New Phoenix Industrial Builds Show Off the Market’s Maturity

There have been a lot signs that Phoenix’s industrial market is coming into its own. Earlier this year, Phoenix was named a top buy market for investment, and it has seen rapid growth, both in absorption and rent. Now, significant speculative developments are coming to the market. Lincoln Property Co. has just delivered a 40-foot clear height speculative third-party logistics facility in Phoenix, illustrating the quality of the market and user demand.

“We saw a lot of activity in the ecommerce sector, and Phoenix is excelling in that market place because we have a great labor story,” David Krumwiede, EVP at Lincoln Property Co., tells GlobeSt.com. “We are less expensive from a labor perspective on a per hour basis and we have more affordable housing than a lot of our competitors. We most often are competitive with Southern California.”

The industrial market has also shifted in terms of the types of buildings users need, and like Southern California, there was demand for not only quality buildings but functional buildings as well. “One thing that has transitioned in the Phoenix marketplace is that these are no longer old dusty buildings with a forklift,” says Krumwiede. “They are employment centers. We have got a ton of parking because of the labor component that goes a long with an ecommerce logistics company. Phoenix competes very well. We saw an opportunity where we could go out and differentiate ourselves in the marketplace with a larger building that could accommodate a larger tenant or be multi-tenant.”

The land site could accommodate a 40-foot clear height, and the developer knew that it was a feature the market needed, especially considering there is only one other 40-foot clear speculative development in the market. “We felt like there was good value in going to 40-foot clear,” he says. “We felt like there were ecommerce users that could maximize that space. We also felt that from an investment sale perspective, an investor would see value in the clear height.”

So far, the development strategy has paid off. There has been tremendous interest from outside of the Phoenix market and from companies looking to bolster their current logistics strategy. “Companies are building their own logistics system, and then there are other companies that go the route of a third-party logistics and are outsourcing logistics,” says Krumwiede. “We are seeing both of those types of users. All of the users that we are talking to are from out of town, so it would mean new net absorption for Phoenix.”

Lincoln expects to sign a deal soon for the entire building. “We have had a lot of tours and proposals going back and forth with full building users and we are optimistic. We are hoping to get something done right after the first of the year,” adds Krumwiede. “We are excited about it.”