Phoenix industrial market: Declining pre-leasing rates highlight gap between vacancy and availability

  • The Phoenix industrial market is experiencing continued growth, marked by new developments and a declining rate of preleased under-construction inventory. While between 2021 and 2022, 80% of all new industrial construction was partially or fully pre-leased, this trend has reversed because of the intensified development activity in 2023 and on.
  • Currently, there's a noticeable gap between vacancy and product availability. Availability includes both spaces listed as available before lease expiration and pre-leasing of unreleased or under-construction space. As of Q1 2024, only 44% of the under-construction inventory was pre-leased. Consequently, any new deliveries falling outside the pre-leased category will further increase the direct vacancy rate, which now stands at 9.7% for the Phoenix industrial market.
  • While vacancy rates continue to be a vital indicator of the health of a market, the availability rate expresses where future vacancy rates are heading if new deliveries are not pre-leased during their under-construction period. In the case of the Phoenix market, it would appear vacancy rates will continue to rise in the foreseeable future as the spread between vacancy rates and the availability rate continues to grow.

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