Industrial-property leasing in Valley cools

Following three consecutive quarters in which commercial tenants leased a net total of 6.2 million square feet of warehouse, manufacturing and distribution-center space, leasing activity nearly ground to a halt in the first quarter, according to senior research analyst Pete O'Neil at commercial real-estate firm Colliers International in Phoenix.

Various commercial real-estate firms use slightly different criteria to measure quarterly net absorption, the total leasable space occupied or vacated in a given quarter.

According to Colliers' measurements, just 89,000 square feet of industrial space was absorbed in the first quarter, a far cry from the several millions of square feet absorbed during the previous nine months.

Commercial real-estate firm Lee & Associates in Phoenix also issued a report this week on industrial leasing activity in the first quarter that measured the total net absorption as slightly higher, at about 113,000 square feet.

Still, it was miniscule compared with previous quarters.

Lee & Associates senior research analyst Matt DePinto said talk of speculative development happening this year in the industrial real-estate sector continues despite the relatively slow first-quarter results. Still, it will depend largely on whether leasing activity picks up again over the next few months, he said.

"Right now there are several developers with site plans and fliers, but it's mostly posturing," DePinto said. "We're kind of at the cusp of spec buildings coming back, but it's still iffy."

Colliers analyst O'Neil said it is important to note that net absorption of industrial space has been positive for eight consecutive quarters. Tenants are forecast to become more active during the remainder of the year, he said, just as the pace of absorption accelerated in the last nine months of 2011.

Industrial development has been a bright spot in metro Phoenix's otherwise dismal construction industry during the past two years. Other than industrial projects such as warehouses and distribution centers, only the construction of multifamily housing has seen a significant increase.

More than 3.1 million square feet of industrial-building space was under construction in the first quarter in metro Phoenix, and about 560,000 square feet of new space was completed, according to the Lee & Associates report.

by J. Craig Anderson - Apr. 6, 2012 02:18 PM The Republic | azcentral.com



Industrial-property leasing in Valley cools