Middle Market Digest: This Week in Southwest

The Southwest market continues to see strong activity. This week, the Arizona market saw particularly strong activity with several deals coming out of several Arizona markets. Phoenix remains a hot spot for investment. Multifamily is the hottest asset class, with properties trading hands and new development activity. Office and industrial activity was also strong in the market. Los Angeles, San Diego and Orange County also saw substantial deal flow this week. Here’s a look at this week’s trends, announcements and deals that you may have missed in Southern California, Utah, Arizona and Nevada.

BY THE NUMBERS

PHOENIX— Phoenix’s current industrial inventory offers only enough contiguous space to accommodate less than half of these requirements, and speculative development will provide much-needed space solutions as Phoenix’s industrial inventory tightens. The Valley’s 1.3 million square feet of Q1 industrial absorption is light compared to the gains of 2017, strong demand remains, including more than 100 industrial tenants each looking for at least 100,000 square feet of local space. Increases in government spending have benefitted key industries in the submarket, with aerospace and defense, in particular, expected to experience mergers and consolidations. Other industries fueling activity in the submarket include high-tech/advanced manufacturing, semiconductor and pharmaceutical/nutraceutical. This growth has pushed the size range of the average southeast Valley industrial user from 15,000 to 50,000 square feet up to 30,000 to 60,000 square feet. Across metro Phoenix, industrial vacancy at the end of Q1 had fallen to 7.3 percent, just 100 basis points above its lowest point. As existing lease and purchase options dwindle, developers can’t seem to deliver new space quickly enough, especially highly functional developments able to attract large, sophisticated single-user operations while still maintaining the potential to become a multi-tenant building. Key amenities important to users are increased clear heights, wider column spacing and additional dock doors.