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Industrial Vacancy Rate Holding Steady With Addition of New Inventory
Phoenix, October 21, 2016 – Colliers International in Greater Phoenix released its third quarter 2016 Industrial Market Report for Greater Phoenix. Report highlights are outlined below. For more details, refer to the attached report or click here to view online.
- Greater Phoenix continues to experience strong demand for industrial space. Net absorption for third quarter totaled nearly 1.1 million square feet. This marks the fourth quarter out of the past five when absorption topped 1 million square feet.
- The Valley-wide vacancy rate for industrial space remained steady at 10.8%, down 80 basis points in the past year.
- Rental rates continue to rise as a result of lowering vacancy and strong demand. Asking rents have spiked 6.4 percent in the past year with additional increases predicted in the upcoming quarters.
- Construction of new industrial developments has been active. Approximately 1.4 million square feet of space was delivered in third quarter and more than 4.5 million square feet have come online year-to-date. Currently the market is underway with 2.4 million square feet.
- Investment sales of industrial buildings cooled down somewhat in third quarter with fewer projects changing hands than in second quarter. Prices and cap rates for 2016 are nearly identical to those of 2015.
According to Colliers International of Greater Phoenix, the industrial market will continue benefitting from healthy tenant demand. Net absorption has been robust, averaging approximately 1.5 million square feet per quarter for the past few years. That trend, combined with lowering vacancy rates will continue through this year and into 2017. New projects coming online are a combination of spec and build-to-suit properties. These developments are located throughout several areas of the Valley, whereas early recovery construction was primarily focused in the Southwest Valley. This geographic diversity is a promising indicator of the overall strength of the market.
The local economy will be a focus of attention in the near-term as Colliers International monitors employment growth. While still positive, job growth has slowed recently to just 2.2 percent. The construction sector, which impacts industrial space, has been adding workers at an above-average pace. Transportation/warehousing also has been adding workers, but the manufacturing sector continues net job losses by about 1 percent this past year.
The investment market will remain healthy through the remainder of 2016 as businesses continue to expand in industrial buildings and new properties are added to the market. Prices and cap rates should remain steady with no interest rate increases anticipated in the short-term. As neighboring markets become overpriced and experience compressed cap rates, Greater Phoenix could attract even more out-of-state attention from investors in the next 12-24 months.
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Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is an industry leading global real estate services company with more than 16,000 skilled professionals operating in 66 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting.
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Colliers International in Greater Phoenix has served clients locally and globally for more than 35 years.