Avison Young releases its First Quarter 2024 Industrial Market Report for Phoenix
Phoenix, AZ – Avison Young recently released its First Quarter 2024 Phoenix Industrial Market Report.
The first quarter of 2024 saw a whopping 10 million square feet (sf) of new industrial product come on the market, surpassing the previous quarter's figures. Over the past year, industrial deliveries in Phoenix have outpaced other major industrial markets and there is no anticipation of a slowdown. Currently, 36.9 million sf remain in the development pipeline, and significant projects are expected to be completed this year, such as a 1.2 million-sf Prologis building in the Glendale (Northwest) submarket, leased by Amazon.
“Phoenix continues to lead the country with speculative warehouse space deliveries. With 4.6 million sf of positive absorption during Q1 2024, the newly developed buildings were justified, and demand is still strong. While more deliveries in 2024 will undoubtedly elevate vacancy rates moving forward, the Phoenix market remains the top U.S. location for distribution, warehousing, and manufacturing occupiers,” said Chris Lydon, SIOR, Avison Young Principal – Phoenix.
Q1 2024 witnessed a surge in positive absorption, totaling 4.6 million sf, 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, it is important to recognize that Amazon’s aggressive leasing activity prominently drove this quarter’s positive absorption, as it signed more than 3 million sf in direct leases in the Northwest and Southeast regions.
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. This is a result of developers that have been 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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