Phoenix Industrial Market Report

1st Quarter 2023

Posted In — Market Research | Market Report


DELIVERIES REACHED an all-time high in 2022, expanding the market’s inventory by almost 10% and is projected to hit yet another historical year in 2023. With a record setting 56M SF currently underway, the Phoenix metro now ranks second in the nation for industrial construction activity, just after Dallas, TX.

ROBUST DEMAND coupled with record-low vacancies have driven asking rents across the market to record rates, posting at $0.98/SF on a triple-net basis in 1Q. The Valley has positioned itself as one of the top markets in not only national supply chains but is emerging as a critical market in advanced manufacturing as well.

HIGHER INTEREST RATES and economic uncertainty in the past year are resulting in a decrease in sales volume. Transaction activity hit a 10-year record low in Q1 with just 2.4M SF that traded. However, sales prices still hover around the record high at $166/SF, indicating the market is still holding strong with buyer competition from many out-of-state and local investors.


PHOENIX RANKED THIRD in the nation for job growth in the start of the year, with a net gain of over 19,000 non-farm jobs in January. Additionally, Phoenix metro’s labor market now has nearly 100,000 more jobs locally than pre-pandemic levels, making it the fifth-highest gain in the nation.

ACCORDING TO THE ARIZONA OFFICE of Economic Opportunity, Phoenix metro’s unemployment rate in November increased 20 basis points YOY to 3%. This is compared to the state’s adjusted rate of 4.1% and national rate of 3.7%.


THE PHOENIX INDUSTRIAL MARKET has gained tremendous momentum and is continually one of the top performing markets in the nation, showing resilience in the face of the pandemic and economic downturns, a challenge going forward may be just how sustainable the growth will be with the slight cooldown of the economy.

THE INDUSTRIAL MARKET’S INVENTORY will expand by approx. 12% by year’s end, when a majority of the current projects are set to deliver. As much of the development is speculative and being delivered without a tenant in place, the market may be vulnerable to a temporary spike in vacancies as the overwhelming construction activity is expected to outweigh new demand. However, the strong demand drivers in Phoenix will work to support the industrial fundamentals in the long term.

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