According to CBRE‘s Q1 Phoenix Industrial Figures, the Metro Phoenix industrial sectors started the year strong in the first quarter. Metro Phoenix recorded 9.6 million sq. ft. of gross absorption marketing, the second-highest quarterly total over the past 10 years.
MORE NEWS: Insights and outlook for the Phoenix construction market
During Q1, leasing activity was notably strong, with 9.6 million sq. ft. leased. For the first time since 2013, three 1 million sq. ft. transactions occurred in the Phoenix industrial market within the same quarter. The market direct average asking triple net lease rate remained unchanged from the prior quarter, which ended at $1.08 per sq. ft. in Q1 2024.
The trend of deliveries outnumbering construction starts persisted in the first quarter of 2024, as products under construction decreased to 30.7 million sq. ft. As most of the product delivered was in the Southeast Valley, the amount under construction in the submarket ended at 8.8 million sq. ft.
Preleasing activity was robust, with 1.3 million sq. ft. of leases signed for buildings under construction throughout the Valley, but primarily concentrated in the Southwest Valley. The region ended the quarter at 30.0% preleased. The preleasing percentage in the Southwest Valley was compromised of several build-to-suits and the 1 million sq. ft. prelease signed at Prologis 303 within the quarter.
Phoenix Q1 2024 Industrial Figures
- Fifty-seven buildings were delivered for a total of 11.6 million sq. ft. in Q1 2024, with 32.4% preleased or 3.8 million sq. ft.
- Net absorption reached 4.5 million sq. ft. in Q1 2024 as Amazon absorbed over 2 million sq. ft. of existing vacant space.
- Construction volume decreased in Q1 2024 with 30.7 million sq. ft. under construction, as the 11.6 million sq. ft. of product delivered heavily outpaced the 3.1 million sq. ft. started.
- Quarter-over-quarter, the vacancy rate increased 150 basis points (bps) to 8.9%.
