PHOENIX-In 2010 and 2011, the big news in the industrial sector was the big-box users and builders; the ones that came in and took down anywhere from 1 million to 2 million square feet of space. But the story was vastly different in 2012.
“We finished the year with a positive net absorption of 7.4 million square feet and our vacancy went down to just under 11%,” comments Pat Feeney, senior vice president with CBRE. “The interesting aspect about this absorption is that it consisted of spaces between 20,000 square feet and 200,000 square feet.”
Lee & Associates’ principal T.J. Swearengin from sees the same thing on the sales side. “I sold a lot of smaller buildings in 2012; between 5,000 square feet and 20,000 square feet,” he explains.
Feeney believes that 2012′s absorption figures were healthier than those posted in 2011, even though the figure was slightly larger. “It means we’re not dependent on Amazon coming in and taking two buildings measuring 1.2 million square feet each,” he comments. “I’d rather do 10 deals at 200,000 square feet or even 20 deals at 100,000 square feet. It shows more businesses making commitments.”
Feeney was also cheered by the diversity of businesses taking space. “We saw manufacturers, third-party logistic providers, pharmaceuticals and food companies, as well as ecommerce.” Added to that is that the area has been accelerating the process for tenant improvements, which also bodes well for businesses coming to town or wanting to expand, Feeney notes.
This is good news for Phoenix, especially as this is one of the regions that, just a handful of years ago, was still reeling from the effects of the Great Recession and its aftermath. To that end, Swearengin indicates that the number of bank transactions for commercial real estate slowed significantly this past year; another piece of good news. “I think what’s happening here is that banks are more stable than they were a year, two years ago,” he comments. “They’re either working out the loans with borrowers or are pulling the trigger on foreclosure. But there aren’t as many REOs as there were.”
Both experts don’t see any major surprises cropping up in 2013 – just the same slow and steady growth that was evident in 2012. Feeney anticipates that net absorption could hit 7.5 million, with a few spec buildings coming out of the ground. Swearengin pushes the speculative construction to 2014, but agrees with Feeney’s assessment of the steady uptick. “This growth is good for the market,” he adds. “It isn’t exciting or sexy, but it’s better to have this slower, steady absorption.”