Amazon Drives Industrial Leasing in Phoenix
E-commerce giant inks three 1M SF deals as vacancy rate nears 9%.
The Phoenix industrial market got off to a strong start for 2024, with net absorption surging to 4.5M SF in the first quarter, nearly double the amount in the previous quarter.
Leasing activity in the Phoenix metro totaled 9.3M SF, much of it driven by Amazon, which inked three leases each encompassing more than 1M SF in North Goodyear, according to CBRE’s Q1 market report.
The vacancy rate continued to grow in Phoenix for the third consecutive quarter, rising to 8.9%, an increase of 150 bps.
The Southeast Valley saw its vacancy rate jump 250 bps to 10.8%, primarily due to 3.1M SF of vacant new supply that was delivered in Q1. The Southwest Valley vacancy rate rose to 11.9%, up 190 bps from the prior quarter, as 2.5M SF of vacant space was delivered in the first quarter.
Amazon absorbed more than 2M SF of existing vacant space in Phoenix metro in the first quarter, signing leases including a deal for 1.2M SF at The Cubes in Glendale and a 1M SF lease at the Paloma Vista Logistics Center, both in the Southwest Valley submarket.
Amazon also was involved in the largest move-out in the Southwest Valley, putting 567K SF up for sublease at the Park 79 industrial complex, the report said. Overall the Southwest Valley submarket recorded positive net absorption totaling 3.2M SF.
A wave of new supply continued to arrive in the market, with deliveries of 57 industrial buildings in Q1 encompassing 11.6M SF, of which 32% were pre-leased.
The total amount of industrial space under construction in Phoenix decreased to 30.7M—huge number, but a drop of nearly 20M SF from the Q2 2023 peak of more than 50M SF—as deliveries continued to outpace construction starts, which totaled 3.1M SF.
“As many industrial products near completion in the upcoming quarters, vacancy can be expected to edge higher,” the report said. “The increased pace of high gross activity with growing national recognition of Phoenix as a prime industrial market may allow for newly delivered space to be absorbed at a timely pace.”