Phoenix industrial market activity continued on record-setting throughout the third quarter, according to a report from CBRE. In Q3 2020, sixteen buildings delivered totaling 3,160,450 square feet. Year-to-date construction completions totaled 8,561,225 square feet and is on pace for the highest level of construction deliveries since 2008. Construction deliveries across the Valley are well- warranted as new users enter the market and vacancy has tightened to the lowest rate in fourteen years.
Net absorption remains strong amid current economic conditions as users outside of the market seek industrial space. Third quarter net absorption totaled 2,156,848 square feet, bringing the year-to-date total to 8,057,847 square feet. Several large move-ins in the Southeast and Southwest Valleys contributed to positive net absorption.
INDUSTRY SECTORS SEEKING SPACE
The most active industries in the third quarter were e-commerce, manufacturing and third-party logistics. Many of these companies are looking in the Southwest Valley due to its accessibility to California and the availability of labor in the area.
E-COMMERCE USERS LEASE SPACE AT RECORD PACE
Amazon is placing its stamp on the Phoenix industrial market. Year-to-date, Amazon has leased over 3,500,000 square feet of space across the valley for distribution, van parking and last-mile facilities. Early in the third quarter, Amazon purchased nearly 92 acres in Goodyear, AZ, where construction is underway.
NEW SUPPLY CREATING OPPORTUNITIES FOR 100,000+ SQUARE FEET USERS
Fifteen transactions over 100,000+ square feet occurred over the course of the third quarter, many in recently completed buildings which provided supply for these large users. Over half of these users moved into properties built in 2018 or newer. There are currently 25 buildings under construction that are over 100,000 square feet, representing 91.1% of all construction activity. This will provide large users more options in the Phoenix market.
Net absorption in Q3 2020 totaled 2,156,848 square feet across metro Phoenix. This is the 42nd consecutive quarter of positive net absorption gains. The Southwest Valley posted the strongest gains in net absorption out of the five market areas totaling 2,023,494 square feet, nearly outpacing the total absorption for the metro. The Southwest Valley is desirable for users due to its proximity to west coast markets, new construction, relative affordability and labor pool. Consecutive quarters of negative net absorption in the Northeast Valley offset some gains with 86,429 square feet of negative net absorption in the third quarter.