Colliers International reports sales of industrial properties in Greater Phoenix surged 33 percent in 2018

Construction activity up by 17 percent

Phoenix, February 4, 2019 – Colliers International reports the Greater Phoenix industrial real estate market posted an active 2018, with sales volume up 33 percent over 2017 and construction of new industrial projects up 17 percent. A slight cooling of net absorption at the end of the year put upward pressure on vacancy rates.

During 2018, sales volume in the industrial sector hit $1.61 billion, with only a minor increase in overall number of transactions. This sales volume level was up 30 percent from 2017’s $1.21 billion. This suggests that buildings sold during the year commanded higher prices. The median price for 2018 was $93 per square foot, below second quarter’s $96 high. This is an unchanged annual price from 2017. Cap rates compressed by 16 basis points over the year to 6.88 percent from 2017’s average of 7percent cap rate. Industrial sales slowed in fourth quarter as net absorption did, falling behind the robust levels of second quarter.

Vacancy rose 10 basis points during fourth quarter to 7.5 percent. This nonetheless marks a 10-basis-point decline in vacancy from a year ago. During the past two years, vacancy has fallen by 240 basis points. The Southwest Valley saw an increase in vacancy during fourth quarter, up 140 basis points from year-end 2017. The current 9.8 percent vacancy is reflective of new speculative space being delivered in this submarket. The Northeast Valley experienced the most dramatic change in vacancy, decreasing 300 basis points to 4 percent, making it the lowest vacancy in the Phoenix region.

Net absorption totaled 2.3 million square feet in the fourth quarter, almost matching second quarter, which was a high point of 2.54 million square feet. This fourth quarter outperformed third quarter by 167 basis points. The modest slowdown in net absorption during the second half of the year pushed the vacancy above the cyclical low of 7.2 percent recorded during second quarter. Vacancy in the low-to-mid-7 percent range is a noteworthy improvement from the double-digit vacancy experienced as recently as 2015.

Net absorption is forecast to reach approximately 6.3 million square feet in 2019, lagging the amount of new construction in the market. Several blocks of large speculative space will come online late in the year, creating a possible surge in net absorption early in 2020.

Approximately 5.4 million square feet of industrial space are currently under construction. This is a decline from the first quarter 2018 when 6.8 million square feet were underway. Deliveries of new inventory in Greater Phoenix totaled just over 7.7 million square feet for 2018, and have averaged nearly 5.8 million square feet per year since 2013. Approximately 7.5 million square feet are expected to come online during 2019. As more spec development comes online, vacancy will rise slightly to an anticipated 8 percent by year-end 2019.

Rental rates rose during 2018 to $0.58 per square foot, per month. This marks a 1.8 percent increase from year-end 2017. Rates for big-box distribution space are rising at a faster rate than the overall market. This product type experienced a 6.4 percent increase in rates to $0.46 per square foot per month as of fourth quarter. After several years of impressive absorption, the Southwest Valley is recording strong rental growth. Rental rates are expected to continue rising, since demand for space remains strong. As new developments are completed, their more expensive rates will impact the overall average and likely push asking rents up 3.0 percent to 3.5 percent in 2019.

The Greater Phoenix industrial market is expected to remain strong during 2019, despite some growing pains that come with increased inventory. Net absorption should continue its healthy pace and developers are satisfying the demand for more space with new projects. The infrastructure investment of the Loop 202 extension to connect the Southeast Valley to the West Valley will make transporting goods through and into Phoenix far less time consuming and more appealing for businesses.

Future development and investment activity could be impacted by a decrease in land supply. Technology companies have been acquiring large parcels of industrial land for data center/tech developments. For instance, Microsoft purchased 258 acres in Goodyear for future use.  This trend could put a squeeze on the supply of industrial land and raise market prices

About Colliers International Group Inc.
Colliers International Group Inc. (NASDAQ: CIGI) (TSX: CIGI) is a top tier global real estate services and investment management company operating in 69 countries with a workforce of more than 13,000 professionals. Colliers is the fastest-growing publicly listed global real estate services and investment management company, with 2017 corporate revenues of $2.3 billion ($2.7 billion including affiliates). With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide, and through its investment management services platform, has more than $25 billion of assets under management from the world’s most respected institutional real estate investors.

Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services firm. Colliers is ranked the number one property manager in the world by Commercial Property Executive for two years in a row.

Colliers is led by an experienced leadership team with significant equity ownership and a proven record of delivering more than 20% annualized returns for shareholders, over more than 20 years.

For the latest news from Colliers, visit or follow us on Twitter: @Colliers and LinkedIn.

Colliers International in Arizona has served clients locally and globally for more than 35 years.

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Thomas Brophy

Research Director


As the research director for Colliers International in Arizona, I manage the research department entrusted with all market data and analysis activities. I am committed to providing cutting-edge research services, integrating innovative approaches to data streaming, and improving how the organization synthesizes and scales research data. My creative outlook significantly enhances research services for clients and brokers.

In addition to publishing quarterly statistical reports for each property discipline, I maintain a database of economic indicators to provide forecasts, and analyze and interpret real estate trends. I produce customized research reports on behalf of brokers and clients, prepare market presentations and develop ad hoc research projects in support of business development.

Collaborating with other service lines and professionals, our research team provides the data necessary to support clients and brokers. Data compilation includes ownership, zoning, land use, property sales and demographics. I actively participate in broker meetings and regional and national research calls to present market research and trends analysis. Our research team develops reliable statistical information for vacancy, rental rates, lease and sale comparables, cap rates, absorption, and construction and renovation trends across property lines, including office, industrial, multifamily retail, healthcare, hotels and land.

My extensive experience includes collecting, analyzing and preparing market and economic data and research, as well as expertise in corporate communications, investor relations, strategic planning, brand management and public speaking. Prior to joining Colliers, I was director of research for ABI Multifamily, where I developed market reports and research data used in marketing materials for ABI offices in Phoenix, Tucson, Sacramento and San Diego. I oversaw all data collection and reporting, wrote monthly market insight articles, and developed market podcasts.

As director of research and partner for Neighborhood Ventures (a multifamily investment firm), I collected, analyzed and wrote market data reports for use in investor presentations, offering materials and corporate communications. As principal with EPU Investments, I directed business and research operations for a multi-divisional investment company involved in single- and multifamily development and land services, including farming and water rights assessments and acquisitions.

Serving as an affordable housing specialist at Hendricks & Partners (now Berkadia), I provided assistance, research and guidance in creating the affordable housing division, and assisted brokers and clients in the acquisition and disposition of assets across the U.S.

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