PHOENIX—CBRE Research recently released a report detailing the effects of the growing e-commerce sector on the U.S. industrial landscape. The report notes that by 2017, online sales could account for more than one in ten of all U.S. retail sales. To keep up with growing demand and service requirements, e-commerce companies are making major investments in their supply chain, including state-of-the-art logistics facilities near major metropolitan areas. Locally, this trend definitely has traction as the Valley has become home to several sizeable e-commerce facilities for notable national retailers in recent years.
To date, metropolitan Phoenix has more than 8 million square feet of industrial space dedicated to e-commerce uses. Going forward, this trend will continue to shape the Valley's industrial landscape; of the 4.2 million square feet of industrial product currently under construction, 2.1 million is being built to specs that would accommodate e-commerce uses.
Pat Feeney of CBRE, who specializes in industrial services in Arizona, was instrumental in negotiating Home Shopping Network's 330,000-square-foot lease for their ecommerce distribution facility located at 7210 W. Van Buren. His team is also responsible for the marketing and leasing of two other large Valley industrial properties (394,775 and 685,084 square feet) that are seeing heavy traffic and interest from e-commerce-related users.
“Phoenix is a great fit for serving e-commerce,” Feeney tells GlobeSt.com. “Also in the running are parts of California, like the Inland Empire, and Nevada, specifically Las Vegas and Reno, and Salt Lake City.”
Las Vegas is a “union town” and e-commerce leaders see that as a potential for higher labor costs—a major strike. Reno is almost as far from the coast as Phoenix, but doesn't boast the quality of life the Valley offers. Salt Lake City doesn't offer the major base that e-commerce requires.
Feeney explains that California has several strikes against it right out of the gate. “It's anti-business, there are a lot of regulations and labor costs are high.” E-commerce facilities, Feeney says, in addition to needing a seasoned workforce, which the Valley has, also use a lot of power. As well as accomodating the sophisticated equipment used, buildings will be refrigerated around the clock.
“In California, the more power you use, the higher your cost per kilowatt. The opposite is true in Arizona. Electricity rates for e-commerce companies will run about 50% less in Arizona,” says Feeney.
The Valley's West Side has a lot to offer e-commerce. It's affordable, it's available and the location works. “It's just in the position for that long-haul trucker to make that one-day trip to and from the coast,” says Feeney.
Additionally, e-commerce operators are seeking a sophisticated labor pool, which Phoenix boasts; labor costs are favorable; corporate taxes are lower; and quality of life for employees is high—all adding up in Phoenix's corner when it comes to site selection.
Feeney says he's been seeing a lot of e-commerce activity on the West Side. He just showed a 685,000-square-foot property at 75th Avenue and Buckeye; two 300,000-square-foot e-commerce tenants are looking to expand; a 400,000-square-foot user is also seeking expansion; and a Seattle-based e-commerce company says Phoenix made the short list for its site, though Las Vegas and the Inland Empire were also under consideration.
A current list of the Valley's e-commerce users includes: Four Amazon facilities at approximately 1.2 million square feet each; Macy's Federated Building at Goodyear Crossing Park, 650,000 square feet built to suit six years ago with a new addition 350,000 square feet; Home Shopping Network, 340,000 square feet; The Gap, 430,000 square feet; Marshall's at Prologis Business Park, 1.5 million square feet; and Ulta, 350,000 square feet.
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