Speculative development will provide much-needed space solutions as Phoenix’s industrial inventory tightens, says the Phoenix office of JLL in its just-released Q1 2018 Industrial Insight report. According to the report, although the Valley’s 1.3 million square feet of Q1 industrial absorption is light compared to the gains of 2017, strong demand remains – including more than 100 industrial tenants each looking for at least 100,000 square feet of local space. 

JLL says that Phoenix’s current industrial inventory offers only enough contiguous space to accommodate less than half of these requirements.

“At first, new construction has the potential to increase vacancy but, based on demand trends, that vacancy could be short lived,” said JLL Senior Vice President Steve Larsen. “The southeast Valley, for example, is no longer for your smaller users. The speculative projects we’re seeing here are larger than they have ever been, and growth is equally strong.” 

According to Larsen, increases in government spending have benefitted key industries in the submarket, with aerospace and defense, in particular, expected to experience mergers and consolidations. “That is resulting in aerospace and defense users needing more space,” he said.

Other hot industries in the submarket include high-tech/advanced manufacturing, semiconductor and pharmaceutical/nutraceutical. This growth has pushed the size range of the average southeast Valley industrial user from 15,000 to 50,000 square feet up to 30,000 to 60,000 square feet.

Across metro Phoenix, industrial vacancy at the end of Q1 had fallen to 7.3 percent, just 100 basis points above its lowest point. As existing lease and purchase options dwindle, developers can’t seem to deliver new space quickly enough, especially highly functional developments able to attract large, sophisticated single-user operations while still maintaining the potential to become a multi-tenant building. Key amenities important to users are increased clear heights, wider column spacing and additional dock doors.

Just some of the new and planned projects positioning to meet local industrial demand include:

• TEN: 1 million square feet under construction in Phoenix.

• Opus Goodyear Crossing: 540,349 square feet of existing product in Goodyear.

• Merit PLC One: 268,872 square feet of planned space in Buckeye.

• 83rd Avenue & Buckeye: 359,040 square feet under construction in the southeast Valley/airport area.

• Airport I-10 Buildings A&D: 353,385 square feet of existing product in the airport area.

• Lotus: Four buildings totaling 463,200 square feet of planned space in Chandler.

• Park Lucero Building D: 94,794 square feet of planned space in Gilbert.

• Majestic Tempe Commerce Park: Three buildings totaling 173,312 square feet of existing product in Tempe.

• Parc Pinnacle: Three buildings totaling 312,054 square feet under construction in Deer Valley.

 

To access additional JLL research reports, visit the JLL Phoenix research page at www.jll.com/phoenix/en-us/research.