Here are the records Metro Phoenix broke in industrial real estate

The Greater Phoenix industrial real estate market set several records during the third quarter, according to a report released by Colliers in Arizona. The city’s burgeoning industrial sector posted its highest net absorption, lowest vacancy rate, and the most space under construction at any given time.

The Grand Phoenix is ​​ranked 2sd nationwide for job creation, just behind Dallas-Ft. Value. The city grew 11.2 percent from 2010 to 2020 and has now overtaken Philadelphia to become the 5e largest city in the country.

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During the third quarter, the industrial market was more active than at any time in its history, reaching 7.2 million square feet of positive net absorption. This marks the 10e consecutive quarter of absorption exceeding 1 million square feet. Net absorption since the start of the year totals an impressive 18.2 million square feet. In the first three quarters of 2021, the market topped 2020 performance by 36% and is on track to surpass 20 million square feet by the end of the year. Mattress maker MLILY has expanded its presence in the West Valley by committing to 1.25 million square feet t G303. Toy maker Funko has committed to 862,602 square feet at 10 West Commerce Park in Buckeye. Electric vehicle manufacturers are entering the Greater Phoenix market. Zero Electric Vehicles leased 103,275 square feet from Gilbert Crossings in July and KORE POWER, a battery company, announced plans to develop a manufacturing facility in Buckeye.

The industrial space vacancy rate in Greater Phoenix fell 70 basis points in the quarter and 270 basis points year-on-year to the city’s lowest on record at 5.2 percent . Every submarket in the metro area has seen a year-over-year decline in vacancies, with the Southwest and Southeast regions recording the largest declines. Supply is limited and tenants looking for 150,000 square feet only have 17 buildings. Companies looking for more than 300,000 have only 10 options available in the Greater Phoenix market.

Rental rates continue to increase in an environment of unprecedented demand. Rates increased 1.54% for the quarter and 8.49% year-over-year to $ 0.66 per square foot. The rental rate has increased by 12% in total since 2019. Due to recent increases, the market is starting to experience annual escalation rates of 3.5-4%. The Airport Zone submarket led the rental rate increase market for the third consecutive quarter. This area saw an 11% year-over-year increase to $ 0.83 per square foot.

Rates in the Southwest rose 9.4% year-over-year to $ 0.50 per square foot. The Southeast submarket increased 3.2% in the quarter to $ 0.75 per square foot. The manufacturing space led product types in rental rate increases, increasing 14.4% year-over-year and 6.1% in the quarter. Manufacturing space in the Southwest submarket saw the largest increase of any property type in a single submarket, increasing 24% year-on-year to $ 0.53 per square foot.

Approximately 5.9 million square feet of new product was added to inventory during the third quarter with a vacancy rate of less than 30 percent. Since the start of the year, a total of 10.7 million new square feet have been added to inventory. Another 20.0 million square feet is currently underway, marking the highest number of products under construction in the metro area in recorded history. The Northwest submarket delivered the most inventory for the third consecutive quarter, completing 4.0 million square feet. The submarket lowered its vacancy rate by 90 basis points in the quarter to 5.4%. About 76 percent of the buildings currently under construction are located in the Northwest and Southwest submarkets.

The result of feverish demand and a limited supply of industrial space in the Phoenix industrial market has pushed up prices in the investment sales arena. The median price paid per square foot increased nearly 20% year-on-year to $ 135 in the third quarter. Investment sales were very active in the third quarter, totaling over $ 1.1 billion and accounting for over 43% of total sales for 2021. The largest single property sale ever in Metro Phoenix history was completed in the third quarter. Park 303, a 1.2 million square foot distribution facility sold for $ 186 million to BentallGreanOak. The property is fully leased to Walmart. The dynamic third quarter involved two deals over $ 100 million. The second concerned a property that has never been occupied at 575 N. 143rd Ave. American Realty Advisors bought the property for $ 103 million.

The largest sale in the third quarter was for a new buyer to the market, illustrating the general and new appeal of the Phoenix market. The region’s pre-business environment and expanding workforce have caught the attention of businesses across the country. The city is attracting more and more high tech manufacturing companies and Phoenix is ​​leading the multiple site picks for companies looking to relocate.

About Robert Valdivia

Robert Valdivia

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