Phoenix continues to lead the nation in industrial deliveries through Q4 2023. In Q4, the Valley delivered over 8.8 million square feet of industrial space, predominantly in the Northwest, Southeast, and Southwest Phoenix submarkets. In addition to this number, 44.3 million square feet (sf) are under development. The Valley ranks number one in inventory under construction, followed by other leaders such as Dallas, Fort Worth, Atlanta, Charlotte, Las Vegas, and the Inland Empire, to name a few.

“The industrial market remains one of the top performing sectors in the Phoenix market, and leasing activity continues to surpass pre-pandemic levels. However, robust deliveries of new product will continue to push vacancy rates closer to normalized levels in the coming few quarters. It is expected that tenants will benefit from the recent substantial shift in supply in the form of increased concessions as landlords will compete to sign deals in an increasingly competitive market,” said Kevin Helland, Senior Vice President – Phoenix with Avison Young. Net absorption declined slightly in Q4 from Q3 but remains positive at 2.3 million sf. Overall net absorption for 2023 did decline compared to 2022 but continues to outperform pre-pandemic numbers. The growth in industrial construction will temporarily affect the balance between occupied and vacant space through 2024 and into 2025, but demand is expected to remain strong due to the positive net absorption experienced in 2023, along with internationally renowned companies such as Amkor, ASM and TSMC that are investing in facilities in the Valley.

At 8%, Q4 concludes 2023 with a spike in vacancy in contrast to the beginning of the year, which is largely due to new deliveries. With new developments continually being brought to the market, vacancy has doubled from what it was in Q1 2023, and this trend is anticipated to continue through 2024. For the last two quarters, the Valley has seen a stark increase in vacancy, with an addition of 220 basis points between Q2 and Q3 and an addition of 150 basis points between Q3 and Q4.