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Construction of industrial space in Phoenix hits record levels

Net absorption in Q1 2021 outpaced strong 2020 performance

Phoenix, April 20, 2021 – The Greater Phoenix industrial real estate market maintained a record-breaking pace during first quarter of 2021, according to Colliers’ first quarter report. Construction activity reached an all-time high level, while momentum of net absorption indicates this year will easily outperform 2020.

Approximately 17.8 million square feet of new industrial space is currently under construction, setting a record for building activity. More projects are in the pipeline and expected to start construction later this year. Of this space, 85 percent is being developed in the Northwest and Southwest submarket clusters.

Sarival Logistics Center, a 1.15-million-square-foot distribution center at Loop 303 and Bethany Home Road is one of the largest projects started this year. 10 West Commerce Park in Buckeye began construction of a new 862,000-square-foot distribution facility. The Northwest submarket delivered the most new inventory during first quarter, completing 2.0 million square feet. During the past 12 months this area has delivered more than 5.7 million square feet of new industrial space.

Net absorption during the first three months reached 5.1 million square feet. This figure is equivalent to 38 percent of the total net absorption posted in all of 2020, achieved in just the first quarter. This marked the second consecutive quarter when all five submarket clusters posted positive net absorption. Walmart committed to 1.2 square feet at Park 303 near Loop 303 and Glendale Avenue. Pepsi, the parent company of Gatorade, committed to expand by 750,000 square feet near its current facility at Tolleson Corporate Park.

The vacancy rate at the end of March was 6.6 percent, down 80 basis points over-the-quarter and 110 basis points year-over-year. This is noteworthy, as the decline took place during a period when 2.9 million square feet of new inventory was completed. That new product came to market with just 39 percent vacancy. This illustrates the rapid drive for speculative development and the speed with which large blocks are being leased.

The Northeast submarket area has the lowest vacancy rate at just 3 percent. The Southeast cluster and Airport Area experienced the largest declines in vacancy year-over-year, settling at 5.5 percent and 4.6 percent, respectively.

Overall asking lease rates continued climbing during the first quarter of 2021. They have increased 8 percent year-over-year, finishing the quarter at $0.64 per square foot. This marks a 1.59 percent increase during the first three months of 2021.  The Airport Area again led the market in rental rate increases, rising 14.2 percent year-over-year to $0.81 per square foot. Rapid growth in the Northwest submarket led to 9.2 percent rate increases to $0.67 per square foot.

Manufacturing properties experienced the largest year-over-year rental rate increases, increasing 11.5 percent.  Manufacturing buildings in the Northwest Valley posted the largest increase of all product types throughout Greater Phoenix, increasing more than 18 percent year-over-year.

The combination of increasing rental rates and decline in vacancy propelled the sales of industrial buildings. Investment sales volume during first quarter outpaced the first quarter of 2020 by 1.3 percent. However, it was down 26.1 percent compared to fourth quarter 2020. One of the largest sales involved a four-building, multi-tenant complex formerly known as The Lotus Project. The property contains 473,516 square feet and sold for $91 million.

During the first three months of this year, $831 million in sales volume was achieved. The median price per square foot for buildings sold in first quarter rose 5.83 percent to $127. Cap rates continued compressing to 6.2 percent.

New businesses and investors are racing to Phoenix, creating incredible demand.  Vacancy of industrial space is expected to increase because of construction volume, but rental rates are expected to remain strong and increase through the remainder of the year.

About Colliers International
Colliers (NASDAQ, TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 67 countries, our more than 15,000 enterprising professionals work collaboratively to provide expert advice to real estate occupiers, owners and investors. For more than 25 years, our experienced leadership with significant insider ownership has delivered compound annual investment returns of almost 20% for shareholders. With annualized revenues of $3.0 billion ($3.3 billion including affiliates) and $40 billion of assets under management, we maximize the potential of property and accelerate the success of our clients and our people. Learn more about how we accelerate success at, Twitter @Colliers and LinkedIn.

Colliers in Arizona has served clients locally and globally for more than 40 years.

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Phillip Hernandez

Senior Research Manager, Arizona


As research manager for Colliers in Arizona, Phillip Hernandez is responsible for proactively developing and implementing research objectives and directing all research activity for the Arizona offices.

He provides leading-edge, thought-provoking research and analysis of market data for use in producing quarterly statistical market reports for each property discipline, as well as other ad hoc reports, research projects and presentations. Phillip analyzes and interprets real estate trends and maintains a database of economic indicators to provide forecasts.

Regardless of the property type or sector, Phillip believes each has a story to tell and that data provides the opportunity to redefine the narrative. With a background in location analytics, he is highly experienced in interpreting complex data sets. Using the latest technology, Phillip developed a system to blend analytics with a visually attractive approach to bring data to life.

Focusing on business development, he leverages market intelligence and insights for thought leadership content strategy in support of client engagement. His goal is to strategically align research and business development efforts and present research in an easily digestible format that promotes Colliers’ market share and revenue growth.

Colleagues describe Phillip as a brilliant storyteller and a passionate, creative and experienced professional.

Prior to joining Colliers, he served as a business analyst at CBRE, where he specialized in creating tailored research reports, as well as unique and interactive applications and dashboards that elevated the market position of assets. Phillip delivered weekly research updates, with relevant lease and sale comps, custom competitive sets and current market activity.

He provided complex market and trend analyses, monitored an extensive database of proprietary market data, and delivered custom quarterly and annual reports that were strategically positioned towards targeted clients. He also led weekly department research meetings to develop initiatives surrounding market trends, produce innovative industry solutions and analyze client-centric objectives.

Previously, Phillip was a GIS analyst for the central region of CBRE. Working exclusively with top-performing markets, he created unique models that illustrated custom real estate datasets through location analytics. Phillip produced high-quality geographic and demographic maps, and investigated multiple approaches to storytelling through map and market analytics.

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