building occupied by Shutterfly and Northern Trust’s first office building . An original 280,000-square-foot industrial building that was occupied at the time of purchase continues to be occupied by Freescale, which has since merged with NXP.
Discovery has also added over 16,000 square feet of retail space occupied by five restaurants (Jimmy John’s, Smashburger, Kneaders, Chipotle and MOD Pizza). Two four-story hotels are currently under construction, a Hilton Garden Inn and a Home 2 Suites by Hilton. Only 12 acres remain to be developed, including 2060 E. Elliott Road, which has been planned as a 158,000-square-foot, three-story office building, and a proposed 86,000-square-foot data center on the northeast corner of the campus.
With Discovery, WPC and Northwood Investors learned the importance of being proactive to tenants’ design requirements, including parking, large floorplates and increased clear heights. Wentworth explains, “We learned that it is critical for us to properly share our vision and demonstrate to tenants the quality of the planned building improvements. It was therefore important that we completed building renovations on a speculative basis and built out partial tenant suites.” Peterson adds, “At Discovery, we understood how important it was to potential tenants that the developer look beyond just the buildings and deliver on-site amenities, including retail and outdoor spaces. That work by WPC is what set Discovery apart and allowed us to successfully lease the project.”
In March 2016, NAIOP Arizona named Discovery Business Campus its 2015 Mixed-use Project of the Year.