The COVID-19 pandemic has caused delays at the Marquee office building and Caesars Republic hotel developments in downtown Scottsdale, but representatives for both projects said they are pushing forward.
“Due to the current covid-19 effects on the capital markets our progress has slowed somewhat, but I can confirm that our Marquee project is noton indefinite hold,” said Greg Williams, managing director with developer Stockdale Capital Partners.
Williams made the statement in response to questions from the Progress about a report published by Scottsdale Planning Commissioner Larry Kush indicating the current economic uncertainty had caused Stockdale to push pause on the Marquee.
The 150-foot office building, was approved by City Council in 2019 and will be next to Stockdale’s Galleria Corporate Centre.
“The controversial 271,000-square-foot Marquee office building on Scottsdale Road is on indefinite hold as the developer, Stockdale Capital, waits for a better reading on how long the lockdown is going to last and what to expect for office space needs in 2021 and beyond,” wrote Kush, who also works in commercial land sales.
Kush published the post as part of the SCOTT Project, a division of the Scottsdale Coalition of Today and Tomorrow, a local civic group. Kush co-chairs the SCOTT Project with resident Andrea Alley.
Kush later told the Progress some work was still being performed on the Marquee site, including underground work with APS to run power lines to the new building.
He said he spoke with the development teams and published the post to keep residents in the loop on major developments in the city that could be affected by the economic downturn.
Another project that could be pushed back, according to Kush, is the Caesars Republic hotel being built by HCW Development on the northeast end of Scottsdale Fashion Square.
The project broke ground on Feb.26, but HCW later announced a month-long delay because of the governor’s stay-at-home order.
But Kush said the delay could be longer, writing in the SCOTT post that the primary construction lender sought a 90-day delay.
Kush said many lenders for large projects like Caesars are on the East Coast and have been spooked by the severe impact of Covid-19.
Kush said HCW would use the 90 days to rebid the project to secure lower construction costs.
“When things are booming, (contractors) will give you a numbers that are ridiculous because they really don’t even want the work,” Kush said. “If you’re a contractor now, you’re worried as hell about what’s going on and you’re going to grab every job you can grab and you’re going to be as readable on the pricing as you can be.”
The spokesperson for the Caesars project stood by the original month-long April delay and did not confirm the longer 90-day pause.
At an economic roundtable hosted by NASDAQ, investment professionals warned that the economic fallout from the pandemic is causing uncertainty in real estate investment in sectors that rely heavily on businesses forced to shut down, including hotels and office.
Dane Bowler, CFO at 2nd Market Capital Advisory Corp., said the demand for office space could be affected by companies forced to have employees work from home during the crisis.
“The threat to office is real, however, as some businesses will realize how much money they can save by downsizing office space,” he said. “I would anticipate office, which is already oversupplied, to be a struggling real estate sector for the foreseeable future.”
The same can be said for investment in hotels, according to the NASDAQ roundtable.
“If people are just sitting at home, we don’t need hotels, malls, and offices, right?” said Jussi Askola, author of the High Yield Landlord investment newsletter. “The market fears that this crisis will lead to lease defaults, unpaid rents, rising vacancy rates, and ultimately, lower cash flow and property values.
Kush said he is confident that both the Marquee and Caesars hotel – and others that have already broken ground around Scottsdale – will continue, calling Scottsdale a premier landing spot for development “It’s exceptionally rare you will ever see a lender stop a project under construction for a whole bunch of reasons,” Kush said.