PHOENIX—As of mid-2015, Metro Phoenix's industrial market was proud to record positive net absorption for the 21st consecutive quarter. Echoing the broader national trend in industrial, demand is exceeding available product on the market. Factors such as e-commerce and distribution efficiencies fuel this growth, especially given the strategic proximity to Southern California. And panelists on the "industrial deal and developments panel" at RealShare Phoenix Metro here on Wednesday, are betting on multi-tenant industrial being the big thing for years to come.
John DiVall, SVP and city manager of Arizona at Liberty Property Trust, says that if you take the three big deals that Amazon did in the region out of the equation, and if you look back historically at the Phoenix market, it has traditionally been a multi-tenant market.
"We are doing a multi-tenant park next year on the west side," explained DiVall. "We will start with a 200,000-square-foot property and then a 260,000-square-foot building and we will see how it goes."
According to DiVall, "multi-tenant product will do well because there hasn't been that kind of product built. That is where we are more comfortable with as opposed to chasing the bigger stuff. We are more bullish and think that is where Phoenix industrial is growing. The multi-tenant market will be the right thing for spec development and is what we are doing for the next few years."
What will be interesting to see, according to DiVall, is if there is any bigger box demand again on the west side. "I think we will eventually also start seeing 36-foot clear" where they can fit more cubic square feet in product, he added.
"There has been a lot of conversation on clear height," added Will Strong, SVP of Cushman & Wakefield. "People are saying they want 36 foot clear. They also want power, infrastructure and trailer storage is becoming more of a necessity where it used to be a luxury. Expandability and parking are also big as well as air conditioned space for ecommerce space."
The biggest thing that will be affecting the industrial market in the coming years in the ecommerce industry and where that goes, says DiVall. "The size and flexibility of the buildings will keep changing the dynamic of real estate more than anything else we can predict."
In terms of geography, Patrick Gallagher, partner of the southwest region at Dermondy Properties, says that building product today in the Southwest market makes a lot of sense. "There is definitely a niche there."
According to C&W's Strong, Phoenix has been slow on the absorption front, but it is coming soon. "We are maybe in the fourth or fifth inning," he said.
Gallagher added that Phoenix is a great growth story. "The general market here has lots of runway ahead. "The bread and butter of industrial has a way to go," he explained, predicting that "in five years, we are going to sit here and talk about how ecommerce focused we will be."
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
