Industrial's Amazing Quarter
The Phoenix warehouse and distribution market ended 2013 on a high note recording a 1.5% rise in effective rents, according to Reis analyst Brad Doremus (snapped in his NYC office reading Paul Ruud's Classical Econometric Theory, while Reis research chief Victor Calanog was reading, well, something else). This was the metro’s highest quarterly growth rate since the onset of the recession and a significant jump considering rent growth averaged just 0.4% over the previous eight quarters. An influx of high-quality space totaling nearly 1M SF likely supported the boost in rents.
Similar to effective rent growth, new construction was at its highest quarterly level since before the recession, Brad reports. New supply in Phoenix ranked third out of the major warehouse/distribution markets for the quarter, trailing only Dallas and Fort Worth. (And you know those two were colluding somehow.) However, Phoenix still remains a tenant’s market. Vacancy, although down from a cyclical high of 19.9% in 2010, is an elevated 17.1% and is actually up 50 bps over the past year. Rents have been flat or increasing in nine straight quarters, but still have a significant amount of ground to make up to reach pre-recession levels.