Industrial Q1 Report - Vacancy Improves, Even as New Projects Come Online
Net absorption in the Greater Phoenix industrial market topped 1.5-million-square-feet in the first quarter, the fourth straight quarter of more than 1-million-square-feet.
In the past 12 months, net absorption has totaled more than 8.1-million-square-feet, but developers have also delivered more than 5.4-million-square-feet of additional inventory. New product has included a mix of spec and build-to-suit projects.
While new projects continue to come online, vacancy is trending lower due to healthy tenant demand for space. Vacancy ended the first quarter at 11.8%, 180 basis points lower than one year ago. This marks the first time since early2008 that the vacancy rate has dipped below 12%.
Sales of industrial buildings slowed in the first quarter, but prices continued to rise. The median price in the first quarter was $73 per square foot, 7% higher than the 2014 median.
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Office Q1 Report - Office Development to Gain Momentum in 2015
Vacancy in the Greater Phoenix office market leveled off in the first quarter, remaining at 17.8% after closing 2014 at the same figure. Year-over-year, vacancy has improved by 100 basis points.
Vacancy is improving at the most rapid pace in the Class A segment, where the rate has fallen 160 basis points in the past 12 months to 16.7%. More than 90% of the total net absorption in the first quarter occurred in Class A buildings.
Net absorption totaled nearly 199,000-square-feet in the first quarter, lagging the totals recorded in the second half of last year. Despite the recent slowdown, net absorption has been positive in each of the past 12 quarters.
Development activity is picking up. More than 1.3-million-square-feet of spec space is under way, following the delivery of less than 550,000-square-feet of spec space in 2014. In addition to the spec construction in the market, build-to-suit projects are also in the development pipeline, headlined by the 2.1-million-square-foot State Farm complex.
Asking rents continue to push higher, ending the first quarter at $21.28 per square foot, 3.3% higher than one year ago. The introduction of newer, more expensive space, into the market could push overall rents higher.
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