Phoenix Registers Strong Demand, Limited Supply and Rising Rents
PHOENIX – Aug. 29, 2019 – Fourteen U.S. markets stand out in a new report from CBRE as strategic options for investors in industrial & logistics real estate who are seeking growth opportunities outside of primary markets.
These markets, which CBRE describes as strategic markets, have registered demand for industrial & logistics real estate that outpaced their supply by a collective 89 million sq. ft. since 2013. In the same span, their industrial rents have increased by an average of 25.2 percent.
In Phoenix, 54.4 million sq. ft. of industrial space has been absorbed since 2013, outpacing the 43.3 million sq. ft. of new construction during the same span.
“Manufacturing, third party logistics, pharmaceutical, e-commerce and food and beverage users have been especially active across Phoenix in recent years, which has led to record absorption levels and the lowest vacancy rate in more than a decade,” said Rusty Kennedy of CBRE in Phoenix. “While availability and affordability of labor are some of the biggest drivers to the region, that is just one part of the story. Phoenix also benefits from strong infrastructure with two rail providers and an efficient freeway grid system in place to service the ever-growing population of the metro and beyond. Additionally, among the area’s advantages are its proximity to California and that it offers direct access to more than 33 million people in seven states within a one-day truck haul.”
Leading these strategic markets are seven that report industrial vacancy rates below or only slightly above the national average (4.3 percent) and aggregate rent growth of 6.1 percent in the past year: Las Vegas, Salt Lake City, Milwaukee, Reno, St. Louis, El Paso and Detroit. The other seven have more new leasing opportunities due to construction completions, and they generated an average rent increase of 5.6 percent: Phoenix, Greenville-Spartanburg, S.C.; Dayton, Ohio; San Antonio; Savannah, Ga.; Central Valley, Calif.; and Northeastern Pennsylvania.
CBRE selected these strategic markets after polling its Industrial & Logistics Capital Markets teams about which markets represent emerging opportunities and opportunities for yield for investors. Some, like Detroit and Phoenix, are primary markets in terms of population but still are coming into their own as hubs of industrial & logistics real estate.
“The Industrial & Logistics sector continues to generate strong momentum with the growth of e-commerce and a healthy U.S. economy, but opportunities vary depending on geography, asset type and other factors,” said Jack Fraker, Vice Chairman and Managing Director of CBRE Global Industrial & Logistics. “Investors seeking higher yields can find them in several markets still hitting their stride as hubs. These markets offer the infrastructure, labor availability, connectivity to major ports, and the real estate fundamentals needed to support strong growth going forward.”
CBRE’s report includes details on each of the 14 markets, such as the friendly business climate of Reno, the relatively affordable labor and business costs of Greenville-Spartanburg, and the proposed, 20,000-acre inland port adjacent to Salt Lake City. To read the report, click here.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.