By Matthew Roy for Arizona Builder’s Exchange
Cushman & Wakefield reported a positive outlook earlier this week with the release of its Q1 2016 Metro Phoenix Industrial Market report this week. With a vacancy rate of 10.1%, the market gained 100 basis points (bps) in the first quarter.
“Occupancy gains are keeping up with newly developed product and leasing activity remains steady with more than 1.3MSF of net absorption in Metro Phoenix during the first quarter,” said Curtis Hornaday, Research Analyst with Cushman & Wakefield in Phoenix.
Notable bright spots in the Valley include the North Glendale submarket – which saw a 620 bps drop in vacancy over the past year to settle at 5.6% vacancy – and the Gilbert-Gateway submarket – which reduced by 170 bps in the past three months to land at 8.0%.
The Metro Phoenix industrial market added 1.6MSF of new inventory in Q1, 67% of which was pre-leased. The average asking rate for that market rose just one cent during that time to $0.53/sf on a monthly triple net basis. Bigger gains were seen in the Gilbert-Gateway and Grand Avenue submarkets, where the price rose 11 cents to $0.73/sf and $0.44/sf respectively.
Projects currently under construction
Cushman & Wakefield reported nearly 2.7MSF of industrial space currently under construction in the Valley in Q1.
The top five projects currently under construction include (follow links to previous AZBEX coverage):
- Opus Airport Industrial in Central Phoenix (393KSF)
- IRIS USA Regional HQ in Surprise (384KSF)
- Santa Fe Industrial Center in Phoenix (368KSF)
- Gateway South in Goodyear (350KSF)
- Metro East Valley Commerce Center in Mesa (349KSF)
The majority of these projects (1.5MSF) were distribution facilities. One project (Metro East) is General Industrial/Multi-Tenant. Two build-to-suit projects (IRIS and Gateway South) are already 100% preleased.
Tracking the market recovery
Over the past two years, more than 7.9MSF of industrial build-to-suit projects were completed in the Metro Phoenix area. Of these projects 57% were Warehouse/Distribution, 39% were General Industrial and 4% were Flex.
The largest among the 4.6MSF of Warehouse/Industrial projects completed was the 800KSF WinCo Warehouse in Southwest Phoenix. The largest General Industrial project was the FAB 42 – Intel Corp in Chandler at a whopping 2.1MSF. And the Discovery Business Campus in Tempe added 237KSF to the market.
The majority of completions were in Chandler (3.1MSF) and Phoenix (2.7MSF), which accounted for 39% and 33% respectively, for a total of 72% of new build-to-suit space in the market. The remaining 28% were located in Casa Grande, Glendale, Goodyear, Tempe and Tolleson.