Source: Cushman & Wakefield
The Metro Phoenix industrial market continued to display strong improvement through the second quarter of 2016, recording a vacancy rate of 9.6%. This is a 50 basis-points (BP) reduction since 1Q15 (10.1%) and marks the lowest vacancy rate since the third quarter of 2007, according to the second quarter industrial report released by Cushman & Wakefield.
Eleven of the 17 defined industrial submarkets experienced a decline in overall vacancy with the Chandler (9.2%) and West Mesa (6.0%) submarkets setting the pace, dropping 210 BP and 370 BP, respectively. The Metro Phoenix industrial market posted a 1.7% decrease in vacancy since the second quarter of 2015, with 14 of the submarkets reporting gains in occupancy.
Conversely, the Gilbert-Gateway submarket experienced the largest increase in vacancy, growing 1.9% over the last three months due to 350,000 square-feet (SF) of speculative general industrial, multi-tenant space that was delivered in 2Q16.
The West Central Phoenix submarket led Metro Phoenix in absorption for the quarter with over 745KSF, dropping its vacancy from 12.2% in 1Q16 to 10.8% at the close of 2Q16. A significant portion of this occupancy growth can be attributed to Kroger (200KSF) and StichFix (122KSF) taking a combined total of 322KSF.
Glendale posted a net gain of over 400KSF in 2Q16 with IRIS USA moving into their new 384KSF build-to-suit (BTS) regional headquarters. Southwest Phoenix reported negative absorption of 145KSF because First Solar gave back 241KSF of their warehouse/distribution center. Tempe rebounded in 2Q16 with 238KSF of net absorption after posting 43KSF of negative absorption in 1Q16.
Over 1.1 MSF of new product was added to the Metro Phoenix industrial inventory in 2Q16, 527KSF which came online preleased or in the form of BTS projects. The 2Q16 new development brings the year-to-date total to nearly 2.7 MSF with 88% of the completions being distribution and multi-tenant properties.
Cushman & Wakefield is tracking an additional 2.7 MSF of industrial product currently under construction, all of which is scheduled to be completed by the end of 2016. Nearly half, 49%, of the under construction space is pre-leased.