Phoenix Industrial Market Stays Hot

The Phoenix industrial market has stayed hot, with no signs of cooling off. Last quarter it delivered over 10 million square feet of industrial space. Kidder Mathews Research Group reports in 2023, the market completed construction on 31.6 million square feet of new deliveries, 16% more than the previous year. 37 million square feet are currently under construction, second in the nation, behind Dallas.

Even with the record deliveries, rental rates continue to rise. The rates climbed to a new high of $1.15 per square foot NNN.

The injection of record-level new deliveries in 2023 resulted in a year-over-year (YOY) uptick in both vacancy and availability rates. Vacancy increased by 560 basis points (bps) YOY to 10%, while availability rates grew by 310 bps to 14.8%. 

Despite the overwhelming level of new construction, the Phoenix industrial market is generating plenty of demand. Net absorption for 1Q 24 totaled positive 4.5 million square feet, indicating that demand is currently keeping up with the high velocity of new construction.