Asking rents surge 25 – 30 percent in these top-performing markets
Growth among traditional and non-traditional industrial users continues to push the Phoenix industrial market forward. This is particularly true in Scottsdale and Deer Valley, where asking rents surged as much as 30 percent in the first quarter of the year as demand surpassed new product in Scottsdale and matched new supply in Deer Valley, according to the Q1 2017 Phoenix Industrial Insight report released this week by the Phoenix office of JLL.
While the average asking rental rate for local industrial space is $0.50 per-square-foot, the highest rates in metro Phoenix belong to the Scottsdale and Deer Valley submarkets, which during the first quarter achieved rental rates of $0.92 per-square-foot and $0.74 per-square-foot, respectively.
Since 2013, this represents a 30 percent surge in Scottsdale and a 25 percent surge in Deer Valley.
“High demand and long-term commitments to space in Scottsdale and Deer Valley from traditional industrial users is proof that companies are growing. There has also been a tremendous increase in demand from smaller and non-traditional users, and a willingness from landlords to lease to these users for the first time,” said JLL Executive Vice President Steve Sayre.
According to Sayre, many of the traditional companies leasing industrial space in Scottsdale and Deer Valley are coming from the southern part of the Valley, opening secondary or tertiary locations in the northern part of Phoenix to better serve customers. Many are from the aerospace, engineering and pharmaceutical industries. Others are related to homebuilding, opening showrooms with custom-designed offices that showcase well when servicing the higher-end demographic profile of the North Valley. Smaller users include companies in industries such as air conditioning, home supplies, janitorial, food users and pets.
“A number of non-traditional users are also utilizing industrial space in unique ways,” said Sayre. “Athletic training facilities, for example, don’t want to pay the high rents and operating expenses of retail space, and need more flexibility in their footprint than retail space usually provides.”
As an example, JLL earlier this year represented Tacflow in a 30,000-square-foot lease in Deer Valley. The location is home to the Craft International Training Team and provides real-world training for law enforcement, military, security professionals and responsible citizens. Tacflow selected the building because it is air-conditioned, with a high clear height and large footprint to allow the training team to set up various equipment and training footprints.
“We are seeing more requirements for air-conditioned space as companies continue to place more people and product needing climate control in warehouses,” said Sayre. “This transition is great for the landlord, as their buildings can achieve higher rents and, therefore, higher values.”