Phoenix Industrial Sector closing in on 2016 in strong postion

PHOENIX - Oct. 15, 2015 - PRLog -- Phoenix Industrial Sector closing
in on 2016 in strong position

PHOENIX, AZ – The Phoenix industrial market finished the third quarter in great shape. In fact, most indicators show that this quarter’s numbers are finally at a point not seen since 2007. For the past 8 years this sector has battled back each quarter, only to get knocked down again and then recover somewhat the next quarter.

The good news is that it’s been mostly uphill during this period, which is a testament to the quality fundamentals of this market. Abundant, well-priced inventory is scattered throughout a diverse geography and able to satisfy most needs of the lessee and buyer. There are sections with obsolete product, but the construction pipeline is poised to meet the replacement needs of the sector.

Given all the success of the industrial sector, it could be doing even better if the Valley’s single-family housing market had not fallen so deeply. All the service and product industries tied to the housing market such as kitchen cabinets, counter tops, windows, roofing suppliers, pool companies and the like, were forced to scale back or go back to a garage-based business until the market turned around. There has definitely been a shift back as the housing recovery is beginning to take root.

This quarter, the Phoenix industrial market vacancy dropped 40-basis points to 11.8%—the lowest percentage since Q1 2008. The Northwest and Northeast submarkets enjoy the lowest vacancy at 9.1% and 9.3% respectively. Net absorption for the quarter posted at 1,860,934 SF and 3,919,612 SF year-to-date. These impressive totals were not fully anticipated at the end of Q2, but as with the history of the sector, figures rebounded well in Q3.

"The construction pipeline continues unabated at this point with many speculative projects, which bodes well for confidence in the sector," said Matt DePinto, Senior Research Analyst with Lee & Associates. "It’s also a good time to build from scratch while it is still possible to do so financially."

Construction continues to be brisk in most sectors. Properties under construction totaled 3,501,024 SF this quarter, nearly double last quarter’s total. New buildings delivered to market inventory this quarter were 972,151 SF, with an impressive year-to-date total of 6,630,366 SF.

Overall asking rents remain flat but have risen especially in the Sky Harbor and Deer Valley areas. Overall rents totaled $0.50 per SF, per month ($6.36 annually). Manufacturing and large distribution properties command the lowest rates while Flex buildings average near $1.00 per SF, per month ($12.00 annually).

In the largest sales transaction, 9 industrial buildings in Phoenix and Gilbert were purchased by Lion Industrial Trust for $80,000,000 or $61.48 per SF.

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Lee & Associates Arizona specializes in providing exceptional commercial brokerage services to the industrial, office, land and investment sectors of the Phoenix commercial real estate market. The Phoenix office was established in 1991 and is now recognized as one of the most successful brokerage firms in the state. Each of our nationwide Lee & Associates offices has a strong local ownership combined with a powerful platform from the national Lee & Associates network.