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PHOENIX-The industrial market here is stronger than it has been in five years and should remain healthy despite the fact that more than 5 million sf is under construction, a new report says.

At the start of the third quarter, the overall vacancy rate for industrial space in metropolitan Phoenix hit 6.9%, a drop of 1.2% since the start of the year, according to a new survey by analysts as brokerage CB Richard Ellis. It’s the lowest rate since 1996, when the vacancy rate was 5.7%.

“When you’ve got a market with 190 million sf and a vacancy rate under 7%, you’ve got a pretty tight market,” Tom Louer, vice president of industrial properties with CB Richard Ellis, tells GlobeSt.com. “Tenants are having a tough time, in some cases, in finding space.”

Through the first half of the year, more than 7.1 million sf of space has been absorbed in the market, including more than 1 million sf of new development, the CB report says.

More than 5 million sf of new industrial space is under development, but Lauer expects most–if not all–of it to be absorbed during the latter half of the year.

According to the CB Richard Ellis report, the tightest markets in the metro area are the Scottsdale Airpark submarket, with a 7.46% vacancy factor; the areas north and south of Phoenix Sky Harbor International Airport, 2.85% and 6.88%, respectively; and near Deer Valley Airport, 4.45%.

While speculative projects continue to be built, some lenders are becoming more stringent about equity requirements on some industrial deals. “The lenders still want to do deals, but are concerned about the market continuing to go forward,” Louer tells GlobeSt.com.

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