Industrial Release 061924

Phoenix, AZ

PHOENIX (May 19, 2024) – Thompson Thrift, a full-service nationally recognized real estate company engaged in industrial, commercial, multifamily, mixed-use and retail projects across the country, shared insights on the current state of the Phoenix industrial market and why they feel notable plans for near-term investment demonstrate a promising outlook for the future of the market.

“While national industrial numbers continue to show a cool down after record growth coming out of the pandemic, Phoenix’s diversified economy, affordability relative to other larger cities in the Southwest and business-friendly regulation have allowed it to remain one of the strongest markets for population and job growth and one of the top-performing industrial markets in the nation,” said Ashlee Boyd, Managing Partner for Thompson Thrift Commercial.

Positive net absorption and large-scale deliveries

During the first quarter the Phoenix market had 4.5 million square feet of net absorption, representing a double-digit increase over 2023. New deliveries reached nearly 12 million square feet with 57 buildings.

Strong leasing activity and notable expansion plans

Some of the world’s most recognized companies continue to locate and/or expand their footprints in the Phoenix area. Notable examples include:

  • Amazon executed three individual leases with over 1 million square feet each during the first quarter—the last time there were three transactions of that size in the same quarter was in 2013.
  • Taiwan Semiconductor Manufacturing Company (TSMC) is tripling down on its commitment to Arizona. The chipmaker announced it will build a third facility at its North Phoenix semiconductor plant, increasing its investment to $65 billion.
  • Intel, the world’s second-largest producer of semiconductor chips, is underway on a $20 billion expansion at its Chandler campus, building two new facilities alongside its four existing ones.
  • LG Energy Solution is underway with a $5.5 billion battery manufacturing complex near Germann Commerce Center in Queen Creek that is expected to create 4,000 new jobs and will propel them to be Queen Creek’s largest employer.
Andrew Imel, Vice President of Industrial for Thompson Thrift stated, “Not only will these expansions from global corporations bring more jobs on their own, but economic development officials indicate that dozens of additional businesses that support and supply these companies will also increase their presence in the Phoenix Valley.”

Lower construction starts and healthy pre-leasing should aid rent growth

While recent speculative deliveries are expected to impact occupancy and asking rents in the short-term, Thompson Thrift believes that a reduction in construction starts and strong pre-leasing activity should tighten vacancy rates in the foreseeable future and accelerate rent growth.

The first phase of Elliot Tech Center, the company’s mixed-use project in Mesa’s highly-acclaimed Elliot Road Technology Corridor, is more than 30% pre-leased—outpacing the 21% Q1 preleasing stats for the overall Phoenix industrial market. Bombard Electric, Avanti Windows and Prestige Protective Coatings are completing build-outs of their new spaces; retail tenant Black Rock Coffee has opened and Circle K and Oregano’s Pizza Bistro have committed to the project; and the remaining two buildings are in lease-up. The company also is preparing to move forward with a second phase that will add another 622,000 square feet of industrial space spread across five buildings, three of which Thompson Thrift expects will be build-to-suits.

Thompson Thrift is also under construction on approximately 400,000 square feet of light industrial space in the first phase of Germann Commerce Center, located just west of the southwest corner of Germann Road and Meridian Road in the Queen Creek suburb. Since the announcement of LG Energy Solution, the leasing team has been working closely with Queen Creek Economic Development and Greater Phoenix Economic Council identifying users directly related to the $5.5 billion battery manufacturing facility. Upon completion of the multi-phase development, Thompson Thrift expects to have just under 1.1 million square feet of speculative and build-to-suit space between 13 buildings ranging from 62,000 to 110,000 square feet each.

“With easy access to the Phoenix-Mesa Gateway airport, Loop 202, and State Road 24, Germann Commerce Center is well-positioned to take advantage of the many benefits of the area, including its skilled workforce, strong industrial demand and proximity to residential housing,” said Imel.
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