Phoenix industrial market report

Q1 2024


Deliveries (sf)

The Phoenix Industrial sector began 2024 with a significant addition of 10 million square feet to the market, surpassing last quarter's figures. Over the past year, industrial deliveries in Phoenix have outpaced other major industrial markets. There is no anticipation of a slowdown in deliveries in the coming 24 months, as speculative development that began in 2022 and beyond continues to make its way into the market. Currently, 36.9 million square feet remain in the development pipeline and significant projects are expected to be completed this year such as a 1.2 million square foot Prologis building in the Glendale (Northwest) submarket, leased by Amazon.


Net absorption (sf)

Q1 2024 witnessed a surge in positive absorption, totaling 4.6 million square feet, which stands at more than double the figure recorded in the previous quarter. This substantial increase comes at a time when vacancy rates in the Phoenix Industrial sector are on the rise due to the influx of new developments. However, is it important to recognize that Amazon’s aggressive leasing activity prominently drove this quarter’s positive absorption, as they signed over 3 million square feet in direct leases in the Northwest and Southeast regions.


Vacancy rate (%)

In Q1 2024, vacancy rates in the industrial sector surged to 9.7%, up 570 basis points, more than double what it was a year ago in Q1 2023. Developers are racing to roll out new inventory, anticipating the forthcoming demand driven by continued government backing of semiconductor facilities in the valley. Under the CHIPS and Science Act, the U.S. Department of Commerce inked a non-binding preliminary memorandum of terms with TSMC Arizona, earmarking $6.6 billion in direct funding and $5 billion in loans. This investment is poised to bolster TSMC’s establishment of three plants in Phoenix, catalyzing the AI boom and related industries (VKTR, 2024).

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