What is Happening with Phoenix’s Industrial Construction Market?

What is Happening with Phoenix's Industrial Construction Market

The 2020 commercial real estate market has seen some unusual challenges with the pandemic. There are places where building projects have paused. In Phoenix, however, industrial development has continued and appears to be on track for the year. Here is more on what is happening with Phoenix’s industrial construction market:

According to a recent report, Phoenix is experiencing a record year for construction. Presently, approximately 10.6 million square feet of industrial space is under construction in the Valley.

Northern 101 Commerce Center

In June, construction started on Northern 101 Commerce Center in Glendale. This 388,621 square-foot space is located at 7860 N. 106th Ave. and is planned for industrial and office use. The new industrial space was designed by LGE Design Build’s in-house architecture firm, LGE Design Group, and is being developed by local developer Creation. The project will include four state-of-the-art buildings with up-to-date features and the parking and height ratios for industrial transport. The property is located west of the Loop 101 with access to the Central, North, and West Valley. The development is expected to finish during the first quarter of 2021.

Second Quarter Summary Shows Significant Industrial Growth

According to a July second quarter summary by Digitek Solutions, during 2020?s second quarter, Phoenix’s industrial market saw its “highest construction deliveries since the fourth quarter of 2013.” Digitek Solutions found that “Phoenix industrial market’s momentum continued into the second quarter with 1,880,638 sq. ft. of positive net absorption, its 41st consecutive quarter of gains.” The second-quarter vacancy was 5.9% marking an increase from the first quarter. At the time of the report, 13,096,560 sq. ft. of industrial space was underway across the Phoenix market, and at the end of the quarter, 40.2% of the space that was under construction had committed tenants. Further, the report showed that several construction projects were focused in the Southwest Valley. Digitek Solutions reported that the most active industries were third-party logistics, manufacturing, and e-commerce.

There were twelve industrial projects totaling 2,224,463 sq. ft. that broke ground in the second quarter in the Phoenix metro area. Of those, Digitek found that 79.2% of projects were planned to accommodate distribution users. Out of all buildings that were under construction, 10,807,636 sq. ft. or 82.5% were being built for distribution or logistics use. The report also found that the Southwest Valley is home to 89.1% of distribution buildings under construction. Large space transactions were prevalent during the second quarter, with eight transactions involving buildings over 100,000+ sq. ft. Twenty-seven of the buildings under construction at that time were over 100,000 sq. ft.

Phoenix Data Center Construction Projects are Up

According to a recent article, the pandemic has increased demand for data centers to support digital connectivity, and Phoenix has emerged as a leader in this market. According to JLL?s 2020 Mid-Year Data, Phoenix ranks as a top location among all U.S. markets, performing second in the nation for year-over-year absorption. The report reflected that metro Phoenix’s industrial construction market includes a strong representation of data center projects.

Laura B. Bramnick is an experienced Arizona real estate attorney who can help you manage all aspects of your Arizona real estate matter. If you are seeking an exceptional, client-driven real estate lawyer in Scottsdale, Phoenix, Sedona, and throughout the State of Arizona, contact Laura B. Bramnick to schedule your consultation.

 

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