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Phoenix industrial market absorption continues to outpace new construction

The Phoenix industrial market is teeing up for its fourth consecutive year in which absorption gains outpace new construction, according to the Q2 Phoenix Industrial Insight Report released Wednesday by the Phoenix office of JLL.

According to JLL, nearly 60 percent of newly completed industrial properties are pre-leased at delivery, with large users taking advantage of new product in the development pipeline. This has owners offering aggressive concessions in order to compete for the “big fish.”

Rental rates also continue to inch higher, driven by manufacturing properties. In the last year alone, manufacturing rates have surged 18.6 percent, to $0.59 per square foot. Growth in this sector has been particularly exceptional in the Southeast Valley, especially in Tempe and Mesa.

“Manufacturing activity in the Southeast Valley is being driven by a variety of manufacturing types including, but not limited to, probiotics, nutraceuticals, packaging, plastics, low tech, automotive, solar tech and aerospace,” said JLL Executive Vice President Steve Sayre.  “About two-thirds of the recent activity we’ve seen is also from companies expanding or those new to town altogether.”

According to Sayre, while the Southeast Valley is known for a highly educated labor force, that’s not the only characteristic driving companies to this area.

“Investors are developing quality product to meet the unique needs of manufacturing companies,” he said. “Build-to-suit activity in this area is the highest it’s ever been, and new construction is enabling companies to design their entire space to gain efficiencies, increase productivity and consolidate operations.”

This activity is working in tandem with a push by Southeast Valley communities to add more robust infrastructures including water, waste water and power.

“It’s exciting to see the Southeast Valley grow, and there are no signs of it stopping anytime soon,” said Sayre.

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About AZRE

Pulling together the multiple facets of the commercial real estate industry in Arizona, AZRE: Arizona Commercial Real Estate Magazine reaches out to the largest local and national commercial real estate audience within the Grand Canyon State and beyond. AZRE covers up-to-date happenings within commercial development, brokerage, construction, investment, finance, architecture, property management, real estate law and more as it relates to Arizona. Additionally, AZRE is an active voice within the commercial industry, partnering with such organizations as NAIOP, ABA, ICSC AZ, AIA AZ and Valley Partnership.

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