According to JLL’s Q1 Phoenix Industrial Market Report, the mid-bay industrial market now represents 42.1 percent of the Valley’s under construction industrial stock. The report points to a lack of product in the 50,000- to 200,000-square-foot size range as a driver of this new construction.
“For many years, demand for Phoenix industrial space has centered around very large, e-commerce and distribution-focused tenant requirements,” said JLL Vice President Kyle Westfall. “The rise of the mid-bay sector is a welcome addition to that demand. It balances out our industrial landscape and allows the large-scale and mid-size sectors to grow in tandem and complement each other – a trend we think will continue in a very robust way.”
As noted by JLL, mid-bay product has recorded more than 5 million square feet in gross leasing in the past 18 months, at an average rate of three deals per month and an average lease size of just under 100,000 square feet. The first quarter continued to reflect that trend, recording nine deals that collectively total just under 900,000 square feet.
The Southwest submarket enjoyed the lion’s share of mid-bay leasing activity with 528,410 square feet, or 72.6 percent, of all first quarter commitments. The largest of these deals was CHEP Pallets, taking the full 186,336-square-foot building at 9494 W. Buckeye Rd. for warehousing and distribution.
In metro Phoenix, there are currently 23 mid-bay projects underway. Together, these total more than 2.5 million square feet, or 42.1 percent, of all local industrial stock currently under construction.
“Mid-bay industrial demand is rising at a rapid enough pace that some of these projects are already starting to see pre-lease activity,” said Westfall. “One example is 777 South 67th Avenue, which has already secured a 109,620-square-foot lease by United Foods International that will take over half of the 187,920-square-foot building.”
As demand increases, so are mid-bay industrial rents, now sitting at an average $0.67-per-square-foot, a 28.8 percent premium over the Valley’s average asking rate of $0.52-per-square-foot.
Across the Phoenix industrial sector, first quarter industrial fundamentals remain strong. Six million square feet of new space is under construction alongside 1.3 million square feet of net absorption, and overall rental rates have increased by 4 percent year-over-year.
To access JLL research for Phoenix and across the U.S., visit the company’s research page at https://www.us.jll.com/en/trends-and-insights#research.