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Metro Phoenix breaks record for industrial construction

Vacancy falls to record low level as users absorb new space

PHOENIX, July 15, 2021 – The Greater Phoenix industrial market is setting records in many categories. Construction of new projects hit a historic record with approximately 19.1 million square feet currently being built. Colliers in Arizona also reports that net absorption of industrial space has pushed vacancy rates to 5.9 percent, the lowest ever achieved in the market. 

Arizona’s economy is booming and experiencing record revenue growth, as well as personal income growth. From 2019-2020 Arizona led the nation (tied with Montana) in the category of largest personal income growth by posting a 7.1 percent increase.

The Greater Phoenix industrial market brought 3.6 million square feet of new product to the market during second quarter. These new projects were completed with vacancy of just 45.4 percent. Sixteen buildings were completed during second quarter and five of those were fully leased when delivered. This strong leasing activity illustrates the rapid change of supply chain and ecommerce activity in our city.

New projects totaling 5.0 million square feet of new construction were started during the past three months. Approximately 73 percent of the 19.1 million square feet currently underway in the Valley are located in the northwest and southwest submarket clusters. 

The Cube, a 1.2 million-square-foot speculative warehouse was started last quarter along the Loop 303 corridor at Northern Avenue and Reems Road. The Southeast Valley experienced a groundbreaking of its first speculative warehouse project exceeding more than one million square feet. The Marwest Capital project called Elliot 202 is located on the northwest corner of Loop 202 and Elliott Road.

The industrial market posted 5.8 million square feet of net absorption during second quarter 2021. This marks the ninth consecutive quarter of net absorption exceeding 1 million square feet. Year-to-date net absorption totals 11 million square feet, which is equivalent to 82.4 percent of all net absorption posted in 2020. 

HelloFresh committed to 438,687 square feet at Prologis Logistics Center IV in Tolleson. The building is currently under construction and expected to be completed this quarter. Ashley Furniture signed a lease to occupy an entire building at Majestic Tolleson Center II, a 224,874-square-foot speculative building completed in 2019. 

Direct vacancy decreased 70 basis points quarter-over-quarter and 190 basis points year-over-year to hit the mid-year point at 5.9 percent. The southeast submarket cluster, which delivered eight vacant buildings totaling 623,342 square feet, still managed to have the largest decrease of vacancy year-over-year. The northwest submarket cluster delivered the most new inventory for the second consecutive quarter, yet this new inventory only resulted in slight vacancy rise of 70 basis points to finish the quarter at 6.3 percent.

Average rental rates for industrial space rose again during second quarter as a result of strong tenant demand. Rates elevated 1.56 percent over-the-quarter and 6.56 percent year-over-year. The current average asking rental rate is $0.65 per square foot. Average rental rates have increased an average of 4.3 percent annually since 2018. The airport area experienced the largest increase in rental rates, followed by the southeast submarket cluster.

Manufacturing space rates surpassed Warehouse facilities with the largest increase year-over-year, increasing 9.76 percent and 9.2 percent, respectively. The rise of rental rates combined with decline in vacancy resulted in stronger sales volume. During second quarter industrial sales volume rose to $547 million. The market experienced a 2.96 percent increase in median price per square foot over-the-quarter to $134.

Phoenix has now broken into the nation’s list of top tier marketplaces, which is resulting in stronger attention and demand from investors and new to market businesses. The appeal of Greater Phoenix will result in continued rental rate increases as the pipeline of projects under construction begins to deliver.Active tenant interest will likely keep vacancy rates low, below the 10-year average of eight to nine percent.

About Colliers
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 at, Twitter @Colliers or LinkedIn.

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

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Phillip Hernandez

Director, Research | 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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