Vacancy rate in industrial market down

Although metro Phoenix is a long way from replacing the jobs and businesses lost in the downturn, the commercial-real-estate sector performed better in the first quarter than during the previous year, Valley commercial-real-estate analysts said.

The sector is significant because it houses the industries in which a majority of working Arizonans earn their paychecks.

The industrial-real-estate market, which includes buildings such as warehouses, distribution centers and manufacturing facilities, gained about 2 million square feet of occupied space in the first quarter, also known as positive absorption.

In other words, 2 million square feet of warehouse and other industrial space that was vacant in the fourth quarter of 2010 is now occupied, according to two Phoenix commercial-real-estate brokerages, NAI Horizon and CB Richard Ellis.

Those new occupants helped reduce the overall vacancy rate for industrial properties to 14.2 percent, compared with 14.7 percent in the fourth quarter, said Craig Henig, senior vice president and managing broker at CB Richard Ellis.

Mark Wilcke, senior vice president at NAI Horizon, estimated the vacancy rate to be a bit higher at 15.6 percent, but his firm's data also show that vacancies decreased slightly.

Not every commercial-real-estate firm measures vacancy the same way.

Some companies that took up occupancy in Phoenix-area industrial properties did so through leasing and others by purchasing the property.

Wilcke said that sale and lease prices for warehouse and other industrial space were at all-time lows in the first quarter, but that the decline in rent and sale prices that began in 2008 was much closer to leveling off than it had been a year earlier.

The biggest industrial-market lease transaction in the first quarter was by Mach 1 Global Services, which signed for about 260,000 square feet of distribution space in Goodyear, according to an NAI Horizon report.

The biggest sale transaction was by Alliance Commercial Partners LLC, which purchased a 66,000-square-foot warehouse building at 450 N. 54th St. in Chandler for $30.45 million, or about $55 per square foot, the report said.

A report from CB Richard Ellis that broke down the industrial market into regions showed that the southeastern and southwestern portions of the Phoenix area had the largest amount of positive absorption.

Nearly 80 percent of the gain in occupancy came from buying and leasing existing buildings, Henig said, which means very little new construction occurred.

He said even bigger deals were coming soon along with more jobs, based on a handful of recent company announcements.

"In early 2010, both First Solar and Intel Corp. announced plans to expand their presence in the Valley," Henig said.

by J. Craig Anderson The Arizona Republic Apr. 16, 2011 12:00 AM




Vacancy rate in industrial market down