Low Industrial Vacancy Spurs Spec Development in Phoenix

Article originally posted on Globe St. on July 8, 2019

The low industrial rate, trend of positive absorption and rising rents in Phoenix is spurring speculative development in the market. Trammell Crow Co. has broken ground on the SM202 Commerce Park, a 700,000-square-foot speculative industrial facility in Metro Phoenix in the Gila River Indian Community.

“Metropolitan Phoenix industrial vacancy rates are at historical lows of 6.1% as of the first quarter 2019 and annual net absorption at historical highs for 3-plus consecutive years running, at an average of 9 million-plus annually,” Joe Ihrke, SVP at TCC, tells GlobeSt.com. “TCC has developed nearly 3 million square feet of new industrial developments over the past five years and has witnessed firsthand the growing size requirements of occupiers. This has driven our thought process for larger buildings at South Mountain 202 Commerce Center.”

The project is in a growing industrial submarket in Phoenix that is becoming a hub for logistics users. “We believe the South Mountain Loop 202 Freeway will be a game changer for travel logistics through Metropolitan Phoenix,” says Ihrke. “This strategic new corridor provides direct connection between the two largest industrial sub-markets in Metropolitan Phoenix and our project location at the first full diamond interchange west of Interstate 10 is very well positioned at the doorstep to the Southeast Valley communities.”

At SM202 Commerce Park, TCC expects to attract both logistics and light manufacturing users, and it is designing the class-A property accordingly. “We anticipate a mix of both warehouse/distribution and light manufacturing occupiers, especially those looking for modern functional space in close proximity to existing Southeast Valley technology operations,” says Ihrke. “Also, occupiers tied to new home construction will be well positioned to serve both Southeast Valley and West Valley communities from our central location. This new South Mountain Loop 202 corridor will vastly expand access to employment bases in both Southeast and West Valley communities allowing for a wider reach of potential occupiers.”

The opening of SM202 will align with the completion of the 202 extension, which will help TCC capitalize on the demand. “Our projected yearend construction start of South Mountain 202 Commerce Center aligns perfectly with both completion of the Freeway expansion and delivery status of other projects within our portfolio,” says Ihrke.

TCC has a total of 1.5 million square feet of speculative development in Phoenix, and it is open to that pipeline. “Strong supply/demand fundamentals are projected to remain in place, as does our desire to deliver modern functional space to meet today’s occupier needs,” says Ihrke.