Leasing hits 6.3 million s.f. for the quarter, with more demand and absorption on the horizon
The Phoenix Office of JLL has released its Q1 2024 Phoenix Industrial Report, noting 6.3 million square feet of new leasing activity – a 60% spike from the previous quarter marking Phoenix’s third-highest Q1 leasing performance on record.
According to the Q1 report, activity was boosted by an uptick in demand for big box warehouses.
“The first quarter of the year was remarkable, proving yet again how resilient the Phoenix industrial market is,” said Riley Gilbert, Senior Managing Director, JLL. “Industrial leasing in the West Valley dominated the field, with large-scale commitments from Sologistics, Steelcase and three major building commitments totalling almost 3.5 million by a Fortune 2 e-commerce retailer.”
As leasing expanded, the development pipeline contracted, falling 44% since its peak in Q2 2023 to 30.9 million square feet. That caused industrial deliveries to outpace construction for the third consecutive quarter, pushing rents up by 2.4% quarter-over-quarter in a market where nearly 40% of newly delivered product is already pre-committed.
Metro Phoenix industrial net absorption, which neared 2.9 million square feet in Q1, will likely grow significantly next quarter, when tenants are expected to take occupancy on 4 million square feet of newly leased space.
The Valley’s 10.6% industrial vacancy rate is expected to rise in the months ahead as the local sector works to fill 31 speculative industrial buildings delivered vacant during Q1. The overall industrial market outlook remains optomistic, however, with the recent $8.5 billion in Intel grants, ongoing expansion at TSMC and CHIPS and Science Act funding serving as just a few of the factors expected to propel growth.
“This market is thriving, and we have a lot of opportunity ahead of us,” said Gilbert, whose team year-to-date has managed approximately 4 million square feet – or 60% - of new metro Phoenix industrial leasing. “Our inventory is modern, flexible, and rent-ready in order to meet the requirements coming our way.”
In Phoenix, JLL is a market leader employing more than 550 of the region’s most recognized industry experts offering office, industrial, retail, healthcare and data center brokerage, tenant representation, facility and investment management, capital markets, multifamily investments and development services, and related services within the real estate leasing, investment and management process. In 2023, the Phoenix team completed more than 120 million square feet in lease and sale transactions, with a total transaction volume of almost $952 million, and directed $67 million in project management across 63 projects.
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