Leasing activity and rental rate growth remain strong despite consolidations
The Phoenix metro area currently holds momentous industrial excitement alongside record-breaking population growth and a growing labor force.
October 23, 2019
- The Phoenix metro area currently holds momentous industrial excitement alongside record-breaking population growth and a growing labor force. At the moment, 2019’s absorption numbers aren’t reflecting the true story amongst four large consolidations and relocations. The deals are Safeway, ULTA, Nestle, and Conair for a total of over 2 million sf.
- While absorption has barely eclipsed 3.8 million square feet, tracked leasing activity for the year has passed 6.6 million square feet, 600,000 square feet over the ten-year average of six-million and only 200,000 square feet behind the five-year average of 6.8 million. The past three years have averaged 5.1 million square feet of absorption in their first three quarters, putting 2019 only 1.3 million square feet behind the average despite 2 million square feet of consolidations negatively impacting absorption.
- In addition to favorable leasing activity, the Valley continues to record positive rental rate increases, with rates increasing by an average of 5.4 percent per year since their last dip from 2012 to 2013. Year-to-date activity is showing an even steeper trajectory, locking in a 9.8 percent rental rate increase since the end of 2018 with more first-generation product coming available by the end of the year to further support rental rate growth. With that, even amongst over 2 million square feet of large move-outs throughout the year, both leasing activity and increasing rental rates help tell the true story of Phoenix’s growing viability in the industrial spotlight.
Source: JLL Research