Phoenix is Second in the Nation for Industrial Real Estate Being Built
The industrial real estate market in the United States is experiencing sustained growth, with more than 690 million square feet of industrial supply currently under construction. According to CommercialEdge, this is up from last year’s previous all-time high of 592 million square feet, indicating that the development of industrial real estate is still accelerating. The positive indicators of higher last-year leases compared to in-place leases, as well as record low vacancies, highlight the potential for another strong year for industrial development, even if demand starts to normalize due to economic headwinds.
To identify the markets experiencing the most demand and supply, CommercialSearch conducted a study that analyzed the state of industrial real estate development in 2023. The study found that Phoenix ranks second among the largest U.S. markets by industrial real estate currently under construction, with a total of over 52 million square feet of industrial space under development.
Out of the projects to be delivered this year, Phoenix’s Lucid AMP – Phase 2 property stands out as the country’s seventh-largest industrial development project due for completion in 2023. The 52.5 million square feet of industrial space under construction in Phoenix represents more than 15% of the market’s current stock.
The high-demand Dallas market is poised to deliver the most industrial space nationally for the third year in a row, with 61.6 million square feet of space in the pipeline. This represents a 60% increase compared to last year’s 38 million and a sizable 7.1% of the market’s current stock. Industrial development in the Metroplex is expected to continue to meet sustained demand in the logistics, manufacturing, and specialized asset types.
In addition to Dallas and Phoenix, the Inland Empire market in California also has a significant amount of industrial space under construction. Together, these three markets account for 145 million square feet of industrial space under development.
The study also identified which industrial real estate subtypes generated the most new developments. The logistics subtype led the way, accounting for more than 43% of new developments. Manufacturing accounted for 31%, while specialized asset types made up 26% of new developments.
The largest projected development this year is Amazon’s Project Schooner warehouse in Johnston, R.I., totaling 3.86 million square feet. Last year’s largest completion was Giga Texas, a 4.3-million-square-foot EV manufacturing facility.
Despite concerns of potential supply saturation, the sustained growth in industrial real estate development indicates continued confidence in the sector’s long-term potential. This growth is fueled by e-commerce and logistics companies that continue to expand their operations and require more space to support their operations.
The increasing demand for industrial real estate has also led to increased competition among developers and investors, which has led to higher land and construction costs. However, the positive indicators of higher last-year leases and record low vacancies suggest that the industrial real estate market remains strong and is expected to continue to grow in the coming years.
In summary, the industrial real estate market in the United States is experiencing sustained growth, with over 690 million square feet of industrial supply currently under construction. Dallas, Phoenix, and the Inland Empire market in California are the top three markets with the most industrial space under development. The logistics subtype generated the most new developments, followed by manufacturing and specialized asset types. Despite concerns of potential supply saturation, the industrial real estate market remains strong and is expected to continue to grow in the coming years.
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