Colliers: Healthy Tenant Demand, Continued Development Highlight the 2015 Industrial Outlook


colliers_logoColliers International 4Q 2014 Industrial Report highlights the Greater Phoenix industrial market and reports 2014 closed in solid shape, setting the stage for further improvement in 2015. Sales activity and net absorption peaked in the middle part of the year, before posting solid, but more modest totals in the fourth quarter. With tenant demand healthy, developers were active in 2014 and will continue to deliver new spec and build-to-suit projects in 2015. Employment growth could provide a spark in 2015. To this point in the cycle, job gains have largely been recorded in white-collar sectors that generally have a minimal impact on the local industrial market. Looking ahead to 2015, the sources of growth are forecast to be more diverse, with stronger gains in construction, manufacturing and trade. Gains in these sectors should directly spur tenant demand for industrial space, supporting the overall health of the market.

  • In brief:
    >> Net absorption in the Greater Phoenix industrial market reached nearly 1.1 million square feet in the fourth quarter, a slight rise from the third quarter total. For all of 2014, net absorption reached nearly 7.4 million square feet, the strongest single year of absorption since 2008.
  • >> Developers delivered approximately 7.1 million square feet of new space to the market in 2014, with a mix of build-to-suit and spec space. An additional 2.4 million square feet of spec space is under construction and scheduled to be delivered in 2015, along with build-to-suit projects totaling nearly 1.4 million square feet.
  • >> Vacancy ended 2014 at 12.3 percent, compared to 12.9 percent one year earlier. Vacancy fell throughout most of the Valley, with the Airport Area proving to be the sole exception. Vacancy rose in the Airport Area as more than 630,000 square feet of spec space was delivered in the fourth quarter.


Sales of industrial buildings slowed somewhat in the fourth quarter, but total activity for the year was up more than 20 percent from 2013. Owner-user transactions slowed throughout 2014, but traditional investment sales increased more than 40 percent in 2014. The median sales price in 2014 was $68 per square foot, 10 percent higher than the 2013 median price.

Total sales activity declined approximately 15 percent from the third quarter to the fourth quarter. Despite the decline in the final few months of the year, transaction activity in 2014 was up more than 20 percent from the 2013 total, and the number of properties that changed hands in 2014 was the highest in any single year since 2008. The mix of transactions also changed from 2013 to 2014, with owner-user transactions slowing by approximately 20 percent, while traditional investment sales activity increased by more than 40 percent.

Pricing held steady throughout much of 2014, despite a changing mix of transactions and volatility in sales velocity. During the fourth quarter, the median price was $68 per square foot, matching the median price for the first nine months of the year. While prices were steady for much of 2014, the median price was 10 percent higher than the 2013 median price. This marked the third straight year where industrial prices have pushed higher. Cap rates inched somewhat lower in 2014, falling to the low- to mid-7% range on average.

To read the full report: Phoenix Industrial Report 4Q 2014