With ample land available for development and relatively low construction costs, users in the Phoenix industrial market often decide to build their own facility instead of leasing space in existing properties. However, leasing activity in existing properties surpassed 13.6 million square feet in 2016, even with 2.2 million square feet of build-to-suit completions in 2016 and another 1.0 million square feet of build-to-suit under construction throughout Metro Phoenix.
Although the volume of leases signed in existing properties declined from previous years due to increased build-to-suit activity, the average lease size continues to increase year-over-year, a sign of renewed interest in the Phoenix market from large corporate users.
Much interest from large users continues to be focused in the West Valley which has always been a popular area for large corporate users. There are currently 55 requirements of at least 100,000 square feet throughout the Valley with 30 of those users looking in the West Valley.
Large spaces that can accommodate these tenants are beginning to dwindle after sitting vacant during the economic downturn. As the Phoenix industrial market continues to expand, developers have moved quickly to meet the increased demand from large tenants in the market.
“For the first time in the past seven years, the Phoenix market is open to speculative industrial projects in the West Valley, said JLL Managing Director, Anthony J. Lydon, “Developers and equity partners are recognizing the strong demand for more availability in the West Valley from scalable and regional users and are developing industrial parks with build-to-suit and speculative options. Opus Goodyear Crossing, Riverside 43 and Southwest Industrial Center are all examples of this. We are excited about both the absorption of speculative space and the build-to-suit activity happening in our market right now.”
Large industrial users who need modern, functional space have pre-leased 61.1 percent of new product delivered in 2016. Submarkets like the Northwest and Grand Avenue, where speculative construction has been limited over the past few years, are finally seeing their first speculative projects.
About the author
Kiana Cox is a senior research analyst in the JLL Phoenix office who works closely with brokerage and support professionals throughout the western region, as well as colleagues throughout the global JLL organization, to provide best-in-class research that differentiates JLL.