1. business and industrial
2. manufacturing

Q1
2015
MARKET
REPORT
PHOENIX
INDUSTRIAL
Phoenix Industrial Market Overview
The Phoenix industrial market continued to
improve in the first quarter of the year, posting
its lowest percentage vacancy (11.8%) since Q1
2008. In that 7-year time period, the Valley’s
industrial inventory gained over 32 million
SF of warehouse/distribution, manufacturing
and flex space. The most recent seven
quarters have yielded the most productive net
absorption gains during this period as well.
This all coincides with a strong return to market
fundamentals and an improving U.S. economy.
demand remains strong for data and call
centers and manufacturing facilities, while
the Southwest Valley continues as the center
for large distribution buildings. Multi-tenant
distribution and warehouse projects are
Absorption/Vacancy
in SF, 2005-2015
16.9%
12.00
18.0%
15.8%
Leasing activity has remained steady
throughout the past seven years, but the
activity level signals that there is quality product
for lease throughout the Phoenix area. With
all the available space, rental rates have yet to
return to pre-recession levels, but have been
gaining ground slowly each quarter.
10.00
-4.00
2.0%
Using available and inexpensive funding
resources, built-to-suit and spec. projects
have gained momentum in the market in
which nearly 2.4 million SF of product is under
construction. Over 2.8 million SF was delivered
to market inventory this past quarter alone.
-6.00
0.0%
The entire industrial market has its bright
spots in different areas. The Southeast Valley’s
14.2%
8.00
6.00
4.00
9.7%
16.0%
13.6%
12.3% 12.0%
12.6%
14.0%
12.0%
11.8% 10.0%
2.00
0.00
-2.00
8.0%
6.0%
7.9%
7.7%
4.0%
Absorption
Vacancy
currently in high demand for mediumsized space. Chandler and the Sky Harbor
Airport area remain the strongest areas for
new multi-tenant building activity.
The Valley’s industrial market closed Q1
2015 with a vacancy rate of 11.8%, 20-basis
points lower compared to last quarter. Net
absorption landed at 1,337,703 SF. The
Southwest and Southeast Valley combined for
nearly 1 million SF of that total.
Overall asking rental rates saw a minor
drop of -0.4% which does not seem to be an
indicator of any specific trend. Leasing activity
was generally lower but within historical norms
and quarterly fluctuations.
In the largest lease transaction of the first
quarter, Tuesday Morning leased 593,600 SF
at Liberty Logistics Center, 563 S. 63rd Ave. in
Phoenix. The company is expected to move
into the vacant facility by September of this
year. The facility will be used as a Western U.S.
distribution center for the discount retailer.
The largest sale transaction for the quarter
was the $10.2 million sale of 651 N. 101st Ave.
in Avondale. The 73,050 SF general industrial
building was bought by Cummins Rocky
Mountain and sold by Granco Enterprises. Price
per SF was calculated at $139.63.
Top 5 Industrial Construction Projects
( ) No. of buildings
Project
Address
Major Tenant
Building SF
Delivery
10 West Logistics Center
Chandler Crossroads
Discovery Business Campus
Coldwater Depot
Parc 17 (3)
NWC 59th Ave. & Van Buren St., Phoenix
2560 E. Queen Creek Rd., Chandler
1900 S. Country Club Way, Tempe
N. 127th Ave. & N. Elesio Felix Jr Way., Avondale
7th Ave. & Interstate 17, Phoenix
Spec.
FedEx
Shutterfly
Spec.
Spec.
659,618 SF
316,034 SF
237,000 SF
187,000 SF
177,700 SF
Q3 2015
Q2 2015
Q4 2015
Q3 2015
Q3 2015
Phoenix Industrial Submarket Map
1. Airport Area Submarket
- N. Airport
- S. Airport N. of Roeser
- S. Airport S. of Roeser
- SC. N. of Salt River
- SC. S. of Salt River
2. Northeast Submarket
- Central Phoenix
- Scottsdale Airpark
- Scottsdale/Salt River
3. Northwest Submarket
- Deer Valley/Pinnacle Peak
- Glendale
- Grand Ave.
- N. Black Canyon
- N. Glendale/Sun City
- W. Phx N. of Thomas Rd.
- W. Phx S. of Thomas Rd.
4. Southeast Submarket
- Chandler
- Chandler Airport
- Chandler N./Gilbert
- Falcon Field/Apache Jct
- Mesa
- Tempe East
- Tempe Northwest
- Tempe Southwest
5. Southwest Submarket
- Goodyear
- SW. N. of Buckeye Rd.
- SW. S. of Buckeye Rd.
- Tolleson
The information and details contained herein have
been obtained from third-party sources believed to
be reliable; however, Lee & Associates Arizona has not
independently verified its accuracy. Lee & Associates
Arizona makes no representations, guarantees, or
express or implied warranties of any kind regarding
the accuracy or completeness of the information and
details provided herein, including but not limited to
the implied warranty of suitability and fitness for a
particular purpose.
Interested parties should perform their own due
diligence regarding the accuracy of the information.
The information provided herein, including any sale
or lease terms, is being provided subject to errors,
omissions, changes of price or conditions, prior sale
or lease, and withdrawal without notice, by third-party
data source providers.
third-party database for the proprietary analysis
of specific warehouse, distribution, manufacturing
and Flex properties above 10,000 SF in the Phoenix
Metropolitan Area.
The Lee & Associates Phoenix industrial market
report compiles relevant market data by using a
Market report analysis by:
Matt DePinto, Senior Research Analyst
© Copyright 2015 Lee & Associates Arizona. All rights
reserved.
Phoenix Industrial Submarket Data
Industrial
Submarkets
Sky Harbor Airport
Net Absorption
Q1 15
YTD Total
Building Completions
Q1 15
YTD Total
Under
Construction
Asking
NNN Rate
Change
from Q4 14
North Airport, S Airport N of Roeser, S Airport S of Roeser, SC N of Salt River, SC S of Salt River
Distribution/Warehouse
32,760,378
2,939,793
9.0%
184,539
184,539
8,998,225
1,123,379
12.5%
(9,688)
(9,688)
Manufacturing
Flex
Total
Northeast Valley
Vacancy
Total SF
Q1 15
Total
Inventory
5,149,694
896,137
17.4%
(2,915)
46,908,297
4,959,309
10.6%
171,936
427,489
604,658
604,658
$0.50
4.2%
-
-
$0.48
0.0%
-
(2,915)
-
171,936
427,489
-
-
$1.03
13.0%
604,658
604,658
$0.61
5.2%
Central Phoenix, Scottsdale Airpark, Scottsdale/Salt River
Distribution/Warehouse
7,087,667
761,730
10.7%
2,847
2,847
-
-
-
$0.85
0.0%
Manufacturing
3,013,372
43,356
1.4%
(7,198)
(7,198)
-
-
-
$0.90
-2.2%
5,144,148
691,218
13.4%
(51,711)
(51,711)
-
-
-
$0.93
3.3%
15,245,187
1,496,304
9.8%
(56,062)
(56,062)
-
-
-
$0.89
0.0%
Flex
Total
Northwest Valley
Deer Valley/Pinnacle Peak, Glendale, Grand Ave., N Glendale/Sun City, North Black Canyon, W PHX N of Thomas, W PHX S of Thomas
Distribution/Warehouse
37,549,957
2,998,873
8.0%
12,888
12,888
-
-
$0.52
Manufacturing
11,294,503
632,387
5.6%
215,033
215,033
-
173,000
173,000
$0.52
2.0%
6,567,662
1,331,460
20.3%
13,950
13,950
-
-
-
$1.02
4.1%
55,412,122
4,962,720
9.0%
241,871
241,871
173,000
173,000
$0.68
1.5%
Flex
Total
Southeast Valley
220,470
0.0%
Chandler Airport, Chandler, Chandler N Gilbert, Falcon Field/Apache Jct, Mesa, Tempe East, Tempe Northwest, Tempe Southwest
Distribution/Warehouse
48,212,735
4,079,156
8.5%
453,690
453,690
Manufacturing
24,539,708
3,751,625
15.3%
28,627
28,627
Flex
14,900,309
2,400,356
18.4%
(15,690)
(15,690)
Total
87,652,752
10,231,137
12.1%
466,627
Southwest Valley
220,470
466,627
1,015,326
164,555
164,555
-
$0.53
0.0%
$0.61
0.0%
297,000
-
-
$0.99
-1.0%
1,312,326
164,555
164,555
$0.68
-1.4%
1,250,328
1,250,328
$0.36
0.0%
160,000
160,000
$0.32
6.6%
Goodyear, SW N of Buckeye Rd, SW S of Buckeye Rd, Tolleson
Distribution/Warehouse
72,711,981
10,055,670
13.8%
403,552
403,552
846,615
Manufacturing
11,241,693
2,305,849
20.5%
107,978
107,978
54,200
Flex
1,385,254
266,325
19.2%
1,801
1,801
85,338,928
12,627,844
15.0%
513,331
513,331
198,322,718
20,835,222
10.5%
1,057,516
1,057,516
Total
-
-
-
$0.57
0.0%
1,410,328
1,410,328
$0.36
2.2%
2,509,900
2,019,541
2,019,541
$0.44
0.0%
-4.3%
900,815
Total Submarkets
Distribution/Warehouse
Manufacturing
59,087,501
7,856,596
13.3%
334,752
334,752
54,200
333,000
333,000
$0.44
Flex
33,147,067
5,585,496
16.8%
(54,565)
(54,565)
297,000
-
-
$0.98
0.0%
290,557,286
34,277,314
11.8%
1,337,703
2,861,100
2,352,541
2,352,541
$0.54
-0.4%
Phoenix Metro Total
1,337,703
Q1 2015 Top Industrial Leases
Property Name
Liberty Logistics Center I
Airport I-10 Business Park
DCT One
Airport I-10 Business Park
Reywest Industrial Park
Address
563 S. 63rd Ave., Phoenix
3000 S. 24th St., Phoenix
101 N. 104th Ave., Tolleson
3000 S. 24th St., Phoenix
121 S. 39th Ave., Phoenix
Submarket
SW N of Buckeye
S Airport N of Roeser
Tolleson
SW N of Buckeye
SW N of Buckeye
Type
Distribution
Distribution
Warehouse
Distribution
Warehouse
Tenant Name
Tuesday Morning
DLS Worldwide
Inventure Foods
Anixter International
Summit Warehouses
SF
Lease Type
593,600
New
78,843
New
67,380
New
63,470
New
62,972
New
Q1 2015 Top Industrial Sales
Property Address
Buyer
Seller
Type
Sales Price
SF
PSF
651N.101stAve.,Avondale
CumminsRockyMountain
GrancoEnterprises
GeneralInd.
$10,200,000
73,050
$139.63
5330 E. Washington St., Phoenix (2)
3167 W. Armstrong Pl. Chandler
2432 W. Birchwood Ave., Mesa
2950 E. Broadway Rd., Phoenix (2)
Covington Asset Mgmt.
Store Capital
Dividend Capital
Viawest Group
$8,962,189* 110,622
$8,080,000
62,533
$6,500,000
81,425
$6,302,500
95,355
$81.01
$129.21
$79.83
$66.10
*Allocated price from portfolio sale
City of Phoenix
Warehouses
Kovach, Inc.
Manufacturing
EverWest RE Partners, LLC Distribution
CAN Enterprises
Warehouses
Economic Indicators
as of Q1 2015
Unemployment
U.S.
Arizona
Phoenix Metro
Steady at 5.5%
Down to 6.6%
Down to 5.9%
U.S. Consumer Price Index (CPI)
Gross Domestic Product (GDP)
Up 0.4%
Up 2.2%
Source: Bureau of Labor StaƟsƟcs, Arizona Dept. of Economic
Security, Eller College of Management, University of Arizona
Buyer Type
Q1 15 Sales
2.0%
51.0%
22.0%
8.0%
Private
REIT
Private Equity
User
Institutional
About Lee & Associates
Lee & Associates Arizona specializes in providing
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to the industrial, office, land and investment
sectors of the Phoenix commercial real estate
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