How Downtown Phoenix Created ‘An Innovation Core’

One of the largest office tenants at Galvanize in the Warehouse District, Coplex is a “venture builder,” giving tech startups the tools to launch and grow successfully. Credit: Fara Illich, DTPHX

By Fara Illich for DTPHX

Since 2016, technology and coworking companies have leased 620KSF of office space in Downtown Phoenix – a 1.7-square-mile area that many thought would never attract tech.

For decades, companies looking to open or relocate passed over downtown for places like Chandler, Scottsdale or Tempe. The popularity of suburban office parks in the ‘80s and ‘90s didn’t help.

A pervasive stigma lingered over downtown, and even after that began to turn around in the 2000’s, some developers and commercial real estate brokers still pigeonholed Phoenix’s urban core as a place with no parking, amenities or workforce.

It required a concerted effort on the part of the City to really cut through that mantra, according to Christine Mackay, who left Chandler to become the City of Phoenix’s community and economic development director in 2014.

But it was bigger than changing the narrative around downtown, according to Mackay. The City really had to nurture downtown’s innovation economy — promoting projects and policies that increased walkability, higher-ed institutions, and the array of entertainment options that attract tech companies and keep talent.

Laying the Groundwork for Innovation: The Physical Space is Part of It

Attracted to the gritty, urban feel of renovated warehouses, a number of tech, architectural and creative firms have moved in just south of the tracks from downtown’s high-rises.

When Galvanize opened its tech education and coworking campus in the Warehouse District in 2017, it housed 48 companies and a school. There are now 140 companies that operate out of Galvanize, ranging in size from small startups to companies as large as Banner Health and McKessen.

For big players like Banner Health and McKessen, opening inside Galvanize isn’t about needing more office space, it’s about getting plugged into the community.

The Proliferation of Coworking

Tech growth often happens in clusters, and the proliferation of coworking spaces, maker spaces, small business incubators, and events like Phoenix Startup Week help foster that growth.

WeWork recently leased four floors at the 101 North building, and just announced another two floors of space in the yet-to-be-finished Block 23 mixed-use complex, where the new ground-floor Fry’s grocery store is opening October 23rd.

Novel Coworking purchased the historic Heard Building in June, with plans to open at the beginning of 2020, and The Department, which opened in 2016, is expanding to two floors. When the build-out is complete, it will offer 50 offices and 30KSF of coworking, complete with a seventh-floor balcony and lactation lounge.

Why Phoenix

Even with the coworking boom downtown, Kyle Frazey, managing director of The Department Coworking said, “there’s enough room in the market for everybody. The Department is nearly leased up, which he chalks up to downtown’s growing desirability.”

Phoenix’s proximity to the Bay Area, relatively cheaper rents and amenities make it a national competitor.

Office spaces rent for about $26 per square foot, according to a report by CBRE, which is one-third the rate in New York and San Francisco.

According to CBRE, the Phoenix metro added 5,651 tech jobs between 2016 and 2017, a consistently growing sector that employs more than 57,000 people.

Read more at DTPHX.

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