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Phoenix Industrial Market Report

2nd Quarter 2022

Posted In — Market Research | Market Report

MARKET DRIVERS

A RECORD 36M SF of new industrial space is expected to deliver by year end across the Phoenix market, a staggering volume this market has never experienced. The concentration of the new supply is being developed in the Southwest Valley, specifically Glendale, due to the proximity to California and relative affordability. The Phoenix metro now ranks second in the nation for industrial construction activity, just behind Dallas.

AVERAGE ASKING RENTAL RATES TOPPED the record rate from last quarter, posting at a new all-time high of $0.73/SF on a triple-net basis. Availability rates have dropped to its lowest on record at 8.1%, reflecting the insatiable demand from industrial tenants in the market. Businesses are highly attracted to the Phoenix market due to the accelerating population growth, affordability, and robust labor pool.

INVESTORS ARE BULLISH on the Phoenix industrial market and strong buyer competition has driven sales prices to an all-time high of $171/SF in Q2. The buyer pool has deepened in the local market, especially with California-based investors that seek affordability and value when compared to their own state. The top sale in Q2 at 10 West Commerce Park in Goodyear was one of the highest total prices on record for an industrial property in the region.

ECONOMIC OVERVIEW

ACCORDING TO the Arizona Office of Economic Opportunity, Phoenix metro’s unemployment rate in May decreased 200 basis points YOY to a 20-year record low of 2.9%. This is compared to the state’s rate of 3.2% and national rate of 3.6%.

THE PHOENIX LOCAL ECONOMY remains among the best-performing markets for job growth and was recently ranked 4th in the nation for best performing metro. Additionally, the market has welcomed many new residents into the labor force. From July 2020 to July 2021, Phoenix reported the largest numeric change in its population compared to other U.S. cities with 50,000 people or more, adding 13,224 new residents.

NEAR-TERM OUTLOOK

THE PHOENIX INDUSTRIAL MARKET’S record level performance in the first half of 2022 will continue to fire on all cylinders into the second half of the year. A strong labor market, coupled with well-positioned access to major highways, has driven tremendous demand to the industrial market, thus, it is expected to remain one of the top markets in the nation for last-mile and e-commerce users, data center operators, and manufacturers alike.

OCCUPIERS CONTINUE to rapidly expand their distribution channels to meet the ongoing demand of e-commerce sales. Tenants are expanding their footprints in Phoenix at an unprecedented pace. Demand will stay strong for not only last-mile and e-commerce users, but also for data centers and manufacturing.

DATA SOURCE: COSTAR, AZ OFFICE OF ECONOMIC OPPORTUNITY, AZ CENTRAL, AZ BIG MEDIA

 
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