Cushman & Wakefield today released its Industrial Construction report, showing demand losing speed as construction completions peak, setting the stage for a return to a more balanced market.
Though Q1 2023 new construction deliveries are up 40% from this time last year with 129.0 million square feet (msf) coming online, starts were down 60% from Q1 2022 levels and fell 34% from Q4 2022. First quarter 2023 starts in the South and West regions, the two regions with largest pipelines, are down 65% and 66%, respectively, from Q1 2022 and all regions lagged at least 32% from the five-year historical start average (2018-2022).
Phoenix industrial construction
• Phoenix has the second largest pipeline next to Dallas/Fort Worth and is considered a larger/growing market with 375 msf of inventory. Phoenix’s growth has accelerated during the pandemic due to population growth/migration and because it is seen as a cheaper alternative to some of the more expensive west coast markets while maintaining proximity to the consumers. While Phoenix has a large speculative ratio, it is sitting at a 4.4% vacancy rate, 360 bps below its 10-year average. It is a market that has registered strong demand in recent years, providing a cushion on the supply risk side.