The Phoenix industrial market set another record year, exceeding last year’s performance which was the best year on record for the region, according to a report from Kidder Mathews, the largest independently owned commercial real estate firm on the West Coast. Net absorption, rental rates and sales volume are all at historic highs and vacancies tightened to an all-time low.
Construction activity has surged in the past year with an astronomical record setting 35M square feet of developments currently underway. The market’s inventory will expand by almost 10% in 2022 when a majority of the projects are set to deliver. Developers are highly attracted to the Phoenix industrial market because of relatively few development barriers, strong demand, and a thriving local economy.
Investors and developers are highly confident in the Phoenix market, as the competitive advantage and growth drivers are stronger than ever. As such, the sales volume in 2021 set a record reaching $4.5B, which reflects the 2020 and 2019 sales volume combined. Buyer competition has put an upward pressure on pricing, with sales prices averaging an all-time high of $144/SF.
• The Phoenix local economy has been one of the most resilient during the pandemic and is among the best-performing markets for job growth. Phoenix lost over 200,000 jobs in the start of the pandemic, but the sharp job losses were temporary. By September 2021, the market fully recovered those job losses and total employment surpassed the pre-pandemic level.
• According to the Arizona Office of Economic Opportunity, Phoenix metro’s unemployment rate in November decreased 330 basis points YOY to a low 2.8%. This is compared to the state’s rate of 4.7% and national rate of 4.2%.
NEAR TERM OUTLOOK
• The Phoenix Industrial market’s performance in 2021 reflected the strength and consistent demand this market has shown cycle after cycle, even amid the pandemic. With the low cost of doing business, proximity to major regional markets, and favorable demographics, investors remain bullish and will continue to seek out the market for quality assets.
• Tenants are expanding their footprints in Phoenix at a breakneck pace. The market has set records for demand over the last couple years and it is expected to increase into the next year, especially for last-mile and e-commerce tenants as well as data centers and manufacturers. The Valley’s rapidly growing consumer base and trends accelerated by the pandemic have bolstered the need for industrial space.
NET ABSORPTION reached a market high of 21.8M SF in 2021
CONSTRUCTION soared to an all-time high with 35M SF currently underway
SALES VOLUME set a record high reaching $4.5B