Drop in Valley Construction Starts could Lead to Future Industrial Space Shortage, Experts Say Article originally posted on Phoenix Business Journal on July 25, 2023 Construction has started on the first phase of a new industrial park in the fast-growing Loop 303 corridor in the West Valley. BUTLER DESIGN GROUP Industrial vacancies could increase in the Valley as a large portion of buildings that saw construction delays earlier this year could deliver by early 2024 amid strong demand from tenants. In the second quarter of this year, major brokerage firms estimated that the Phoenix metro had between 49 million and 60 million square feet of industrial space under construction. But absorption of space ranged from as low as 1.5 million square feet, a drop from the previous quarter, to 3.9 million square feet because of limited available buildings and back-office vacancies, according to CBRE Group Inc. “We only had 1.7 million square feet of completions [during Q2],” said Cooper Fratt, an executive vice president with CBRE. “All of the weather and rain we had in metro Phoenix delayed a lot of these projects’ construction timelines.” Q2 2022, by comparison, saw an estimated 6 to 7 million square feet of absorption — or the space leased minus what became vacant — along with bigger leases signed and 6 million square feet of space completed. Cooper Fratt PROVIDED BY NAIOP Fratt said a lot of buildings are expected to deliver by the end of 2023 or early next year, but construction starts have also decreased over the past year because of increased interest rates, which have impacted commercial lending. “Starting at the fourth quarter of 2024, into 2025, there could very well be a shortage of space. Starts are down significantly in the second quarter and we project that to continue at least through the rest of 2023,” Fratt added. The vacancy for the second quarter was estimated at 3%, a figure that has remained mostly steady over the past year. Some older second-generation space also came online in Q2, while JLL research shows that sublease vacancy saw a slight increase. Find the Full Article Here: bizjournals.com/…/industrial-cbre-phoenix-arizona-outlook