Sizeable e-commerce leases signed in Phoenix in 2018 are helping to fill millions of square feet of new industrial space – particularly in the Southwest Valley – according to the Q2 2018 Phoenix Industrial Insight report from the Phoenix office of JLL.

Per the report, the market has delivered 1,832,881 square feet of space in Q2 – double the amount of Q1 deliveries – while continuing to inch toward record low vacancy rates.

There has also been a perceivable shift this year from Phoenix’s more traditional large logistics and distribution requirements to the signing of numerous, sizeable e-commerce leases. During the second quarter, 39 percent of all industrial leases were signed by e-commerce companies, compared to 7 percent by logistics and distribution users. 

“We are very excited about the e-commerce activity we’re seeing, and with the sector expected to rise to as much as 40 percent of all retail sales within the next 10 years, we see much more space demand and activity ahead,” said JLL Managing Director Anthony Lydon. “This is the future of industrial and we’re thrilled to be a part of it.”

Robust demand from e-commerce users has helped to generate 1.6 million square feet of Q2 absorption, with 35.5 percent (or 587,260 square feet) landing in the Southwest Valley. The Southwest Valley also commands the largest year-to-date overall industrial absorption, at 39.9 percent (or 1,196,416 square feet).

“California can’t compete with the industrial lease opportunities that Phoenix provides,” says Lydon. “Close location to the ports, great transportation routes, an abundance of labor and lower costs – we have it all.”

Lydon expects that demand will continue for all types of e-commerce space needs – a spectrum that includes bulk fulfillment, regional sortation, last-mile delivery to homes and businesses, even food-related e-commerce functions. That is a good sign, he says, for the more than 5.2 million square feet of industrial space now under construction throughout metro Phoenix. Again, the Southwest Valley dominates this activity, holding 72.1 percent (or 3,765,480 square feet) of the industrial space set to deliver in 2018 and 2019. Gilbert ranks second with 13.5 percent (or 706,895 square feet) of new industrial construction.

To access JLL’s Q2 Phoenix Industrial Insight report or other local and national JLL research reports, visit the JLL Phoenix research page at www.jll.com/phoenix/en-us/research.