Phoenix Business Journal
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$675M downtown tower expects to break ground by early 2027
Included in the development will be a 250-key luxury lifestyle hotel to be called The Optimist
By Angela Gonzales – Senior Reporter, Phoenix Business Journal
Updated Apr 21, 2026 4:12pm MST
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What’s This?
A long-awaited downtown residential project with twin towers and hotel expects to break ground by early 2027
Project from Empire Group known as Astra now rebranded as Arro
Valley restaurant group signs on as tenant to create eatery, nightlife space in main tower. With financing hurdles finally cleared, groundbreaking is expected by early next year for a $675 million project that will become Arizona's tallest tower.
Rebranded as Arro, the 1.8 million-square-foot development will encompass two towers in downtown Phoenix. The north tower will be 541 feet tall and the south tower next door will be 425 tall.
The project's working name had been Astra since Phoenix Business Journal first reported on Empire Group of Cos.' vision for the development in August 2019. At the time, total development costs were expected to be around $350 million for the 2.18-acre development on Second Avenue between Van Buren and Fillmore streets.
At the time, the tallest of the two buildings was envisioned to be 525 feet, which even at that height would have overshadowed the former Chase Tower building, which sits at 483 feet at the southeast corner of Van Buren and Central Avenue in the heart of downtown Phoenix.
Included in the development will be a 250-key luxury lifestyle hotel to be called The Optimist. That hotel will be part of the taller north tower and is expected to be flagged by a major global brand, which will be announced at a later date, said Geoffrey Jacobs, managing partner of Aspirant Development, the luxury urban infill division of Scottsdale-based Empire Group.
Aspirant is also partnering with Phoenix-based Pretty Decent Concepts to develop and operate a multi-level restaurant and nightlife experience atop the north tower.
The 16,000-square-foot restaurant space will occupy the top two floors of the building that will offer unobstructed views of metro Phoenix.
Financing hurdles had delayed Empire Group project
The north tower will include 380 residential units while the south tower will include a 275-unit luxury co-living component and a 150,000-square-foot office space.
Arro is expected to be permit-ready by the end of 2026, with an anticipated three-year construction timeline.
Given the complex nature of the project — with two towers and multiple levels of underground parking — groundbreaking could very well slip into early next year, Jacobs told Phoenix Business Journal.
"Even assuming we are permit-ready by the end of the year, the general contractor, subcontractor, utility and city coordination for a project of this scale and complexity could easily take a few months prior to starting construction," Jacobs said.
Challenges in the financing market delayed the project, which at one point was scheduled to break ground during Q2 2025.
Financing is still actively being pulled together while the design of the project is ongoing, Jacobs said.
"This is consistent with how we raise and deploy capital with all of our projects," he said.
Arro is part of $1.35 billion in total development costs Empire Group is juggling across four apartment towers — along with another $1.07 billion in build-to-rent projects totaling 3,500 units across 15 properties in metro Phoenix.
Financing for new construction of multifamily has been more challenging in recent years for a few reasons. For one, interest rates have not come down, said Pete O'Neil, national director of research for Northmarq.
"There has been a lot of expectation that interest rates would trend lower and we haven't seen that," O'Neil said. "Longer-term interest rates like the 10-year Treasury or short-term interest rates like SOFR or the Fed Funds rate are only about 15-30 basis points lower than they were a year ago."
Another potential challenge for financing is the perception that a lot of multifamily markets across the country are overbuilt and capital providers are being more cautious about developing new projects in the current environment, O'Neil said.
"It's also tougher to underwrite new development deals in an environment like the one we're in where rents are either flat or have come down," he said. "Developers have to project where they think the rents will be when the project comes online, and in times like we're in currently — where rents have declined in recent years — projecting what rents will be when the project begins leasing is a challenge."
Downtown rental demand still holds up
While there has been a lot of construction lately in the downtown Phoenix and Roosevelt Row areas, it appears that renter demand is strong in those areas, O'Neil said.
"The downtown area has been posting pretty steady and healthy absorption for the past few years, with some of the highest absorption totals in the fourth quarter of last year and the first quarter of this year," O'Neil said. " So, supply has been active, but there's definitely some demand there too. That's probably a sign that things could improve if the properties downtown can continue to attract renters."
Monthly rental rates are averaging around $2,000 downtown, about $500 a month higher than the metro Phoenix average, O'Neil said.
The downtown and Roosevelt Row areas are showing higher vacancy rates than the rest of metro Phoenix, O'Neil said.
"Vacancy rates for stabilized properties in the area are around 10%, and if you factor properties that are in lease up, that number is closer to 20%," O'Neil said.
Connor Devereux, senior director of market analytics for CoStar Group/Homes.com, said the downtown core offers the right lifestyle for young professionals.
"The area has a growing amenity base of restaurants, bars and entertainment, and young professionals value the live/work/play lifestyle it offers," Devereux said. "The continued investment in light rail, proximity to major employers, the ongoing development/expansion from universities, and relative affordability compared to the city centers in other metros are strong value propositions supporting apartment demand."
While newly opened rental projects are pressuring occupancy and rent growth downtown, Devereux said that over the long term, the area has structural drivers that are expected to sustain underlying renter demand.
"With the peak of the construction wave likely in the rearview mirror, the area should see less supply pressure in late 2026 or 2027, which should support strengthening operations and an eventual re-acceleration of rent growth over the mid-term," Devereux said.
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