Future Cities

2022 North America Industrial Big Box Review & Outlook: Phoenix

March 11, 2022 5 Minute Read

The Greater Phoenix industrial market is delivering strong results with record net absorption and a record-low vacancy rate. Phoenix’s strategic location, combined with its outstanding water, power and transportation infrastructure, makes it a highly desirable market for all industry sectors. Additionally, with 50,000 students graduating from our colleges and universities each year and population growth of approximately 100,000 per year, the labor supply is incredibly strong. We are confident that the Phoenix industrial market will continue to accelerate in the coming year.
Paul KomadinaCBRE Senior Managing Director


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Greater Phoenix is one of the fastest growing markets in North America, which is increasing demand for big-box industrial facilities and providing a growing available labor pool. Nearly 5 million people or 1.7 million households live within 50 miles of the population core, with an expected growth rate of 8% over the next five years. Nearly 25% of the population is in the 18-to-34 age group.

Figure 1: Phoenix Population Analysis

Image of data table and chart

Source: CBRE Location Intelligence.

According to CBRE Labor Analytics, the local warehouse labor force of 72,729 is expected to grow by 17.3% by 2030. The average wage for a non-supervisory warehouse employee is $15.53 per hour, 4.2% higher than the national average.

Figure 2: Phoenix Warehouse & Storage Labor Fundamentals

Featured statistics with text and icons

Source: CBRE Labor Analytics.
*Median wage (1 year experience); non-supervisory warehouse material handlers.

Location Incentives

Over the past five years, there have been 132 economic incentives deals totaling more than $459 million at an average of $12,457 per new job in the Phoenix metropolitan area, according to Wavteq.

According to CBRE’s Location Incentives Group, among the top incentive programs offered in metro Phoenix is the Arizona Competes Fund, which provides discretionary grants to businesses that achieve certain performance measures and create new jobs with wages that are equal to or above the median county wage.

Another program available in metro Phoenix is the Quality Jobs Tax Credit Program, which awards income tax credits of up to $9,000 per job to generate high-quality employment opportunities in Arizona. The income tax credits are spread over three years to encourage continuous employment. To qualify, businesses must make a capital investment and create jobs that meet specific wage requirements. These tax credits are non-refundable and non-transferrable, and any unused credits may be carried forward for up to five consecutive years.

Figure 3: Phoenix Top Incentive Programs

Source: CBRE Location Incentives Group.
Note: The extent, if any, of state and local incentive offerings depends on location and scope of the operation.

Logistics Driver

Approximately 130,000 miles of Arizona highways, including I-10, I-8 and I-40, make it easy to get goods to consumers. Recent expansions and improvements were made to Loops 202 and 303.

Phoenix Sky Harbor International Airport (PHX) is a burgeoning air cargo hub utilized by FedEx, DHL and UPS. Cargo processed in the airport's two complexes, South Air Cargo and West Air Cargo, increased 10% in 2020 (most recent data). Cargo operations at PHX are forecast to increase in years ahead. The Comprehensive Asset Management Plan for PHX includes new development to handle more air cargo.

Approximately 130,000 miles of Arizona highways, including I-10, I-8 and I-40, make it easy to get goods to consumers.

Image of interstate freeway loop

Capital Markets

As institutional, private and foreign investors expand their holdings in Phoenix, cap rates continue to compress for both Class A and B assets. Robust market fundamentals and a challenging regulatory environment in California are helping drive occupiers to Phoenix, resulting in rising rental rates and lower cap rates as investors seek industrial assets with near-term rollover to capture future growth. The market’s exceptional fundamentals, strong labor pool and ability to quickly reach consumers in all Western states will continue to drive strong investor demand in 2022.
Joe CestaCBRE Executive Vice President

Figure 4: Cap Rate Comparison

Chart of year over year percentage changes

Source: CBRE National Partners.

Supply & Demand

Strong population growth has attracted big-box occupiers to the market, resulting in back-to-back years of more than 10 million sq. ft. in leasing activity. Net absorption totaling 13.3 million sq. ft. last year made Phoenix the No. 2 growth market (net absorption as a percent of total inventory) in North America. The direct vacancy rate fell by 3.4 percentage points to 3.6% and the under-construction total increased to 22 million sq. ft.—the fifth highest total among markets in this report.

General retailers & wholesalers accounted for 62% of total leasing activity last year, followed by 3PLs at 21%. Despite a significant amount of construction, oversupply concerns are minimal due to strong preleasing and the reduction in existing vacant space. The market’s growing population and available supply will increase investor interest and keep cap rates below 4%.

Figure 5: Share of 2021 Leasing Activity by Occupier Type

Multicolored circle chart

Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research.

Figure 6: Leasing Activity

Bar chart with text and numbers

Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research.

Figure 7: 2021 Construction Completions vs. Overall Net Absorption

Image of bar graph

Source: CBRE Research.

Figure 8: Direct Vacancy Rate by Size Range

Image of bar graph

Source: CBRE Research.

Figure 9: Under Construction & Percentage Preleased

Image of data table

Source: CBRE Research.

Figure 10: Historical First Year Taking Rents (psf/yr)

Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research.

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