Despite Some Cooling in Q4 2022, Phoenix Industrial Market Remains Very Strong

The Phoenix industrial real estate market remained one of the strongest in the country during the fourth quarter of 2022, with rental rates continuing to climb and vacancy levels remaining stubbornly low, even as investment activity dropped significantly, according to new research from Transwestern Real Estate Services (TRS).

Transwestern tracks industrial properties in nine critical Phoenix submarkets, whose industrial inventory totaled 350 million square feet of space as of the close of the fourth quarter of 2022. There is 45 million square feet of industrial space in construction, down from 55 million square feet last quarter, and nearly 120 million square feet of proposed space.

Average asking rent rates jumped almost 10% since just last quarter, closing at $11.70 per square foot, compared to $10.77 at the end of the third quarter. However, investment activity almost halved during the quarter, dropping from $960 million in the third quarter to $593 million in the fourth.

“The industrial market had a very impressive streak of eight quarters of record-breaking investment levels,” said Jennifer Barili, Senior Research Analyst, Transwestern. “While there was a marked decrease this quarter, the activity level was still right in line with pre-pandemic averages. That torrid rate simply couldn’t continue, and the hot investment market needed to return to equilibrium.”

Additional highlights from the quarter include:

  • Overall vacancy closed the quarter at 4.8%, a slight increase from last quarter’s 4.6% and down year-over-year from 5.0%, and still considered a very tight market.
  • Availability dropped from 52.2 million square feet at the end of the third quarter to 49.4 million square feet in the fourth.
  • The West Valley submarket remains the most available submarket, though at only 6.6% availability, while the Camelback Corridor and Scottsdale submarkets are each at 1.0%.
  • There was 7.1 million square feet of absorption in the quarter, compared to 5.0 million square feet a year ago.

Download the fourth quarter 2022 Phoenix industrial report here.

Transwestern Real Estate Services (TRS) adds value for investors, owners and occupiers of all commercial property types through a comprehensive perspective and by providing solutions grounded in sound market intelligence. Part of the Transwestern companies, the firm applies a consultative approach to Agency Leasing, Asset Services, Tenant Advisory + Workplace Solutions, Capital Markets, and Research & Investment Analytics.

The privately held Transwestern companies have been delivering a higher level of personalized service and innovative real estate solutions since 1978. Through an integrated, customized approach that begins with good ideas, the firm drives value for clients across commercial real estate services, development, investment management, and opportunistic endeavors for high-net-worth investors. Operating from 33 U.S. offices, Transwestern extends its platform capabilities globally through strategic alliance partners whose unique geographic, cultural, and business expertise fuels creative solutions.

Photo: Industrial: Avondale Commerce Center in Avondale. Photo courtesy of Colliers International of Arizona

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