Future Cities
Phoenix
2024 North America Industrial Big-Box Review & Outlook
April 29, 2024 5 Minute Read
Demographics
Phoenix has been one of the country’s fastest-growing metros. Now, almost 5 million people or 1.9 million households—about a quarter aged 18-34—live within 50 miles of the market’s core, with a 2.9% expected five-year growth rate.
Figure 1: Phoenix Population Analysis
The local warehouse labor force of 99,991 is expected to grow by 11.6% by 2034, according to CBRE Labor Analytics. The average wage for a non-supervisory warehouse worker is $18.86 per hour, 6.3% above the national average but 7.5% below the Inland Empire.
Figure 2: Phoenix Warehouse & Storage Labor Fundamentals
* Median wage (1 year experience); non-supervisory warehouse material handlers.
Location Incentives
Over the past five years, there have been more than 260 economic incentives deals totaling more than $550 million for an average of $12,000 per new job in metro Phoenix, according to fDi Intelligence.
CBRE’s Location Incentives Group reports that the top incentive programs in metro Phoenix include the Arizona Competes Fund, offering discretionary grants to businesses that achieve certain performance measures and create new jobs with wages equal to or above the median county wage.
Another regional program is the Quality Jobs Tax Credit Program, offering 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. Any unused credits may be carried forward for up to five consecutive years.
Figure 3: Phoenix Top Incentive Programs
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 transportation of goods simple. 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 is processed in Phoenix’s two complexes, South Air Cargo and West Air Cargo. The Comprehensive Asset Management Plan for PHX includes new development to handle more air cargo in the coming years.
Approximately 130,000 miles of Arizona highways, including I-10, I-8 and I-40, make transportation of goods simple.
Supply & Demand
Phoenix’s industrial big-box market had a significantly higher vacancy rate in 2023 due to a mix of less leasing activity and continued major new development. 7.9 million sq. ft. was leased last year, 52.2% lower than 2022’s record 16.5 million sq. ft. This reduction in leasing also halved net absorption to 10.1 million sq. ft. Combined with the completion of 17.2 million sq. ft. of construction, the vacancy rate surged to 10.7%, from 3.4% in 2022. Despite increased vacancies, rental rates kept growing, with average taking rents reaching $9.21 psf/yr, a 27% increase from 2022.
Currently, around 23 million sq. ft. of space is under construction, with only 26.4% preleased. Phoenix has the second-highest construction activity in North America, which is expected to further increase vacancies in 2024. However, the region’s population growth and a strong labor market will continue to attract regional occupiers. Construction starts significantly declined at the end of 2023. The rise in vacancy rates is projected to stop by late 2024 and start to decrease by 2025.
Figure 4: Share of 2023 Leasing by Occupier Type
Source: CBRE Research.
Figure 5: Lease Transaction Volume by Size Range
Source: CBRE Research.
Figure 6: 2023 Construction Completions vs. Overall Net Absorption by Size Range
Figure 7: Direct Vacancy Rate by Size Range
Figure 8: Under Construction & Percentage Preleased
Figure 9: First Year Taking Rents (psf/yr)
Source: CBRE Research.
Explore Big-Box Insights by Market
-
Central Valley’s proximity to the affluent Bay Area gives it convenient access to more than 5.3 million people within 50 miles of the market’s core.
-
Around 11.9 million people live within 50 miles of the market’s core, the third-most of any U.S. market in this report, with a projected 0.4% five-year growth rate.
-
Over 15 million people live within 50 miles of the market’s core—the second-largest population of any U.S. market in this report, with a flat expected five-year growth rate.
Industrial & Logistics Research
John Morris
President, Americas Industrial & Logistics, Advisory Services
