The Phoenix industrial real estate market, already one of the strongest in the U.S., closed a very robust Q3 2022, as rent rates continued to increase, more space was added to the construction pipeline, and vacancy remained low, according to new research from Transwestern Real Estate Services (TRS).
Transwestern tracks industrial properties in nine critical Phoenix submarkets, whose industrial inventory totaled 293.5 million square feet of space as of the close of the third quarter of 2022. The market has an additional 56 million square feet of industrial space in construction, a figure that is dwarfed by the 108 million square feet of proposed space. Average rents increased approximately 20% year-over-year across all submarkets to $11.84 per square foot. Absorption for the quarter totaled 4.8 million square feet, bringing the year-to-date total to 22.8 million square feet.
“I’m not sure ‘on an absolute tear’ is a proper research term but it has become difficult to come up with superlatives on how hot the Phoenix industrial market has been over the past year,” said Jennifer Barili, Senior Research Analyst, Transwestern. “The market continues to grow and shows no sign of stopping. For example, last quarter there was 40 million square feet of industrial space under construction market-wide and this quarter there is more than that in the West Valley submarket alone.”
Additional highlights from the quarter include:
• Overall vacancy remains tight at 4.6%, up slightly from last quarter’s 4.3%, but down year-over-year from 5.2% in the third quarter of 2022.
• The West Valley submarket has the highest vacancy rate at 6.0% and the largest inventory with 160 million square feet.
• Three submarkets are under 2.0% vacancy: Camelback Corridor (1.0%), Tempe (1.6%) and Scottsdale (0.9%).
• Net absorption slowed compared to 6.0 million square feet last quarter.
• The 56 million square feet of space under construction is up from 30.7 million square feet in the third quarter of 2021 and much higher than the five-year average of 15.7 million square feet.
• Average asking rents were up $1.33 per square foot across all submarkets.
• Some submarkets saw extremely high rent growth year-over-year, including Downtown/Midtown CBD (45.3% increase), North Central Phoenix (39.8% increase) and Camelback Corridor (35.1% increase).
Download the third quarter 2022 Phoenix industrial report at https://transwestern.com/market-reports.