The Big Returns Behind Industrial Investments in Phoenix

There are big returns to be made in the Phoenix industrial market. The Koll Co. and Seera Investment Bank B.S.C have sold the Buckeye Logistics Center, 1 million-square-foot industrial facility in Phoenix, for $98.4 million after buying it in 2016 for $74.5 million. The property is leased to Amazon, which has converted the property to use for its growing soft goods business. The Phoenix industrial market has been growing rapidly, fueled by ecommerce activity, and has seen increased investor interest as a result.

“The Koll Company recently completed a new 10-plus year lease with Amazon and worked extensively with Amazon to convert the industrial building to more efficiently accommodate their new soft goods and clothing distribution business plan,” Scott Lanni, principal at the Koll Co., tells GlobeSt.com. “At that point, we had successfully created the ultimate value of the real estate asset making it the appropriate time to sell the property.”

The Koll Co. worked closely with Amazon to help the firm meet its growth needs, and as a result, was able to secure a longer lease term. The $98 million price tag sets a new price-per-square-foot record for the Phoenix market. “The sales price did meet our expectation and we set a new per square foot watermark for the Phoenix industrial market,” explains Lanni. “An absolute success for The Koll Company and its senior management team.”

Of course, the ownership received strong interest in the asset, illustrating the growing interest in the market—and making this a great time for the two investment firms to capitalize on the appreciation. The name of the buyer, however, was not disclosed. “Due to the size of the asset and the well-known tenant, we were approached by numerous prospective buyers from all around the globe,” adds Lanni. “We sold the building in an off market transaction to a well-capitalized long-term investor.”

This activity also indicates a shift in the Phoenix industrial market, which is falling on investor and user radar. “Phoenix has long been viewed as a secondary industrial market in the US,” explains Lanni. “I believe that viewpoint is changing as is the entire industrial/distribution model. E-commerce is playing a big factor in these changes as well.  The transportation access and strategic location in the western US make Phoenix ideally located for these E-commerce businesses and other typical distribution retailers.  The Phoenix industrial market is fast becoming a preferred investment market by all types of investors resulting in a decrease in cap rate and increase of per square foot pricing.”