Commercial Corner, General Real Estate
April 26, 2016
Managing Principal, Cushman & Wakefield
Associate Market Director – Research, Cushman & Wakefield
Phoenix is among the top-performing large metro economies in the west with one of the strongest industrial markets in the country. The local economy has strengthened with year-over-year growth in nonfarm jobs. The total included 12,700 industrial sector jobs within the manufacturing, construction, natural resources & mining, transportation, warehousing & utilities and wholesale trade sectors. Construction topped the list with 7,200 jobs accounting for 57 percent of the new industrial positions this year. As a whole, the industrial employment sectors make up 19 percent of the total employment base within the Metro Phoenix region. With housing gaining momentum in the near term, it will in turn fuel continued demand for industrial space, particularly among mid-sized users who in the aggregate are critically important to the Phoenix industrial market.
The Southwest Phoenix industrial submarket experienced a steady decline in vacancy, as four of the top five occupancies for the quarter transpired within this area. McLane Food Service occupied their newly developed distribution space, contributing nearly 350,000 square feet of absorption to this submarket. Additionally, Dircks Moving & Logistics and Mattress Firm each occupied over 170,000 square feet in the Southwest Phoenix submarket. Inland Kenworth also contributed over 98,000 square feet to this figure by taking possession of their built-to-suit truck service facility.
While the Southwest Phoenix submarket accounted for a collective abundance of occupancy growth, the largest single gain for Q1 2016 was the new REI distribution facility. This pulled the Glendale submarket out of the negatives and helped close out the quarter with over 387,000 square feet of absorption. The much anticipated 400,000 square feet project is the largest completion of the 12 new buildings with that project.
Leasing activity is up since the last quarter of 2015 and demand remains strong, especially in top-shelf general industrial – multi-tenant space valleywide.
Several trends have become clear for the outlook of 2016. First, expect a lot of conversation on clear height. The 36-foot clear height is the new minimum, with some retailers looking at 40-foot or 42-foot clear height to accommodate needs. Second, power, infrastructure and trailer storage is becoming more of a necessity, where it used to be a luxury. Third, expandability and parking are a must, as well as air conditioned space for ecommerce space.
Currently, there is 2.7 msf of new industrial product set to deliver throughout 2016, of which 67 percent is built speculatively. It is important that our market continues attracting new businesses to the Valley and expanding existing tenants will help maintain our healthy market condition.
Bryon is an industry veteran with more than 30 years of experience in commercial real estate. He has been recognized with numerous industry related awards. Bryon can be reached at 602-224-4470 or at email@example.com.
Curtis Hornaday oversees the Cushman & Wakefield Research Department in the Phoenix office. Curtis can be reached at firstname.lastname@example.org.
Commercial 360° Seminar
FRIDAY, MAY 27, 2016 – 9:00 AM TO 12:30 PM
This seminar is for anyone wanting to learn about growth and development in Arizona.
Learn from industry leaders regarding Arizona and Salt River Pima economic development, land availability, trust land funds, energy and water plans as well as a current market update – hear how all these factors effect the state’s growth and the real estate industry. Tempe Mayor Mark Mitchell will also provide some detail on how projects in Tempe are creating a positive influence for the state of Arizona.
Credit: 3 hrs. Legal Issues