Despite Slow Q1, Phoenix Industrial Shows Improvement

PHOENIX-Lee & Associates’ Q1 Industrial Market Report shows what appears to be a recovering economy with vacancies dropping by 80 basis points to 11.9% and 5.7 million square feet under construction. The only potential flies in the ointment were sales volume (which dropped to just under 80 million square feet versus the more than 100 million square feet trading hands in the previous quarter) and absorption, which stood at 1.5 million square feet, which is down from the 1.9 million square feet reported during Q4 2012.

Lee & Associate senior research analyst Matt DePinto says he isn’t too concerned about absorption, pointing out that the numbers are seasonal. Furthermore, while there is still forward momentum in leasing, DePinto tells GlobeSt.com that activity within the smaller spaces – between 30,000 square feet and 70,000 square feet – has also seen a slowdown. “Some of the smaller companies that scaled back or went back to their garages are looking for space and looking to lock those deals in,” he says. The large-use activity is also strong. “It’s the mid-range space that’s struggling,” DePinto observes.