James Wentworth, C&W's senior managing director, believes the momentum will continue to set up more record-breaking quarters. As for Q1, he attributes the strong leasing to local expansion and new companies entering the Valley. Southwest Phoenix leads the market with 484,087 sf of absorption. Transcoastal Signs leased 115,870 sf for a 49th Avenue building and Distro took 97,238 sf in a West Buckeye Road facility.

Leasing activity, though, hasn't managed to significantly lower vacancy rates. Marketwide vacancy dropped to 8.1% at the end of the first quarter from 8.6% at year-end 2004 for a 240-million-sf inventory, according to Cushman & Wakefield.

Wentworth explains industrial construction across the Valley has increased, offsetting some absorption and preventing larger drops in vacancy percentages. More than five million sf of industrial space has come online in the past 12 months. Currently, there is 916,919 sf under construction. Most construction is taking place in the Deer Valley, Sky Harbor and South Central Phoenix submarkets.