2024 Arizona Industrial Market Report
Arizona Key Findings
- Increased competition from fresh supply is slowing rent growth. Average asking rents increased by 2.7% in the past year, down from 14.6% in late 2022.
- The overall quantity of vacant space in buildings 100,000 SF or larger has increased by 30 million SF since Q4 2019, bringing the vacancy rate among these assets to a record 16.9% by year-end 2024.
Market Snapshot
- Number of Transactions: 880
- Months to Sale: 5.4
- Sales Volume: $4.7B
- Average Sale Price per SF: $175
- Cap Rate: 6.6%
- Vacancy Rate: 17.1%
- Rent Growth: 3.4%
- Average Market Asking Rent per SF: $13.82
- SF Under Construction: 24M
- SF Delivered: 38M
- SF Absorbed: 14M
Mesa
Market Overview
Mesa’s industrial fundamentals have improved dramatically over the last decade, owing to a near-complete absence of new supply and consistent lease demand. Though unstable demand over the last three years has allowed vacancies to rise from the sub-2% area in early 2022 to 6.7%, circumstances remain tight, and availabilities are significantly lower than the submarket’s historic average. Due to vacant space becoming more difficult to find, net absorption is likely to be limited unless new supply is introduced through ground-up construction or adaptive reuse.
Gilbert
Market Overview
Gilbert is experiencing supply-related challenges. Over the last 18 months, a rush of massive speculative industrial building has flooded the submarket. The increase of deliveries contributed to a rise in vacancy from 3.7% in mid-2022 to 25.1% today, as significant supply pressure outweighed strong leasing activity. Vacancy is expected to stay elevated in the coming quarters as the submarket digests recent supply increases. After dropping significantly in 2023, investment volume increased in 2024 as investors sought out the submarket’s extensive inventory of small- and mid-bay homes. In 2024, industrial buildings sold for approximately $303 million, up from less than $100 million in 2023.
Chandler
Market Overview
Chandler is one of Phoenix’s key advanced industrial areas, with a highly educated workforce and strong infrastructure to support growth. Intel is the submarket’s largest occupier, with their Ocotillo site spanning 700 acres in southwest Chandler. Underlying industrial demand has been relatively strong. The submarket’s net absorption during the last year was 790,000 square feet. At the same time, developers finished 880,000 square feet, increasing vacancy from 6.1% a year ago to 6.2% today. Rent growth has slowed dramatically over the last 18 months, mirroring global market trends. The average asking rent increased by 2.3% over the last year.
