The Phoenix Industrial Market continues to fire on all cylinders as levels for net absorption, construction and rental rates ended the year at all-time highs. The Phoenix Market absorbed 22 million square feet of space for the second year in a row, had 43 million feet under construction and the vacancy hovered around 4%.
Robust user demand continues to drive the market with a number of large spaces being
leased in the fourth quarter. The top five leases of the quarter were all done at newly constructed speculative buildings. The largest transaction of Q4 was the Logistics Plus lease at the 1,156,860 square foot Sarival Logistics Center in Litchfield Park, followed by JA Solar Company leasing 763,410 square feet at the GO|99 project in Tolleson and the Unical lease at the 599,486 square foot Falcon Park 303 in Glendale.
Phoenix came in second nationally with 43 million feet under construction, trailing only Dallas, Texas with 85 million feet under construction. Roughly 8.4 milllion square feet, or 20%, is pre-leased or being built-to-suit. The largest projects under construction are CapRock’s five building West 202 Logistics Park at 2,544,175 square feet followed by Lincoln Property Company’s Park 303 at 2,372,801 square feet.
Deliveries for Q4 were 9,603,150 square feet, of that, 2,211,496 square feet, (23%) was preleased. The largest deliveries of Q4 were the 915,160 square foot Cotton 303 Logistics Center developed by Pizzuti, the new 802,439 square foot Best Buy distribution built by Merit Partners and the 742,693 square foot Building A at Latitude 303 built by WCP and AEW.
Investment sales volume in Q4 decreased by 32% from Q4 of last year ending at $644M. Year-to-date sales volume reached $4.4 billion which is a 23% decrease from 2021. There were 146 total transaction in the final quarter of the year compared to 280 in Q4 2021. The slow down can be attributed to rising interest rates and fear of a looming recession.
Strong demand coupled with record-low vacancy has driven asking rents across the market to record rates, posting at $0.88/SF on a triple-net basis in Q4. The Phoenix industrial market was in the top tier in the nation for rent growth over the last year, but despite the increase, it continues to be an affordable option when compared to the 30-40% markup of nearby major regions in California.
Despite the economic headwinds that are predicted in the US economy, the Phoenix Market remains poised for another banner year. Phoenix remains one of the top markets in the country for industrial product and demand continues to stay strong for all sizes of space across the market. The strength of the Phoenix industrial market is expected to continue into 2023 even as some developers pause projects in the Valley due to rising inflation, increased interest rates and potential future economic obstacles.
Construction Deliveries
Market Statistics
About This Report
The information and details contained herein have been obtained from third-party sources believed to be reliable; however, Lee & Associates Arizona has not independently verified its accuracy. Lee & Associates Arizona makes no representations, guarantees, or express or implied warrenties of any kind regarding the accuracy or completeness of the information and details provided herin, including but not limited to the implied warranty of suitability and fitness for a particular purpose.
Interested parties should perform their own due diligence regarding the accuracy of the information. The information provided herin, including any sale or lease terms, is being provided subject to errors, omissions, changes of price or conditions, prior sale or lease, and withdrawl without notice, by third -party data source providers.
The Lee & Associates Phoenix Industrial Market report compiles relevant market data by using a third-party databse for the proprietary analysis of specific warehouse, distribution, manufacturing and flex properties in the Phoenix Metropolitan Area.
Market report analysis by: Chris McChesney - Lee & Associates Arizona
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