Q3 2022 Industrial Market
Net absorption in the third quarter ended at 4.9 million square feet, bringing the year-to-date total to 21.6 million square feet. The first nine months of 2022 have almost matched the net absorption posted for the entire year 2021, falling just shy of 2.5 million square feet. Vacancy dropped to a new historic low of 2.4 percent. There were 5.8 million square feet of new inventory delivered in third quarter, bringing the year-to-date total to 18.0 million square feet. A staggering 40.9 million square feet of industrial product is under construction.Key Takeaways:
- Rental rates have increased over 22.9 percent year-over-year
- The amount of product under construction increased 16.1 percent quarter-over-quarter to 40.9 million square feet
- 4.9 million square feet of positive net absorption, bringing the year-to-date total to 21.6 million square feet
With the fear of a recession in the near term, the Industrial Market in Phoenix has managed to continue outperforming every other sector in the market and is showing healthy performance in the third quarter. The industrial labor market is also experiencing improvement due to the growth of the market.
The Phoenix industrial market does not anticipate a slow down in the near term, and each quarter the market outperforms the previous, setting new records. The third quarter lived up to the hype, following previous quarterly trends.Outlook:
Despite the increase of product under construction, vacancy remains extremely compressed due to elevated tenant demand, and continues to put upward pressure on rental rates. The quickly accelerating rental rates have also been driving up the annual escalation steps in lease negotiations. This is starting to hurt smaller companies that have trouble adapting to the current market when negotiating renewals.