Phoenix industrial market report Q3 2021November 1, 2021
The unemployment rate in the Phoenix MSA fell to 4.8 percent in August 2021, 90 basis points higher than the unemployment rate in February 2020.
The Phoenix consumer price index increased by 5.1 percent year-over-year as of August, nearly equating the U.S. city average increase of 5.3 percent in the same timeframe.
Industrial jobs have increased by 4.5 percent since the start of 2021, representing a net gain of 14,600 jobs.
The national price of construction materials has increased by 35.3 percent from January to August 2021. This headwind has played a factor in the increased rents and asset prices for Phoenix industrial properties.
Leasing activity has remained strong during the pandemic, with a 65.1 percent increase in annualized activity relative to the prior 10-year average.
Annual leasing activity is on pace for 19.9 msf. Barring a weak Q4, leasing activity should reach a new high-water mark in 2021.
Net absorption since 2020 is much higher than any other period in the last two decades. There has been 30.2 msf of positive net absorption from 2020 to Q3 2021; in the previous 20 years there was only 76.1 msf of total net absorption.
Approximately 47.7 percent of the industrial sf currently under construction is concentrated in buildings that are 500,000 sf or larger. This is a result of an influx of industrial demand from large corporations setting up or expanding operations in the Phoenix MSA.
The vacancy rate has been declining for most of the past decade and is currently at a post-2000 low of 6.4 percent.
Asking rents have grown by 16.8 percent since the start of the pandemic. From Q1 2015 to Q4 2019, asking rents rose by 24.7 percent.
Asking rents have increased by $0.18 psf per quarter on average since the start of the pandemic. From Q1 2015 to Q4 2019, asking rents increased by approximately $0.07 psf per quarter on average.
Q3 activity in industrial investment was at an all-time high in the Phoenix MSA, with more than $1.3B in total sales volume.
Park 303 Phase 1, a 1.3 msf park located in Glendale, sold for $186M in Q3. This transaction is the largest single-building industrial sale in Arizona’s history. The building was sold by Lincoln Property to BentallGreenOak, who is leasing the building to Walmart.
The other 9-figure deal that closed in Q3 was American Realty Advisor’s $103M purchase of Lincoln Logistics 40 in Goodyear. Nike paid $70M for the building at 143rd Avenue and Van Buren Street in 2019, later scrapping plans for a factory due to the pandemic.