By The Phoenix Office of JLL
The Phoenix Office of JLL has released its Q1 2024 Phoenix Industrial Report, noting 6.3MSF of new leasing activity – a 60% spike from the previous quarter – marking Phoenix’s third-highest Q1 leasing performance on record.
According to the Q1 report, activity was boosted by an uptick in demand for big box warehouses.
As leasing expanded, the development pipeline contracted, falling 44% since its peak in Q2 2023 to 30.9MSF. That caused industrial deliveries to outpace construction for the third consecutive quarter, pushing rents up by 2.4% quarter-over-quarter in a market where nearly 40% of newly delivered products are already pre-committed.
Metro Phoenix industrial net absorption, which neared 2.9MSF in Q1, will likely grow significantly next quarter, when tenants are expected to take occupancy on 4MSF of newly leased space.
The Valley’s 10.6% industrial vacancy rate is expected to rise in the months ahead as the local sector works to fill 31 speculative industrial buildings delivered vacant during Q1. The overall industrial market outlook remains optimistic, however, with the recent $8.5B in Intel grants, ongoing expansion at TSMC and CHIPS and Science Act funding serving as just a few of the factors expected to propel growth.