Ecommerce Users Plant Roots in Phoenix’s Southwest Valley

Ecommerce users are driving leasing activity in the Phoenix industrial market—specifically in the Southwest Valley submarket. According to a second quarter report from JLL, 39% of industrial leases and 1.6 million square feet of industrial space in the second quarter was signed to ecommerce users, compared to 7% of leases signed to logistics and distribution users. More than 35% of the leasing activity occurred in the Southwest Valley, accounting for 587,260 square feet of absorption in the Phoenix market.

“Retailers and other service providers are reacting to the new consumer who demands: what I want; where I want; when I want,” Anthony Lydon, managing director at JLL, tells GlobeSt.com. “In order to accommodate a myriad of products and deliver through a seamless omnichannel experience, retailers/shippers must have scaleable and variable operations for first-mile activities—items that are received from shipping ports, manufacturers and assembly sources—as well as last-mile fulfillment facilities, which are smaller in size and located proximate to population density.”

It is no surprise that development activity has followed the demand to the Southwest Valley. The Phoenix market has a total of 5.2 million square feet in the construction pipeline, and 3.8 million square feet is in the Southwest Valley. Likewise, the Southwest Valley had 48.1% of the new construction deliveries in the Phoenix market with 882,626 square feet of more than 1.8 million. “Owners and investors are increasing their development and construction cost budgets in order to accommodate the modern e-commerce employers,” explains Lydon. “They and their equity and debt partners are being very deliberate and disciplined in designing projects, managing community entitlements and delivering modern supply chain space solutions on a timely basis.”

Big box facilities are in the highest demand among these users, many of which need to receive product from rail or trucks coming from the ports. “The modern design for these distribution/ fulfillment facilities differs from second-generation space in several ways,” adds Lydon. “They offer about 20% more auto parks to accommodate multiple employee shifts; 25% to 50% more electrical power to cool the building and power advanced supply chain material handling equipment; and feature clear heights of 36 to 40 feet to allow for higher racking and/or mezzanine space for supporting activities. On-site truck queuing lanes are also important to provide for auto and truck separation, and reduced skylights mitigate cooling loss with new LED lighting.”

The Southwest Valley has long been a popular industrial submarket, representing 75% of the industrial supply in the West Valley, according to Lydon. Ecommerce and logistics users, however, have fueled growth in the surrounding submarkets as well, including the Grand Corridor and the Northwest Valley. Lydon expects these markets to continue to grow, saying, “New transportation infrastructure investments like the Loop 303, Northern Parkway and Loop 202 extensions will create greater synergies between various submarkets throughout the West Valley and open the door for more live-work-play opportunities for its residents.”