Sales of Phoenix industrial properties surged 33% in 2018

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The Greater Phoenix industrial real estate market posted an active 2018, with sales volume up 33 percent over 2017 and construction of new industrial projects up 17 percent.  A slight cooling of net absorption at the end of the year put upward pressure on vacancy rates.

During 2018, sales volume in the industrial sector hit $1.61 billion with only a minor increase in overall number of transactions.  This sales volume level was up 30 percent from 2017’s $1.21 billion.  This suggests that buildings sold during the year commanded higher prices.  The median price for 2018 was $93 per square foot, below second quarter’s $96 high.  This is an unchanged annual price from 2017.  Cap rates compressed by 16 basis points over the year to 6.88 percent from 2017’s average of seven percent cap rate. Industrial sales slowed in fourth quarter as net absorption did, falling behind the robust levels of second quarter.

Vacancy rose 10 basis points during fourth quarter to 7.5 percent.  This nonetheless marks a 10 basis point decline in vacancy from a year ago.  During the past two years, vacancy has fallen by 240 basis points.  The Southwest Valley saw an increase in vacancy during fourth quarter, up 140 basis points from year-end 2017.  The current 9.8 percent vacancy is reflective of new speculative space being delivered in this submarket.  The Northeast Valley experienced the most dramatic change in vacancy, decreasing 300 basis points to four percent, making it the lowest vacancy in the Phoenix region.

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