The Phoenix industrial sector remained steady this quarter with vacancy continuing to decline and net absorption remaining positive. The overall Phoenix vacancy rate fell slightly this quarter to 12.1%, down from 12.5 % posted at the mid-year point. This brings vacancy rates down almost a full percentage point compared to the same quarter in 2013 when the rate was 13.2%. The Southwest Valley posted the highest vacancy rate at 14.7%, while the Northwest Valley posted the lowest at 9.0%.
“The Phoenix commercial real estate market is continuing to recover quarter over quarter albeit slowly but surely. This increase in activity is touching every product sector; Office, Retail, Industrial and Investment. While vacancy rates continue to decline, some pricing has increased, and absorption has been positive, with submarkets in the valley in all products showing increased activity. The Phoenix market seems to be more confident than the actual economy might dictate, but Phoenix is drawing positive attention nationally in many areas and consumer confidence is following. Most agree that 2014 is a good foundation for 2015, which will be the year when RECOVERY will be spelled with capital letters.”
After an impressive end to 2013, the industrial sector slowed slightly this quarter; both leasing activity and sales volume decreased. Rental rates inched upwards in Q1, continuing the long term trend of increasing rates. Despite positive first quarter absorption, vacancy rates saw a small increase in Q1. However, long-term vacancy trends continue to decline in all industrial property types, except for big box inventory.
In Q4 of 2013, net absorption totalled 2,669,041 SF, making up for a slow Q2 and Q3 that posted negative numbers. 2014 was vibrant with activity in the first couple months, but fizzled into a net absorption of only 479,422 SF. This decrease was reflected in leasing activity as well; last quarter 4.3 million SF was leased in the Phoenix Metro industrial market, while just 2.2 million SF was leased in the first quarter of 2014. Sales Volume also fell this quarter, coming in at $176 million, down from the $331 million seen at the end of 2013.