By CJ Jorgensen for AZBEX
Metro Phoenix heavily leads the U.S. industrial supply pipeline.
The Sept. 2024 National Industrial Report by Yardi Matrixshows many U.S. markets have seen industrial pipeline shrinkage, yet Phoenix stands apart as a major outlier.
Phoenix has 36.8MSF of industrial space under construction, which equates to 9.1% of stock. Adding in planned projects brings that number to 20.6%.
A large portion of the construction began in 2024, equating to 10.6MSF.
Warehouse/distribution accounts for roughly half of the pipeline, but manufacturing and data centers both have a notable presence in the Phoenix market.
Manufacturing makes up 25% of all industrial space under construction. Data centers make up 18% of the pipeline but also account for roughly a quarter of all square feet started in 2024.
Phoenix ranked 11th in average rent, with an average price of $8.99/SF in August. This equates to a 12-month change of 7.5%.
The average rate for properties signed with the last 12 months, at $13.14/SF, was significantly higher than the total average rent, at $8.99/SF. Phoenix also saw a vacancy rate of 5.6%.
Regarding sales activity, Phoenix ranked fifth with a total YTD sales price of $158/SF and a total of $1.7B in YTD sales as of Jul. 31, 2024.
National Industrial Trends
Nationally, the e-commerce market has created a large demand for industrial space; however, that demand started to soften last year. This year, the e-commerce sector has rebalanced and is now growing at a steady pace.
More than 1.1BSF of industrial space was completed between 2022 and 2023, equating to 5.7% of the stock. Estimates have placed e-commerce as requiring roughly three times as much industrial space as traditional retail sales to work efficiently.
In total, 369.3MSF of industrial space is under construction, which equates to 1.9% of stock. With the addition of planned projects, that number reaches 4.5%.
Despite industrial development cooling in recent years, numbers are still elevated, as 2024’s totals appear similar to 2019’s, which had an impressive 195.8MSF of starts.
National in-place rents for industrial space had an average of $8.11/SF, which equates to a 7.2% 12-month change.
The national average rate signed within the last 12 months was $10.56.
The national vacancy rate sat at 6.7%. The large amount of new supply in the sector has increased the vacancy rates. Two years ago vacancy rates sat at approximately 4%.
There has been a deceleration in growth of new leases, with some markets seeing a decrease in new lease rates. The national average rate for a new lease saw an increase of $0.65 over the last year.
The national YTD sales price came out to $132/SF, with a YTD sales amount of $36.9B as of July 31.
This year appears on track to exceed, or at least match, 2023’s sales volume.