Why Phoenix is Still a Top Industrial Market, as Rest of US Cools Off

Although mega warehouse deals for e-commerce and logistics companies have slowed nationwide since the start of the Covid-19 pandemic, these sectors continue to drive the industrial market forward in Phoenix.

Factor in the current manufacturing boom and an exodus of companies leaving California, and the Phoenix metro has muscled its way to the top of the industrial ranks, according to a July report from CommercialEdge.

The Valley had an estimated 58 million square feet of industrial space under construction in June 2023, which is equal to approximately 16.6% of the region’s existing inventory.

This ranks as the No. 1 supply pipeline in the country ahead of Dallas-Forth Worth’s 52 million square feet and the Inland Empire’s 31 million square feet, CommercialEdge data shows.

CommercialEdge also attributed the construction growth to the area’s manufacturing growth and the continued flow of companies moving out of Southern California. In the second quarter, the Inland Empire’s absorption fell to -1.3 million square feet, which is the first time this market has seen negative absorption in the past two decades, according to Savills data.

The ongoing demand for space in the Valley has resulted in Phoenix seeing 9% in-place rent growth year-over-year in June, which is the highest increase across markets that don’t have port access.

What’s more, according to Transwestern data, the Phoenix metro had an additional 120 million square feet of industrial space proposed in the second quarter of 2023.