The objective of Artis' organic growth strategy is to identify and extract the maximum value from each asset in its portfolio. The key to maximizing organic growth is efficient and effective management of assets, maintaining high occupancy levels, capitalizing on increases in renewal rents and realizing the gain between in-place or expiring rental rates and market rental rates through new leasing activity.
During 2019, Artis' management team successfully renewed 1.6 million square feet of gross leasable area, reporting a weighted-average increase in renewal rents of 5.6%. This demonstrates a healthy rate of organic growth. In addition to the increase in renewal rents achieved, Artis reported that stabilized same property net operating income (which excludes the Calgary office portfolio and properties planned for disposition), increased by 5.1% year-over-year, and increased 3.8% year-over-year when calculated inclusive of the Calgary office portfolio and properties planned for disposition. Management estimates market rents are 1.5% above in-place rents across the portfolio. These metrics are indicative of potential revenue growth to be gained from future leasing activities.
Development projects are an integral part of Artis' new initiatives announced in November 2018 and are an important component of Artis' growth strategy. With capitalization rate compression in many of Artis' target markets and, therefore, fewer compelling opportunities to acquire real estate, value creation through development and redevelopment projects present a way to achieve growth at attractive yields. New development projects also increase the overall quality and leasable area of Artis' portfolio, which correspondingly increases revenue potential and asset value. Value creation projects improve the aesthetics of Artis' assets, while simultaneously increasing the energy efficiency and revenue growth potential of its buildings.
Development projects are an integral part of Artis' new initiatives announced in November 2018 and are an important component of Artis' growth strategy.
Artis completed five new industrial development projects in 2019: Park Lucero IV, Cedar Port I, Park 8Ninety II, Park 8Ninety III and Tower Business Center.
Park Lucero is a four-phase industrial development on a 48-acre parcel of land in the Greater Phoenix Area, Arizona. The first phase of this project was substantially complete in 2015 and consists of three state-of-the-art industrial buildings totalling approximately 208,000 square feet of leasable area. Construction of the second and third phases, comprising approximately 132,000 and 147,000 square feet of leasable area, respectively, were completed in 2017, while construction of the fourth phase, comprising 95,000 square feet of leasable area, was completed in 2019. All phases of the development total approximately 582,000 square feet of leasable area and are over 95% leased.
In 2018, Artis acquired Cedar Port, two parcels of land totalling 52.5 acres in Houston (Baytown), Texas, for the multi-phase development of approximately 1,040,000 square feet of industrial real estate. The first phase of this project, Cedar Port I, totals approximately 519,000 square feet and is 100% leased for a 12.5-year term with annual rent escalations of 2.5%. Artis completed Cedar Port I in 2019.
Artis owns a 127-acre parcel of development land called Park 8Ninety located in the Southwest industrial submarket in the Greater Houston Area, Texas, which is being developed in several phases into approximately 1,789,000 square feet of new generation industrial real estate. Construction of Park 8Ninety I was completed in 2017, comprising three buildings and totalling approximately 440,000 square feet. Park 8Ninety II, comprising 572,000 square feet, and Park 8Ninety III, comprising 33,000 square feet were completed in 2019. Park 8Ninety III is 100% leased to a national tenant.
In 2018, Artis acquired an 80% interest in Tower Business Center, an industrial development in the Greater Denver Area, Colorado. This site, totalling approximately 30 acres, is located in close proximity to I-10 and is part of a large industrial/retail market. This project comprises two buildings totalling approximately 420,000 square feet of leasable area. The first building totals approximately 290,000 square feet and is 100% leased to a national tenant pursuant to a long-term lease which commenced in 2019. Construction of Tower Business Center was completed in 2019.
Artis also has numerous ongoing development and densification projects underway in the portfolio. In 2018, construction of 300 Main and 330 Main began, which are two new projects that will span nearly an entire city block in downtown Winnipeg, Manitoba. These sites are located above the Shops of Winnipeg Square retail concourse and Winnipeg Square Parkade, and adjacent to 360 Main, a 30-storey Class A office tower, all of which is currently owned by Artis. 300 Main will be a best-in-class amenity-rich apartment building with main floor commercial space, while 330 Main will be a state-of-the-art multi-tenant retail property. 330 Main is approximately 90% pre-leased pursuant to a 20-year lease with rental increases every five years. At Park 8Ninety in the Greater Houston Area, Texas, construction of the fourth phase is under way and is 100% pre-leased to a multi-national tenant. Lastly, in 2019, Artis began construction of an additional 17,000 square foot building at Linden Ridge Shopping Centre II in Winnipeg, Manitoba, which is 100% pre-leased to two national tenants.
Value creation can also be achieved through the redevelopment of existing assets within the portfolio, by capitalizing on opportunities to realize the highest and best use for a property or by modernization to attract long-term credible tenants and remain competitive in the marketplace. Artis' management conducts ongoing strategic review of each asset in its portfolio to identify such opportunities. At the end of 2019, Artis had two properties held for redevelopment; Sierra Place, an office asset in Calgary, Alberta, and 2145-2155 Dunwin Drive, an industrial property in the Greater Toronto Area, Ontario. Redevelopment plans were underway to convert Sierra Place from an office to a residential property; however, plans are on hold as the REIT is pursing opportunities to sell this property. 2145-2155 Dunwin Drive is being converted into commercial condominium units. The conversion is expected to be complete in 2020.
In addition to the above noted projects, Artis has an extensive development pipeline, which consists of commercial projects that are in the early planning stages to be developed over the next several years and projects that are being considered for future development. The REIT also has several potential multi-family development opportunities that are planned for sale once rezoning and densification entitlements are achieved.
Tower Business Center
Tower Road and E. 38th Avenue