Developer more Selective on New Tenants at Papago Plaza as Sprouts starts Construction

Article originally posted on Phoenix Business Journal on May 22, 2023

Come next summer, a new Sprouts Farmers Market is expected to anchor a revitalized mixed-use center that will include retail, lodging, restaurants and multifamily in south Scottsdale.

Pivot Development has started construction on a 23,000-square-foot smaller format Sprouts (Nasdaq: SFM) and a new parking garage, which will be at the Papago Plaza on the southwest corner of McDowell and Scottsdale roads.

Lee Mashburn, president of Pivot Development, expects to be a little more selective on leasing out a new restaurant building across from Sprouts — at least until the grocery store gets further along in construction.

“Once the Sprouts is up and out of the ground and getting to be visible then our opinion is we might have as good or better options [for new leases],” Mashburn said. “There’s a laundry list of folks we’re out there [talking] with. The tenant interest is overwhelming almost.”

Mashburn said that some of those tenants who he and his brokerage team are in dialogue with are Panera, Little Fig and Press Coffee, to name a few.

In addition to Sprouts, any new tenant that signs a lease will join Panda Nails, Wells Fargo, Nekter Juice Bar and Toasted as confirmed tenants for Papago Plaza.

Plans for the project

The Sprouts will be at the base of a 172-space, two-story garage to serve as parking for a new Marriott Springhill Suites and overflow parking for the retail and restaurant services.

Mashburn expects Sprouts to open no later than August 2024. The 116-key Marriott Springhill Suites will open in the middle to end of July of this year. As the hotel opens, Mashburn said construction will start on two new retail buildings for the site.

The redevelopment also calls for three restaurant and retail buildings of 5,825, 8,000 and 11,200 square feet. The 8,000 and 11,200-square-foot buildings are separated by a grassy “restaurant park” area, centered around a grove of trees, according to the developer. The plaza will have common areas to include fountains, a water wall, a large hearth fireplace and benches.

“It’ll be a nice little deal when we get it finished,” Mashburn said.

Nelsen Partners is the architect of the project while Sustainability Engineering Group is the civil engineer. Pearson Engineering Associates is handling electrical and mechanical work and Sigma Contractors Inc. is the general contractor.

Judi Butterworth, Carol Schillne and Cole Schillne of Orion Investment Real Estate are the listing brokers for Papago Plaza.

In total, the project carries a price tag of $100 million with $30 million just for the retail component of the redevelopment, Mashburn previously told the Business Journal.

Papago Plaza has a 276-unit luxury apartment complex called SeventyOne15 McDowell that was built by Alliance Residential Co. in a joint venture with The Carlyle Group. The newly built luxury apartment community sold for $150 million to a couple of limited partnerships led by York Howell & Guymon.

Brokerage firm Avision Young found Scottsdale’s retail market to command by far the highest asking rental rate across the Phoenix metro at $32.28 per square foot during the first quarter of 2023. With a vacancy of 3.8% during the quarter, Scottsdale was tied with northwest Phoenix for the second-lowest vacancy across all submarkets in the Valley and falls below the market total of 5.6%.