Analysts point to two primary sources for interest in themarket. First, the Census Bureau's most recent figures rank Phoenixas the third fastest growing major metropolitan area in thecountry, adding more than 130,000 people in the last 12 months.Second, proximity to Southern California makes the region anattractive alternative to the coastal state's increasinglycongested and expensive markets.

Jay Ellingson, executive vice president of SunCor DevelopmentCo., calls Southern California proximity the major impetus for theTempe, AZ company's development of Palm Valley 303, a 1,600-acre,19.6 million-sf business park in the Phoenix suburb of Goodyear.The project launched in April with the construction start of a440,000-sf, speculative cross-dock distribution facility. "Tenantswill be able to bring containers direct from the ports of LongBeach and Los Angeles for break-down, assembly and distribution,"he explains. "Even though there are added transportation costs,rents are significantly lower than the Inland Empire."

Not surprisingly, California companies are among the largestinvestors in the growing market. Irvine, CA-based LBA Realty Inc.,which owns some two dozen Arizona industrial and office properties,made the year's largest purchase with the $73 million acquisitionof McShane Westside Business Park, a 1.1 million-sf property inTolleson, AZ. Smaller California firms have also targeted theregion. San Mateo, CA-based GW Williams Co. recently paid $8.1million for Airport Plaza, an 84,118-sf industrial project inPhoenix that is 86% occupied. The acquisition is the company'sfourth in the market, and Steven Lindley, a senior vice presidentwith Grubb & Ellis/BRE Commercial in Phoenix who co-brokeredthe deal, tells GlobeSt.com the buyer is looking for additionalarea investment opportunities. California buyers are equally activeat the market's lower rungs. According to Grubb & Ellis/BRE,private California investor Jeff Lion purchased a vacant 17,200-sfindustrial building in Tempe for $1.45 million and LosAngeles-based Maximum Management Corp. bought a 20,400-sfindustrial building in Phoenix for $1.26 million.