According to a recent survey by Kidder Mathews, Phoenix remains a top location for industrial development. The city has consistently maintained a strong construction pipeline, with an average of 8 million square feet delivered annually since 2022. This trend is expected to continue through 2025, as there are currently 21.8 million square feet of new projects underway. So far this year, there have been deliveries totaling 37.6 million square feet – which is already higher than the total deliveries in all of last year (2023). As vacancy rates continue to rise due to this influx of new developments, the demand-supply imbalance will only intensify.
Compared to last year (YOY), vacancy rates have increased by 440 basis points (bps) and availability rates have increased by140 bps – reaching levels of13.l% and15.l%, respectively.However,in comparisontothe third quarteroflastyear(3Q24),vacancyratesonlygrewby140bpsandavailabilityincreasedby20bps.
Despite these rising vacancy rates driven by new developments in the market through next year (2024), direct net absorption remains positive as logistics and manufacturing tenants expand their presence in Phoenix.Directnetabsorptionintheindustrialmarkettotaled17.Smillionssquarefeetthisyearcoupledwith5.Tmillionssquarefeetofleasingactivity.
While rent growth may be slowing down slightly,thePhoenixindustrialsectorcontinuestostaystrong.Askingrentsfordirectleaseshave remained steady at $1.I2/SF NNN onaquarter-over-quarterbasis(QOQ).This indicates that despite some challenges,the industrial sectorinPhoenixisstillperformingwell.ThispostoriginallyappearedonConnectCRE.com
