By Chris Keeley,
Phoenix Commercial Brokers
Not since 2006 to 2007 have we seen this amount of new construction in the Greater Phoenix Industrial market. We have had approximately 10,000,000 square feet of new construction in the industrial market alone in 2019, and the demand and absorption rates justify the new development.
The Deer Valley Airpark could use some of that infusion. We are sitting in a very healthy submarket with lease rates and purchase prices increasing exponentially based on a significant lack of current inventory.
There have been 50 industrial buildings sold in the Airpark this year for an average sale price of about $131 per square foot. There are currently only about 18 buildings available for users to purchase between 5,000 and 100,000 square feet, all of which are second generation. The only new buildings under construction are MACS Pinnacle 7 Phase 2 two buildings on Pinnacle Peak and 3rd Street that are for lease, and one 12,000 square foot building under construction in TTR Industrial Park I at Deer Valley and 16th Street. The demand for purchase options is very high in the Deer Valley Airpark but our inventory has not kept up recently. Of course we have reached a Sellers market finally and pricing has reflected that. We are fast approaching the numbers we saw in the heydays of 2005 to 2007. Most quality industrial buildings will cost $140 plus per square foot moving forward.
The lease product has kept up with demand, with many new projects built in the last few years in the industrial sector. There are about 800,000 square feet currently available in Deer Valley but minimal small lease spaces. The majority of vacant space is 10,000 square feet up to 150,000. There are only a few projects left that can accommodate 1,000 to 3,000 square foot tenants. And forget it if you are looking for a yard – those properties are few and far between.
Lease rates have also crept up close to 2007 rates. The average lease rate for quality industrial space is $0.75 to $0.85 psf (NNN). There are a lot of options for larger tenants, so they should still expect to achieve lower rates if they shop around. With a few more hundred thousand square feet coming onto the market soon, there may be some discounts to be had today but with the overall lack of new construction in our market, don’t expect that to last long.
If there are any of you speculative builders out there looking for new projects, I’d love to sit down with you and discuss what’s worked in the past that I expect would work again. Let’s talk.
Chris Keeley is a Deer Valley Commercial Specialist with Phoenix Commercial Brokers, an Industrial Real Estate Agency located at 22849 N. 19th Ave. Ste 140 in Phoenix.