PHOENIX, ARIZONA INDUSTRIAL THIRD QUARTER 217 QUICK STATS Direct Vacancy 8.7% Overall Vacancy 9.% Lease Rate NNN $.54 Gross Absorption Under Construction MARKET TRENDS Current Quarter 5,991,128 SF 4,751,494 SF Change from Last Quarter Year Overall Vacancy Rental Rates Gross Absorption Under Construction INDUSTRIAL SUMMARY & OUTLOOK The Phoenix industrial market witnessed vacancy rates decrease during the quarter, moving from 9.3% to 9.%. Average asking rents in the market increased 5.9%, year over year, moving from $.51nnn to $.54nnn. Gross absorption finished the quarter with 6. million square feet of activity, while net absorption posted a gain of 2.5 million square feet of occupied space. New construction activity increased during the quarter with 4.75 million square feet currently underway, as the market has delivered 4.9 million square feet of new space for the year. The labor market continues to see improvement as unemployment rates have declined from 4.6% to 4.%, year over year, adding 32,2 new jobs (+1.8%). Since the 1st quarter of 211, buildings 1, sf and larger have seen vacancy decline from 15.8% to 11.9% (absorbing +28.9 million sf), while buildings under 2, sf have witnessed vacancy decrease from 12.% to 5.1% (absorbing +4. million sf) and buildings 2, to 99,999 sf have seen vacancy decline from 16.4% to 7.7% (absorbing +15.8 million sf). During the past five years, the market has absorbed 38.6 million square feet of industrial space, while new construction has added 29.4 million square feet of new space. The investment and sale market for industrial real estate in the greater Phoenix market remains strong, as median sale prices have increased 16.4% year-to-date, and is higher by 63% compared to 211 prices. The capital markets remain solid with plenty of liquidity, but we do expect interest rates rise in the coming year, which is expected to slow price growth. The Phoenix industrial market continues to see market fundamentals strengthen, and we expect vacancy to remain in the singledigits heading into 218, as strong demand still remains above new supply, and we expect rents to rise another 3% to 5% in the coming year. VACANCY & NET ABSORPTION ECONOMIC STATS 5,, 14.% Current Month Previous Year 4,, 12.% Sep. 17 Sep. 16 3,, 1.% Unemployment 4.% 4.6% Rate (MSA) Change in # +9,2 +32,2 Of Jobs (MSA) % Change for +.5% +1.8% Jobs (MSA) 2,, 1,, (1,,) 8.% 6.% 4.% 2.% (2,,).% Net Absorption SF Overall Vacancy
PHOENIX, ARIZONA INDUSTRIAL THIRD QUARTER 217 VACANCY RENTAL RATES & TIME ON THE MARKET 14.% $.6 12. 12.% $.55 1. 1.% $.5 8. 8.% 6.% 4.% 2.% $.45 $.4 $.35 6. 4. 2..% $.3. Direct Vacancy Overall vacancy rates (including sublease space) decreased during the quarter, moving from 9.3% to 9.%. Of the five submarkets within the Phoenix market, the Northwest submarket ended the quarter with the lowest total vacancy of 6.7%, followed by the Northeast at 7.1%, the Southwest at 8.5%, the Southeast at 1.2%, and the Airport submarket finishing the quarter at 11.%. Since the third quarter of 216, overall vacancy rates have decreased from 1.4% to 9.%, and is now at its lowest level since 27. ABSORPTION Overall Vacancy Avg. Rent (NNN) Time to Lease (Months) Standard industrial rental rates increased 5.9%, year over year, moving from $.51nnn to $.54nnn. Of the five major submarkets within the Phoenix market, the Northeast submarket ended the quarter with the highest standard industrial rental rate of $.9nnn, followed by the Southeast submarket at $.62nnn, the Airport at $.57nnn, the Northwest at $.54nnn, and the Southwest submarket finishing at $.38nnn. Average industrial asking rates increased 1.9% from the previous quarter, moving from $.53nnn to $.54nnn, while the median time to lease edged lower from 5. months to 4.8 months. CONSTRUCTION ACTIVITY 8,, 7,, 6,, 5,, 4,, 3,, 2,, 1,, (1,,) 9,, 8,, 7,, 6,, 5,, 4,, 3,, 2,, 1,, (2,,) Net Absorption SF Gross Absorption SF SF Newly Completed SF Under Construction Gross absorption during the quarter totaled 6. million square feet, up 34% compared to the previous quarter, and higher by 15% compared to a year ago. Net absorption posted a gain of 2.5 million square feet during the quarter, and has gained 7. million square feet for the year. In 216, the market gained 7.2 million square feet, after gaining 8.5 million square feet during 215, +8. million square feet during 214, and a gain of 4.6 million square feet in 213. The overall market continues to see very strong growth, recording positive net absorption during nineteen of the past twenty quarters, while absorbing 38.6 million square feet. Under construction activity moved higher during the quarter, with 4.8 million square feet currently underway, as the market has delivered 4.9 million square feet for the year. In 216, the market delivered 5.7 million square feet of new space, after adding 5.4 million square feet of new space in 215. During 214, the market added 7.3 million square feet of new space, after adding 6.1 million square feet in 213. During the past five years, the market has averaged 6.3 million square feet of new space deliveries, annually. Among the space currently under construction, 32% of the new space has been pre-leased or is already committed.
PHOENIX, ARIZONA INDUSTRIAL THIRD QUARTER 217 MARKET SNAPSHOT Total Direct Direct Total Vacant Vacancy Inventory Vacant Vacancy w/ Sublet with Sublet SUBMARKETS Square Footage Square Footage Rate Square Footage Rate Airport 5,52,426 5,45,195 1.7% 5,576,387 11.% Northeast 16,95,948 1,113,795 6.9% 1,149,271 7.1% Northwest 6,78,933 4,24,688 6.6% 4,72,23 6.7% Southeast 94,145,64 9,71,42 9.6% 9,582,234 1.2% Southwest 95,499,284 8,5,377 8.4% 8,143,392 8.5% Phoenix Totals 317,23,655 27,665,475 8.7% 28,523,514 9.% Industrial Market Inventory Southwest 3% Southeast 3% Airport 16% Northeast 5% Northwest 19% 12.% 1.% 8.% 6.% 4.% 2.% Industrial Vacancy Rates.% Airport Northeast Northwest Southeast Southwest Direct Vacancy Vacancy with Sublet Average Average Square Feet Square Feet Gross Absorption Industrial R&D / Flex Built in Under Square Feet SUBMARKETS Rent Rent 217 Construction Current Quarter Airport $.57 $.93 627,25 17,58 824,162 Northeast $.9 $1.2 2,532 61,992 362,27 Northwest $.54 $.85 1,99,365 1,445,476 2,23,962 Southeast $.62 $.95 525,631 1,126,584 1,356,489 Southwest $.38 $.56 1,594,462 2,9,862 1,424,245 Phoenix Totals $.54 $.82 4,857,15 4,751,494 5,991,128 $1.2 $1. $.8 $.6 $.4 $.2 Industrial Rental Rates 12,, 1,, 8,, 6,, 4,, 2,, New Construction Activity $. Airport Northeast Northwest Southeast Southwest Phoenix Totals Average Industrial Rent Average R&D / Flex Rent Airport Square Feet Built in 217 Northeast NorthwestSoutheastSouthwest Phoenix Totals Square Feet Under Construction
PHOENIX, ARIZONA INDUSTRIAL THIRD QUARTER 217 PHOENIX INDUSTRIAL SALES TREND ANALYSIS TOTAL SALES TRANSACTIONS Market 28 29 21 211 212 213 214 215 216 217-3Q Under 2, SF 244 119 152 216 27 339 371 391 423 369 2, - 99,999 SF 82 35 56 71 86 12 122 138 99 92 1, SF & Larger 23 5 9 18 23 12 14 32 23 14 Totals 349 159 217 35 316 453 57 561 545 475 TOTAL TRANSACTION DOLLAR VALUE (MILLIONS) Bldg. SF 28 29 21 211 212 213 214 215 216 217-3Q Under 2, SF $216.9 $87.8 $91.1 $81.2 $12.8 $154.6 $171. $174.8 $21.2 $181.9 2, - 99,999 SF $249. $77.5 $1.6 $164. $145.6 $237.9 $322.3 $349. $29.9 $239. 1, SF & Larger $356.5 $87.2 $78.2 $19.3 $234.3 $255.3 $126.2 $232.4 $524.3 $133.6 Totals $822.3 $252.6 $269.9 $354.5 $482.7 $647.7 $619.5 $756.1 $1,25.3 $554.4 TOTAL SQUARE FEET SOLD Bldg. SF 28 29 21 211 212 213 214 215 216 217-3Q Under 2, SF 1,813,3 1,6,49 1,18,825 1,484,22 1,634,868 2,546,916 2,824,942 3,161,531 3,419,137 2,825,398 2, - 99,999 SF 3,178,852 1,155,343 2,13,466 2,965,546 3,336,52 4,76,74 4,785,523 5,55,383 4,299,571 3,668,689 1, SF & Larger 5,442,379 1,857,72 2,421,898 3,89,625 4,785,996 3,797,898 2,147,253 5,182,343 8,135,456 2,371,995 Totals 1,434,234 4,19,535 5,733,189 8,259,391 9,757,366 1,421,518 9,757,718 13,894,257 15,854,164 8,866,82 AVERAGE PRICE / SF Bldg. SF 28 29 21 211 212 213 214 215 216 217-3Q Under 2, SF $127.2 $89.23 $78.57 $61.83 $66.78 $69.56 $75.2 $76.41 $81.16 $96.74 2, - 99,999 SF $82.37 $67.8 $48.38 $56.41 $48.6 $61.14 $68.69 $73.26 $69.27 $78.65 1, SF & Larger $72.29 $51.5 $39.48 $43.22 $53.45 $67.21 $58.76 $63.2 $64.44 $7.82 Averages $85.9 $65.81 $51.7 $52.49 $54.12 $65.33 $67.93 $7.4 $68.67 $81.47 MEDIAN PRICE / SQUARE FOOT Bldg. SF 28 29 21 211 212 213 214 215 216 217-3Q Under 2, SF $125.61 $9.95 $73.4 $65.23 $63.2 $69.47 $76.79 $76.38 $82.82 $95.95 2, - 99,999 SF $8.29 $58.46 $51.18 $55.1 $48.17 $53.84 $62.63 $67.34 $65.34 $73.92 1, SF & Larger $67.53 $69.55 $34.17 $38.39 $47.71 $64.76 $57.8 $64.8 $63.94 $69.85 Median Average $111.56 $83.1 $65.74 $55.31 $57.72 $65.12 $68.75 $74.49 $77.33 $9.2 MEDIAN $ PSF INCREASE Bldg. SF 29 21 211 212 213 214 215 216 217-3Q Under 2, SF -27.6% -19.3% -11.1% -3.1% 9.9% 1.5% -.5% 8.4% 15.9% 2, - 99,999 SF -27.2% -12.5% 7.5% -12.4% 11.8% 16.3% 7.5% -3.% 13.1% 1, SF & Larger 3.% -5.9% 12.4% 24.3% 35.7% -1.7% 12.1% -1.3% 9.2% Totals -25.5% -2.9% -15.9% 4.4% 12.8% 5.6% 8.3% 3.8% 16.4%
Median Price PSF Annual Increase Square Footage Sold Average Price PSF Number of Transactions Transaction $ Volume (Millions) PHOENIX, ARIZONA INDUSTRIAL THIRD QUARTER 217 PHOENIX INDUSTRIAL SALES TREND ANALYSIS Number of Transactions Transaction Volume $ 6 $1,2. 5 $1,. 4 $8. 3 $6. 2 $4. 1 $2. 28 29 21 211 212 213 214 215 216 217-3Q Under 2, SF 244 119 152 216 27 339 371 391 423 369 2, - 99,999 SF 82 35 56 71 86 12 122 138 99 92 1, SF & Larger 23 5 9 18 23 12 14 32 23 14 Totals 349 159 217 35 316 453 57 561 545 475 18,, Square Footage Sold $. 28 29 21 211 212 213 214 215 216 217-3Q Under 2, SF $216.9 $87.8 $91.1 $81.2 $12.8 $154.6 $171. $174.8 $21.2 $181.9 2, - 99,999 SF $249. $77.5 $1.6 $164. $145.6 $237.9 $322.3 $349. $29.9 $239. 1, SF & Larger $356.5 $87.2 $78.2 $19.3 $234.3 $255.3 $126.2 $232.4 $524.3 $133.6 Totals $822.3 $252.6 $269.9 $354.5 $482.7 $647.7 $619.5 $756.1 $1,25.3 $554.4 $14. Average Price PSF 16,, 14,, 12,, 1,, $12. $1. $8. 8,, $6. 6,, 4,, 2,, 28 29 21 211 212 213 214 215 216 217-3Q 1,813,3 1,6,49 1,18,825 1,484,22 1,634,868 2,546,916 2,824,942 3,161,531 3,419,137 2,825,398 Under 2, SF 2, - 99,999 SF 3,178,852 1,155,343 2,13,466 2,965,546 3,336,52 4,76,74 4,785,523 5,55,383 4,299,571 3,668,689 1, SF & Larger 5,442,379 1,857,72 2,421,898 3,89,625 4,785,996 3,797,898 2,147,253 5,182,343 8,135,456 2,371,995 Totals 1,434,234 4,19,535 5,733,189 8,259,391 9,757,366 1,421,518 9,757,718 13,894,257 15,854,164 8,866,82 $4. $2. $. 217-28 29 21 211 212 213 214 215 216 3Q Under 2, SF $127.2 $89.23 $78.57 $61.83 $66.78 $69.56 $75.2 $76.41 $81.16 $96.74 2, - 99,999 SF $82.37 $67.8 $48.38 $56.41 $48.6 $61.14 $68.69 $73.26 $69.27 $78.65 1, SF & Larger $72.29 $51.5 $39.48 $43.22 $53.45 $67.21 $58.76 $63.2 $64.44 $7.82 Averages $85.9 $65.81 $51.7 $52.49 $54.12 $65.33 $67.93 $7.4 $68.67 $81.47 $14. $12. $1. $8. $6. $4. $2. Median Price PSF 5.% 4.% 3.% 2.% 1.%.% -1.% -2.% -3.% -4.% -5.% % Change Median Price PSF $. 217-28 29 21 211 212 213 214 215 216 3Q Under 2, SF $125.61 $9.95 $73.4 $65.23 $63.2 $69.47 $76.79 $76.38 $82.82 $95.95 2, - 99,999 SF $8.29 $58.46 $51.18 $55.1 $48.17 $53.84 $62.63 $67.34 $65.34 $73.92 1, SF & Larger $67.53 $69.55 $34.17 $38.39 $47.71 $64.76 $57.8 $64.8 $63.94 $69.85 Median Average $111.56 $83.1 $65.74 $55.31 $57.72 $65.12 $68.75 $74.49 $77.33 $9.2-6.% 29 21 211 212 213 214 215 216 217-3Q Under 2, SF -27.6% -19.3% -11.1% -3.1% 9.9% 1.5% -.5% 8.4% 15.9% 2, - 99,999 SF -27.2% -12.5% 7.5% -12.4% 11.8% 16.3% 7.5% -3.% 13.1% 1, SF & Larger 3.% -5.9% 12.4% 24.3% 35.7% -1.7% 12.1% -1.3% 9.2% MEDIAN $ PSF INCREASE -25.5% -2.9% -15.9% 4.4% 12.8% 5.6% 8.3% 3.8% 16.4%
PHOENIX, ARIZONA INDUSTRIAL THIRD QUARTER 217 MARKET REPORT OVERVIEW PHOENIX, ARIZONA MARKET MAP METHODOLOGY & TERMINOLOGY Methodology Industrial and flex (R & D) buildings that are 5, square feet and greater. Direct Vacant SF Space that is vacant and ready for occupancy by a user. The space is being offered for lease or sale directly from the landlord. Total Vacant W/ Sublet SF Space that is vacant and ready for occupancy by a user. The space is being offered for lease or sale by the landlord or for sublease by the current tenant. DAUM OFFICES LOS ANGELES, CALIFORNIA 81 S. Figueroa Street, Suite 6 Los Angeles, CA 917 213-626-911 LOS ANGELES NORTH, CALIFORNIA 2182 Burbank Boulevard, Suite 21 Woodland Hills, CA 91367 818-887-36 SANTA CLARITA VALLEY, CALIFORNIA 28494 Westinghouse Place, Suite 312 Valencia, CA 91355 661-75-2299 MID-COUNTIES, CALIFORNIA 1381 Cerritos Corporate Drive, Suite C Cerritos, CA 973 562-27-33 ORANGE COUNTY, CALIFORNIA 44 MacArthur Boulevard, Suite 95 Newport Beach, CA 9266 949-724-19 VENTURA & SANTA BARBARA, CALIFORNIA 751 Daily Drive, Suite 15 Camarillo, CA 931 85-987-8866 Direct Vacancy Rate Total vacant direct space (vacant space for lease or sale from the landlord or owner) divided by the total rentable square footage for existing buildings only. Vacancy W/ Sublet Rate Total vacant direct space and sublease space divided by the total rentable square footage for existing buildings only. Gross Absorption The total change in occupied space over a given period of time, counting space that is occupied but not space that is vacated by tenants. Gross absorption differs from leasing activity, which is the sum of all space leased over a certain period of time. SAN GABRIEL VALLEY, CALIFORNIA 13181 Crossroads Pkwy. N, Suite 1 City of Industry, CA 91746 562-695-7244 SOUTH BAY, CALIFORNIA 125 W. 19th Street, Suite 42 Gardena, CA 9248 31-538-67 INLAND EMPIRE, CALIFORNIA 3595 E. Inland Empire Boulevard, Bldg. 5 Ontario, CA 91764 99-98-1234 PHOENIX ARIZONA 172 E. Highland Avenue, Suite 12 Phoenix, AZ 8516 62-957-73 The information contained in this report has been obtained from sources deemed reliable and has incorporated third-party data which has not been independently verified by DAUM. While we do not doubt its accuracy, DAUM makes no guarantee or warranty as to its completeness or accuracy. Due to the dynamic (constantly changing) database which DAUM uses to compile and analyze markets contained in this report, previously published statistics may vary from the data published in this report. Statistics and data have been revised to reflect changes in the following categories: existing buildings being verified and added to the database, new or revised occupancy information gathered, new construction being added to the inventory, building demolitions and renovations, as well as other factors that would necessitate revisions to the data and the properties surveyed. This methodology allows us to present the most current and up-to-date information, trend analysis and comparative statistics for this report. Net Absorption The net change in occupied space over a given period of time, calculated by summing all the positive changes in occupancy (move ins) and subtracting all the negative changes in occupancy (move outs). Under Construction Planned buildings for which construction has started but have not yet been granted a Certificate of Occupancy. Planned buildings are not included. Completed in 217 New buildings with original construction completed in the year 217 and granted a Certificate of Occupancy. Renovated buildings are not included.