Phoenix's industrial market has seen a significant swell of activity, with record-breaking industrial building deliveries reaching nearly 30 million square feet in 2023. High demand during the COVID-19 pandemic fueled this explosive growth, particularly in the e-commerce and online shopping sectors. Now, vacancy rates are showing signs of expansion, sitting at 8%—a notable climb from earlier in the year, according to the Phoenix Business Journal.
Despite the delivery of about 9 million square feet of industrial space in the fourth quarter of last year, and an additional 13 million square feet from the preceding quarter, Phoenix has maintained strong market dynamics. In fact, "Phoenix quickly became one of the darlings of the national industrial market, so everybody responded," Avison Young’s senior vice president, Kevin Helland, told Phoenix Business Journal. As federal interest rates and available inventory rise,, the leasing-and-vacancy landscape is beginning to regulate.
The surge in industrial space hasn't deterred developers either, with about 40 million square feet under construction during the fourth quarter, and 6.3 million square feet initiating construction around the same time. This forward-looking approach reflects the strong "longterm belief in Phoenix as a continued industrial growth market," said Cooper Fratt, an executive vice president at CBRE, in a statement obtained by the Phoenix Business Journal.
Major leases have continued to be signed, despite the increased inventory and speculation around the fate of big-box warehouses, which were a hot commodity during the pandemic but now, are facing softened demand. Meyer Burger is preparing to open a massive manufacturing plant in Goodyear, and SOLogistics, along with Wholesale Tire and Wheel Distributors, have secured significant footprints in the region, as well. AZ Big Media highlights the diversity of industries moving into Phoenix, bolstering the city’s position as a hub for advanced manufacturing, aerospace, logistics, and technology.
Looking ahead, observers may anticipate more equilibrium coming to the Phoenix industrial market with normalization on the horizon. A balance between supply and demand is expected, after years of spurting growth post-pandemic. Nevertheless, structural underpinnings suggest the Valley will remain a top competitor on the national industrial stage, even as the potential for an economic cooldown could apply some pressure, as reported by AZ Big Media.
