arizona q1 2014 industrial report - cassidy turley

PHOENIX INDUSTRIAL Economy

Over the past two years, metro Phoenix has ranked in the top 10

in the nation in terms of jobs added. In 2012, metro Phoenix

ranked fourth in the nation with 48,300 net new jobs, and

ranked eighth in 2013, with 41,700 net new jobs. Out of the

41,700 jobs added in 2013, 11,400 were office using, and

5,000 were industrial, ranking 12th and 7th in the nation

respectively. As 2014 unfolds, the metro Phoenix economy is

expected to add an additional 38,600 new jobs (according to

Moody’s) with a projected unemployment rate of 6.2 percent by

year-end.

Market Overview The metro Phoenix industrial market continued to post positive

gains in the first quarter, with 2,937,850 square feet of net

absorption. The majority of the gain is due to the completion of

Intel’s Fab 42 (2,145,757 square foot) manufacturing building in

the Chandler submarket. In addition to the large occupancy by

Intel, Macy’s expanded an existing building by 360,000 square

feet in the Southwest Phoenix submarket and Living Spaces

occupied their 437,234 square foot build-to-suit in the West

Central Phoenix submarket.

The overall weighted average asking rent declined $0.01 quarter-

over-quarter, and was flat year-over-year. Despite the slight

decline, the metro Phoenix average asking rent is expected to

increase slightly as 2014 progresses. The metro Phoenix

vacancy rate declined 40 basis points to finish the quarter at

12.2 percent, and the year-end vacancy rate is expected to be

around 12.0 percent.

At the end of the first quarter, there was 2,231,497 square feet

under construction. Of the 2.2 million square feet, 1,085,000 is

build-to-suit or owner built, and the balance is speculative

development. The speculative development projects are

currently in the Gilbert/Gateway, Deer Valley, and Southwest

Phoenix submarkets. There are three projects in Deer Valley that

make up 339,908 square feet of the total under construction.

They range in size from 10,584 to 90,575 square feet buildings.

Overall Vacancy

Net Absorption/Asking Rent 4Q TRAILING AVERAGE

$0.40

$0.45

$0.50

$0.55

$0.60

-2.0

-1.0

0.0

1.0

2.0

3.0

2010 2011 2012 2013 1Q 14

MSF

Net Absorption, 000's Asking Rent, $ PSF

PHOENIX

Industrial Market SnapshotFirst Quarter • 2014

Market IndicatorsQ1 13 Q1 14 12-Month

Forecast

Overall Vacancy 12.0% 12.2%

Net Absorption 1,097,360 2,937,850

Under Construction 5,896,413 2,231,497

Average Asking Rent $0.51 $0.51

Economic IndicatorsQ1 13 Q1 14 12-Month

Forecast

Phoenix Employment 1,791k 1,842k

Phoenix Unemployment 6.9% 6.4%

U.S. Unemployment 7.7% 6.7%

10%11%12%13%14%15%16%17%18%

2010 2011 2012 2013 1Q 14

Historical Average: 11.8%

www.cassidyturley.com | 2

The remaining speculative projects are the Five Star building

(697,049 square feet) in the Southwest Phoenix submarket and

a 109,540-square-foot building in the Gilbert Gateway

submarket which is 50 percent pre-leased. More speculative

construction announcements are expected in the Deer Valley,

Chandler, and Gilbert/Gateway submarkets, as several well-

funded developers have purchased land over the past few years

and tenant demand has increased year-over-year.

Over the past few years, the Southwest Phoenix and West

Central Phoenix submarkets had the bulk of the construction

activity with large warehouse/distribution (+300,000 square foot)

projects. At the end of the first quarter, there were 11 buildings

in these submarkets that could accommodate a

+300,000-square-foot user. Speculative construction is

expected to be limited in these submarkets until there is

significant leasing in these buildings.

2014 is expected to be a year of strengthening market

fundamentals as the economy continues to improve. Expect

continued demand from large and small users as employers add

more jobs.

Outlook

• The metro Phoenix vacancy rate is expected to be ±12.0 percent at year-end.

• Net absorption is expected to be positive +5.0 million square feet at year-end.

• Expect small tenant activity (5,000 to 30,000 square feet) to increase.

• Speculative construction activity is expected to increase in the Deer Valley, Chandler and Gilbert/Gateway submarkets.

The metro Phoenix vacancy rate declined 40 basis points to finish the quarter at 12.2 percent

Flex, General Industrial, Warehouse/Distribution GI AND WH/D RENTS HAVE INCREASED 5.3% AND 3.6% YEAR-OVER-YEAR

New SupplyNEW SUPPLY IS EXPECTED TO BE 6% BELOW THE HISTORIC AVERAGE IN 2014

Large Block SpaceBLOCKS OF CONTIGUOUS SPACE (BUILDINGS ARE ONLY COUNTED ONCE)

02468

101214

02 03 04 05 06 07 08 09 10 11 12 13 14 15

MS

F

0

5

10

15

20

25

30

K003 >K9.992 - 002K9.991- 051K9.941- 001

# O

F B

LOC

KS

FLEX GI WH/D

$0.30

$0.50

$0.70

$0.90

$1.10

2010 2011 2012 2013 1Q 14

Flex GI WH/D

PHOENIX



PHOENIX


ASKING RENTS CONVERTED TO NNN.

TOTAL BLDGS

INVENTORY SUBLET VACANT

DIRECT VACANT

VACANCY RATE

1ST QTR NET ABSORPTION

YTD NET ABSORPTION

UNDER CONSTRUCTION

WEIGHTED AVG ASKING RENT

Submarket

Black Canyon 149 4,009,472 17,600 416,675 10.8% 10,118 10,118 - $0.60

Central Phoenix 111 3,128,488 - 266,258 8.5% 31,400 31,400 - $0.74

Chandler 343 21,941,137 463,666 1,803,997 10.3% 1,995,827 1,995,827 285,000 $0.69

Deer Valley 472 15,198,140 10,608 1,397,817 9.3% 118,010 118,010 339,908 $0.88

East Mesa 120 4,429,323 - 498,620 11.3% (25,135) (25,135) - $0.69

Gilbert/Gateway 508 16,784,561 95,380 3,554,702 21.7% 40,531 40,531 109,540 $0.59

Glendale 97 5,845,809 3,105 850,477 14.6% 14,653 14,653 - $0.48

Grand Ave 554 18,759,925 23,228 1,163,457 6.3% 23,199 23,199 - $0.33

North Glendale 92 3,034,518 - 484,359 16.0% 39,412 39,412 - $0.61

Pinal 126 6,880,549 3,330 545,436 8.0% 1,547 1,547 - $0.37

Scottsdale 140 5,529,767 26,064 493,182 9.4% (28,126) (28,126) - $0.92

Scottsdale Airpark 333 7,517,873 24,300 961,004 13.1% (26,318) (26,318) - $0.84

Sky Harbor Airport 1,243 45,508,537 158,334 5,329,422 12.1% (266,790) (266,790) - $0.50

Southwest Phoenix 281 38,239,588 731,047 4,368,952 13.3% 434,254 434,254 1,497,049 $0.37

Tempe 977 37,735,036 166,460 4,262,162 11.7% (46,104) (46,104) - $0.62

West Central Phoenix 964 54,026,792 269,621 6,950,921 13.4% 628,777 628,777 - $0.36

West Mesa 188 6,069,178 9,050 640,920 10.7% (7,405) (7,405) - $0.55

Grand Total 6,698 294,638,693 2,001,793 33,988,361 12.2% 2,937,850 2,937,850 2,231,497 $0.51

By Product Type

General Industrial 1,628 79,388,124 999,072 7,387,244 10.6% 2,030,164 2,030,164 394,540 $0.51

Flex 805 31,366,720 294,246 6,053,457 20.2% (132,141) (132,141) - $0.89

Warehouse/Distribution 4,265 183,883,849 708,475 20,547,660 11.6% 1,039,827 1,039,827 1,836,957 $0.43

Grand Total 6,698 294,638,693 2,001,793 33,988,361 12.2% 2,937,850 2,937,850 2,231,497 $0.51


Industrial Submarkets Metropolitan Phoenix

Zach Aulick Director, Research 2375 East Camelback Road

Suite 300

Phoenix, AZ 85016

Tel: 602.224.4464

Fax: 602.468.8588

[email protected]

The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

Copyright © 2014 Cassidy Turley. All rights reserved.

PHOENIX


About Cassidy Turley

Cassidy Turley is a leading commercial real estate services provider with more than 4,000 professionals

in more than 60 offices nationwide. With headquarters in Washington, DC, the company represents a

wide range of clients—from small businesses to Fortune 500 companies, from local non-profits to major

institutions. The firm completed transactions valued at $25.8 billion in 2013, manages approximately 400

million square feet on behalf of institutional, corporate and private clients and supports more than 24,000

domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full

spectrum of integrated commercial real estate services—including capital markets, tenant representation,

corporate services, project leasing, property management, project and development services, and

research and consulting. Cassidy Turley enhances its global service delivery outside North America

through a partnership with GVA, giving clients access to commercial real estate professionals in 65

international markets. Please visit www.cassidyturley.com for more information about Cassidy Turley.

Wils

on S

t

Turn

er R

d

Roo

ks R

d

Mill

er R

d

Ap

ache

Rd

Wat

son

Rd

Rai

nb

ow R

d

Dea

n R

d

Air

port

Rd

Tuth

ill R

d

Jack

rab

bit

Trl

Per

ryvi

lle R

d

Citr

us R

d

Patton Rd

Dixileta Dr

Lone Mountain Rd

Cot

ton

Ln

Sariv

al R

d

Greenway Rd

Waddell Rd

Cactus Rd

Peoria Ave

Olive Ave

Northern Ave

Estr

ella

Pkw

y

Bu

llard

Ave

Litc

hfie

ld R

d

Dys

art

Rd

El M

irage

Rd

Avon

dal

e B

lvd

107t

h A

ve

99th

Ave

Bell Rd

Greenway Rd

Thunderbird Rd

Cactus Rd

Peoria Ave

Dunlap Ave

Northern Ave

91st

Ave

83rd

Av e

75th

Ave

67th

Ave

59th

Ave

Glendale Ave

Bethany Home Rd

43rd

Ave

35th

Ave

Camelback Rd

Thomas Rd

McDowell Rd

Indian School Rd

Van Buren St

Buckeye Rd

Lower Buckeye Rd

Broadway Rd

51st

Ave

43rd

Ave

35th

Ave

27th

Ave

19th

Ave 7t

h A

veC

entr

al A

ve7t

h S

t

16th

St

24th

St

Baseline Rd

Dobbins Rd

32nd

St

Happy Valley Rd

Pinnacle Peak Rd

Deer Valley Rd

Cave

Cre

ek R

d40

th S

t

Tatu

m B

lvd

56th

St

64th

St

Scot

tsda

le R

d

Pim

a R

d

Hay

den

Rd

Lincoln DrMcDonald Dr

Chaparral Rd

7th

St

Cen

tral

Ave

7th

Ave

19th

Ave

32nd

St

16th

St

Indian School Rd

Thomas Rd

McDowell Rd

McKellips Rd

Kyr

ene

Rd

Ru

ral R

d

McC

linto

ck D

r

Guadalupe Rd

Elliot Rd

Warner Rd

Ray Rd

Williams Field Rd

Pecos Rd

Mes

a D

r

Stap

ley

Dr

Gilb

ert R

d

Lind

say

Rd

Val V

ista

Dr

Gre

enfie

ld R

d

Southern Ave

Broadway Rd

McDowell Rd

McKellips Rd

Brown Rd

University Dr

Broadway Rd Cris

mon

Rd

Sign

al B

utte

Rd

Soss

aman

Rd

Rec

ker

Rd

Pow

er R

d

Joy Ranch Rd

Cloud Rd

Carefree Hwy

56th

St

64th

St

Scot

tsda

le R

d

Hay

den

Rd

Lone Mountain Rd

Dixileta Dr

Rio Verde Dr

128t

h S

t13

6th

St

Shea Blvd

Bell Rd

Union Hills Dr

Greenway Rd

Thunderbird Rd

Cactus Rd

Germann Rd

Queen Creek Rd

Ocotillo Rd

Chandler Heights Rd

Riggs Rd

Hunt Hwy

Dob

son

Rd

Alm

a S

choo

l Rd

McQ

uee

n R

d

Coo

per

Rd

Gilb

ert R

d

Lind

say

Rd Va

l Vis

ta D

r

Gre

enfie

ld R

d

Hig

ley

Rd

Pow

er R

d

Soss

aman

Rd

Haw

es R

d

Rittenhouse Rd

Hunt Hwy

Baseline Rd40th

St

Bell Rd

Lake

Ple

asan

t R

d

51st

Ave

Chandler Blvd

Ray Rd

Haw

es R

d

24th

St

32nd

St

48th

St

University Dr

Pri

est

Dr

Sun Valley Pkwy

Pinnacle Peak Rd

259t

h A

ve

187t

h A

ve

163r

d A

ve

211t

h A

ve

Jomax Rd

§̈¦10 §̈¦10

§̈¦10

§̈¦10

§̈¦17

§̈¦17

§̈¦17

£¤60UV101

UV101

UV101

UV101

UV101

UV202

UV202

UV202UV202

UV202

UV87

UV87

UV51

UV74

UV303

UV303

UV303

UV347

UV85

UV85

£¤60

£¤60

UV801 £¤60£¤60

3

1

6

13

28

12 15

59

4

16

17

7

11 14

10

¯1 North Glendale

2 Glendale

3 Southwest Phoenix

4 Grand Avenue

5 West Central Phoenix

6 Deer Valley

7 Black Canyon

8 Central Phoenix

9 Sky Harbor Airport

10 Scottsdale Airpark

11 Tempe

12 Chandler

13 Scottsdale

14 West Mesa

15 Gilbert/Gateway

16 East Mesa

17 Pinal

arizona q1 2014 industrial report - cassidy turley

Documents