The Phoenix Industrial market is on pace to set a record year, exceeding even last year’s exceptional performance which was one of the best years on record for the region, according to a report from Kidder Mathews. Net absorption, rental rates and sales volume are all at historic highs and vacancies tightened to an all-time low.
A record setting 29.2M SF of construction is currently underway, and many of these developments are speculative spaces. A significant spec development breaking ground in Q4 is CapRock West 202 Logistics, the largest spec project in the history of the city of Phoenix. The project will have two phases with the first phase anticipated to deliver by year end 2022 and will total 3.4M SF across eight buildings.
Sales volume in the third quarter reached an astounding new record at $1.2B with almost 200 transactions. Likewise, the average price/SF hit an all-time high this quarter at $143/SF. Investors and developers are highly confident in the Phoenix market, as the competitive advantage and growth drivers are stronger than ever.
• Phoenix is among the best-performing markets for job growth. The region lost fewer jobs (on a percentage basis) than any other large metropolitan area and has recovered at a relatively swift pace from the negative impacts of COVID-19, gaining back approximately 75% of the lost jobs from the previous year. Oxford Economics forecasts the market to recover all jobs lost during the pandemic by the end of the year.
• According to the Arizona Office of Economic Opportunity, Phoenix metro’s unemployment rate in August decreased 24 basis point YOY to 4.2%. This is compared to the state’s rate of 6.2% and national rate of 5.2%.
• Investors are bullish on Phoenix and many out-of-state buyers are active in the market, representing roughly a quarter of the sales. Buyer competition among local buyers, as well as many out-of-state and institutional investors, has put an upward pressure on sales pricing and is expected to further increase in the near future.
• The Phoenix Industrial market is on track to outperform the previous year’s record level performance. A robust local economy, coupled with strong demand, sets the way for a successful year end.
• Occupiers continue to rapidly expand their distribution channels to meet the rising demand of e-commerce sales. Tenants are expanding their footprints in Phoenix at an unprecedented pace. Demand will stay strong for not only last-mile and e-commerce users, but also for data centers and manufacturing.
NET ABSORPTION reached a market high of 6.1M SF
CONSTRUCTION soared to an all-time high with over 29M SF currently underway
SALES VOLUME set a record high reaching $1.2B
Sources: CoStar, AZ Office of Economic Opportunity, AZ Central, Oxford Economics