Over the past few years, industrial markets have grown dramatically. Several markets like Phoenix have emerged as growth markets for manufacturing leasing activity, and they are becoming strategically important for operations, as well as attractive opportunities for industrial investors. Cushman & Wakefield recently examined national industrial leasing statistics from 2020-2022 to see which markets, outside of the seven primary industrial markets, performed the best in our six major tenant types.
DEEPER DIVE: Phoenix industrial rents increase 31% in 12 months
Phoenix is the emerging market for manufacturing leasing activity. Over the past three years, the Phoenix industrial market saw nearly 10.7 million square feet of new leasing activity for manufacturing tenants. This number seems low compared to some of the other categories, but manufacturing leasing is far more uncommon than warehouse/distribution leasing. Most manufacturing is specialized, and tenants will opt to own their space, making the stats more impressive.
The Phoenix market added more than 56 million square feet of new industrial space over the past three years, providing plenty of new space for those looking to enter the market. Tenants like inexpensive, reliable energy and labor, as well as low worker’s comp costs in a right-to-work state. Due to tightening vacancies across other western markets, Phoenix will continue to attract owner/users that desire to be in the west but can’t compete with some of the California pricing and lack of space.
OTHER KEY TAKEAWAYS
• Three of the seven markets selected sit in the Midwest region. This indicates that not only coastal markets dominate the industrial market in terms of attracting tenants to new space.
• Some key drivers evaluated alongside leasing activity include population growth, corporate moves, labor costs and infrastructure investment, as they are important drivers of industrial demand growth in most markets.
• Houston reigns as the overall winner for emerging leasing market. With nine deals over 1 million square feet (msf) in the past few years, Houston’s success can be attributed to thriving e-commerce and retail wholesaler activity.