Phoenix Industrial Development Leads the U.S.

In line with last year’s trend, Phoenix has solidified its position as the leading market for industrial development in the country. The region’s growth is propelled by high-tech sectors, including semiconductor manufacturing and data centers, which are infusing the area with advanced technology and innovation.

This surge in development not only boosts the local economy but also enhances Phoenix’s appeal as a hub for cutting-edge industries. Additionally, the city’s strategic location and robust infrastructure further contribute to its appeal for industrial investment.

A total of 375.7 million square feet of industrial space was under construction across the nation as of June—representing 1.9 percent of stock—according to a recent CommercialEdge report. Phoenix’s development pipeline was the largest in the nation.

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In June, Phoenix’s under-construction pipeline stood at almost 39 million square feet across 125 properties, accounting for 9.3 percent of the total stock, surpassing by far the national average of 1.9 percent.

In the first six months of the year, almost 10 million square feet of industrial space broke ground in the metro in 51 properties, representing 2.5 percent of the total stock. The index was significantly higher than the national average of 0.6 percent, according to CommercialEdge data.

Notable properties currently underway include Taiwan Semiconductor Manufacturing Co.’s construction of the largest industrial property in Greater Phoenix, rising in the metro’s North Gateway submarket. The facility at 5088 W. Innovation Circle will be the most advanced semiconductor fabrication plant on U.S. soil, spanning 805 acres and encompassing a total of 3.8 million square feet. Construction began in 2021, while completion is expected at the beginning of next year.

Lucid Motors commenced construction on Lucid Advanced Manufacturing Plant-1, a 2.8 million-square-foot facility in Casa Grande, with completion planned later this year. Spanning over 470 acres, the development will become one of the largest industrial facilities in Phoenix.

Deliveries maintain a steady flow

Year-to-date through June, 17.4 million square feet of industrial space came online in Phoenix. Deliveries accounted for 4.3 percent of the market’s total stock, surpassing almost four times the 1.1 percent national average.

Among peer markets, the metro outpaced New Jersey (4.8 million square feet), Chicago (8.8 million square feet) and Atlanta (4.1 million square feet) for industrial deliveries, but trailed Dallas (20.4 million square feet) and the Inland Empire (18 million square feet).

At the beginning of 2024, US Capital Development completed The Paloma Vista Logistics Center Building 1, a 1 million-square-foot cross-dock facility located in Buckeye, Ariz.

In May, Kohler Co. also officially opened its almost 1 million-square-foot manufacturing facility in Casa Grande, Ariz. The developer broke ground on the project more than two years ago.    

Sale prices higher than the national average

Phoenix’s industrial sales volume registered more than $1 billion in transactions in the first half of 2024. Spread across 86 properties, almost 6.8 million square feet of industrial space traded across the metro.

Facilities changed hands for an average of $164.49 per square foot, surpassing the $134.92 national average. New Jersey ($244.88 per square foot) and the Inland Empire ($229.61 per square foot) recorded higher average prices, while Chicago ($98.52 per square foot) lagged behind.

In May, Stonelake Capital Partners expanded its Phoenix footprint with the acquisition of two industrial properties totaling 726,802 square feet in Goodyear, Ariz. CIM Group sold the pair for $108 million in an all-cash deal that was one of the largest industrial transactions in metro Phoenix this year.

EQT Exeter has recently purchased I-10 Gateway, a 641,906-square-foot industrial facility in Buckeye, Ariz., for $60.1 million. Developer BET Investments sold the vacant property, which represents the first phase of Buckeye I-10 Logistics, a 145-acre master-planned park.

Vacancy rates continue to grow

The industrial vacancy rate in Phoenix clocked in at 5.2 percent as of June. Indianapolis (5 percent) registered the lowest rate among peer markets, while Chicago (7.0 percent) and New Jersey (7.1 percent) fared worse.

In one of the the most significant recent deals in the metro, Amazon signed a 1 million-square-foot, full-building lease in Buckeye, Ariz. The company closed the 10-year lease at Paloma Vista Logistics Center’s Building B, located at 15301 W. Northern Ave. Tenant improvement plans have been submitted and include architectural, electrical, mechanical and plumbing changes.

Back in March, Amazon committed to another 10-year lease at The Cubes at Glendale’s Building B, a newly built 1.2 million-square-foot industrial facility in Phoenix’ West Valley. The submarket became an industrial hotspot in recent years, due to strong labor market access, a simplified tax system and low cost of doing business.

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