Jones Lang LaSalle is reporting in its Q1 industrial report that despite seasonal lay-offs, Phoenix has recorded another month of steady job gains. The Valley added 43,000 new jobs over the last 12 months, a 2.4 percent annual gain. The trade, transportation and utilities sector added 8,400 new jobs, a testament to growth in retail operations across the valley. Manufacturing employment continues to falter with a loss of 1,500 jobs over the last year. Intel’s new 2.2 million square foot manufacturing facility in Ahwatukee/ Chandler was completed this quarter, but currently stands vacant. However, with improving economic conditions in Phoenix, and the additions of large companies such as Apple to the Valley, expect manufacturing to rebound over the next few quarters.
Leasing activity in the first quarter was primarily driven by smaller tenants between 25,000 and 50,000 square feet. Smaller companies are much more sensitive to local economic conditions and as a result, are growing with Phoenix’s recovering economy. The housing market is beginning to stabilize in Phoenix with smaller increases to the median price, but related companies such as those involved in cabinetry and carpentry are reaping the benefits of the housing market’s quick rise.Other companies involved in retail and entertainment are also seeing increased consumer demand and as a result are expanding their operations into larger footprints across the valley.
2013 saw industrial construction get ahead of absorption leading to incremental increases in the vacancy rate as the new product had trouble finding tenants. However, despite this spike in construction in 2013, Phoenix is on track to fill its new space as activity from users begins to pick up.
Leasing activity
Southwest
- CFA Cabinetry expanded into 63,840 square feet at 420 S 53rd Avenue
- All Pro Industrial leased 21,596 square feet at 2939 W Culver Street
Tempe
- PetClub, a growing pet retailer, leased 45,228 square feet 860 W Carver Road
- Box Smart signed a deal for 28,068 square feet at 1120 W Fairmont Drive
Airport
- Creative Touch Interiors leased 36,540 square feet at 1002 E University Drive
- CLARK Security Products also renewed its space this quarter for 25,182 square feet at 2140 S 7th Avenue
Gilbert
- JumpStreet, an indoor trampoline park, renewed 25,423 square feet at 455 E Warner Road
- Water Purity signed a deal for 22,710 square feet at 6410 S Sossaman Road
Grand Avenue
- Express Tow and Salvage leased 23,800 square feet at 3839 W Indian School Road
Tenants in the market
- Tesla is considering Arizona for a large, new manufacturing facility to produce batteries.
- Project Knockout, a global retailer, is in the market for 500,000 square feet of distribution and manufacturing space in the Southwest Valley.
- An undisclosed solar company is close to consummating a 180,000-square-foot lease southwest valley.
- An undisclosed furniture company is looking for a 200,000- to 300,000- square-foot solution in the southwest valley.
Sales activity
- Cohen Asset Management purchased the 43 Avenue Logistics Center located at 1635 South 43rd Avenue for $21.1 million ($54 per square foot). Tratt Properties was the seller of the 100 percent vacant, 394,776-square-foot property.
- The 250,796-square-foot Riverside Distribution Center, located at 2225 South 43rd Avenue, traded hand in the first quarter for $13.2 million ($53 per square foot). Prologis sold the property when it was 44.0-percent occupied to Exeter Property Group.
- Meritex Enterprises purchased the Mack Deer Valley distribution Lane from Carlson RE Co. The property was 97.0-percent occupied and traded at $17.7 million ($91 per square foot) center at 21410 North 15th
- Leclerc Group purchased a 165,000-square-foot warehouse facility in the Southwest valley to occupy. This owner/user purchased the building from Leggett & Platt for $7.6 million ($46 per square foot).
Construction activity
- Intel finished construction on its 2.2 million-square-foot manufacturing fab in Ahwatukee/Chandler in the first quarter. Unfortunately, due to the fast moving nature of the semiconductor industry, the fab currently stands vacant. Intel has outlined intentions to adapt the facility to manufacture newer chips.
- The WinCo Warehouse is under construction and expected to be delivered in the second quarter this year. The 800,000-square-foot facility will act as a distribution hub for WinCo Foods.
- The Buckeye Business Center is also under construction and will add 697,049 square feet of industrial space to Phoenix’s inventory. It is still 100 percent available to any interested tenants.
- Turner Spectrum Ridge broke ground last quarter and is moving along with construction on several new industrial properties in Deer Valley. A total of eight free-standing buildings will add 120,169 square feet to Phoenix’s inventory.
For complete reports see JLL Phx Q1 2014 Industrial Outlook and JLL Phx Q1 2014 Industrial Statistics.
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services. Jones Lang LaSalle’s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today’s commercial real estate dynamics and identify tomorrow’s challenges and opportunities.
Contact Jones Lang LaSalle in Phoenix at (602) 282-6300.