Phoenix Industrial Market Report
Phoenix Key Findings
Past 12 Months | Source: CoStar Group
- The industrial sector in Phoenix is experiencing one of the largest supply waves in history, with around 38 million square feet in industrial deliveries over the past 12 months.
- Absorption levels increased to 11.7 million square feet during the same timeframe. This marked the third-highest level of absorption in the U.S.
- Vacancy is highest for industrial facilities that are 100,000 square feet or greater.
By the Numbers
- SF Delivered: 38M SF ↓ from Q2 2024
- SF Absorbed: 11.8M SF ↓ from Q2 2024
- Sales Volume: $3.2B ↑ from Q2 2024
Phoenix Demographics
Past 12 Months | Source: CoStar Group
- Unemployment Rate: 3.3%
- Current Population: 5,143,982
- Households: 1,961,713
- Average Household Income: $87,478
The Phoenix metro added 48,800 jobs through August 2024, which outpaced many markets in the U.S. Residents are drawn here for the variety of jobs available in the metro, as well as the relative affordability of the city. Phoenix will also see new job growth from companies like Taiwan Semiconductor Manufacturing Company (TSMC), Amkor, and Intel. TSMC will bring the most new job additions to the metro as the firm announced it will now add a third fab to its development in North Phoenix.
Phoenix Industrial Market Performance
After the large number of new industrial additions, leasing activity has struggled to keep up with supply. However, firms like Logistics Plus and Amazon aided industrial absorption in Phoenix by leasing around 4 million square feet, combined, in west Phoenix submarkets. This brought absorption metrics for the logistics, construction, and manufacturing segments 20% above 2019 levels.
There is still 26.4 million square feet of industrial developments on the way, which is expected to keep vacancy high going into 2025. This increase in new construction has also caused rent growth to decrease. With developments not coming to a stop, rent growth is forecast to slow to the lowest level in a decade over the next year as demand balances with new supply.
Phoenix Industrial Properties Underway
The large influx of deliveries and the remaining square footage on the way have caused Phoenix to rank as the highest construction market for industrial properties. Areas in western Phoenix, such as Glendale, Goodyear, and Tolleson, made up more than half of the metro’s construction activity since 2019. The eastern side of Phoenix also saw an increase in industrial construction with around 16 million square feet delivered near the Phoenix-Mesa Gateway Airport.
Sales Activity
Sales volume throughout 2024 has outpaced historical trends in Phoenix. There was about $2.5 billion in sales throughout the opening nine months of 2024, and sales have increased each quarter of the year so far. There are several upcoming loan maturities for 2025, which could keep sales momentum stable next year.
