Skip to main content Skip to footer

Phoenix industrial market continues setting records

Phoenix Industrial Q12022 PR Hero

Vacancy rate drops to historic low 4% while rental rates rose 7.5% in first quarter 2022

Greater Phoenix posted its strongest industrial market conditions during first quarter 2022. Vacancy fell to a historic low level of 4.0 percent during the first three months, as the market delivered 5.6 million square feet of new projects. Net absorption continues at a robust pace, posting 7.8 million square feet last quarter. Investors also remained active in the market, purchasing nearly $1 Billion in Phoenix industrial space last quarter. 

Strong tenant demand drove vacancy down 80 basis points last quarter and 260 basis points year-over-year to a historic low 4.0 percent. The Southwest submarket clusters felt the largest decrease, falling 100 basis points over-the-quarter and 450 basis points year-over-year, ending at 5.1 percent vacancy. This submarket delivered more than 12.6 million square feet of product since 2020. The lowest industrial vacancy in Greater Phoenix was 1.8 percent, posted in the Northeast submarket , followed by the Airport Area with 2.7 percent vacancy. 

Large blocks of space are in high demand and low supply. Only 15 existing buildings in the metro area have space available to accommodate a tenant of 150,000 square feet and just eight options have availability for a tenant over 300,000 square feet. 

First quarter 2022 was the third quarter in the past two years when the Valley posted more than seven million square feet of industrial absorption. This was the eighth consecutive quarter of absorption surpassing one million square feet. During the first three months of this year, 7.8 million square feet were absorbed, the second highest total in Arizona history. If activity continues at this pace, the market could reach nearly 30 million square feet of net absorption in 2022. First quarter posted the market’s largest number of new tenants leasing 150,000 square feet, with 15 new deals signed. Home improvement giant Lowes signed a lease to expand its footprint in the market by 1.2 million square feet at The Cubes at Mesa. Amazon agreed to 1.19 million square feet at Elliot 202, where construction should be finished in second quarter. LG recently announced plans for a $2.8 billion battery manufacturing plant in Queen Creek. That company joins other manufacturers coming to the area or expanding, including Intel, TSMC, KORE, and JX Nippon Mining and Metals.

Low vacancy and high demand have drive up rental rates, which have escalated 15.2 percent year-over-year and 7.5 percent over-the-quarter, reaching $0.74 per square foot. This marks the largest increase during a quarter and year-over-year, outpacing fourth quarter 2021 which had previously set the record. Industrial rental rates have increased an average of 7.2 percent annually since 2018. Rates have increased more than 26 percent since first quarter 2020. Southeast submarket posted the largest increase year-over-year at more than 14.3 percent to end at $0.80 per square foot. Southwest and Airport Area followed with 13.0 and 11.5 percent, ending at $0.55 and $0.93 per square foot, respectively. 

Construction activity set records each quarter since the pandemic began and 2022 elevated the market to a new high point. Currently 33.9 million square feet of new industrial space is underway, a rise of 12.3 percent from the previous quarter. More than 35 percent of the new space under construction is pre-leased. Development of the West Valley as an industrial quarter is leading the way. Approximately 78 percent of buildings under construction are located in the Northwest and Southwest submarkets. First quarter brought delivery of 5.6 million square feet. Since 2020 the market increased its inventory by 10 percent with the addition of 36 million square feet of new product. 

The Greater Phoenix market is capturing the eye of investors throughout the country and abroad. Investment sales volume during first quarter 2022 was extremely active, but still fell behind fourth quarter 2021. Investment sales reached $934 million with an increased median price of $161 per square foot. Demand for our projects drove the median price per square foot up 28.3 percent year-over-year. The largest transaction of first quarter was the Landing Phase 3 portfolio, comprised of seven buildings in the Southeast valley totaling 525,342 square feet. Scottsdale-based Martens Development Company sold this to Cohen Asset Management for $130 million, striking a blended price per square foot of $244. Rapid increases in land prices are driving up rental rates and increasing investment sales. The former Big Surf Water Park in North Tempe was purchased by Overton Moore Properties for $49.9 million, $32.83 per square foot. The nearly 35 acres will be the site of a multi-building industrial park. 

While the market is extremely strong, the pace of escalating rental rates is creating stress on tenants that need to renew leases, as well as new to market tenants looking for space. The majority of vacant spaces are receiving multiple offers. However, the price gap still exists between the Phoenix market and California, which continues to motivate developers, tenants and investors to seek opportunities in Arizona.

About Colliers
Colliers (NASDAQ, TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 65 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 to $3.6 billion ($4.0 billion including affiliates) and $46 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.

Related Experts

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.

View expert