The Phoenix industrial market is undergoing a major shift moving into the fourth quarter of 2024, marked by a surge in new development that has pushed vacancy rates to 11.7%, up from just 4.1% in mid-2022. This rise in vacancies, especially in properties over 100,000 SF, has slowed rent growth from the double-digit increases seen in recent years. However, demand remains strong, with 10.3 million SF of net absorption over the past year driven by the logistics and manufacturing sectors. Smaller bay spaces under 50,000 SF are still highly sought after, maintaining lower vacancy rates than larger spaces.
With 29.4 million SF under construction, Phoenix has one of the largest industrial development pipelines in the country, focused mainly on large properties in areas like the West Valley and Phoenix-Mesa Gateway Airport region. This new supply has made Phoenix a hot spot for industrial investment, bringing in $2.5 billion in sales in the first nine months of 2024 alone. Despite the rise in vacancy, the influx of institutional investment and substantial contributions from companies like TSMC and Intel in semiconductor manufacturing is strengthening Phoenix’s position as a key industrial hub, supporting long-term growth and job creation in the region.
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