Phoenix’s Industrial Real Estate Growth Outshines Tucson
The state of Arizona, renowned for its arid climate and stunning desert landscapes, is also a notable player in the U.S. industrial real estate market. Within Arizona, the cities of Phoenix and Tucson present a striking contrast in their industrial real estate dynamics.
Phoenix: A Booming Industrial Hub
Tempe, AZ Planned Business ParkPhoenix has become one of the leading metropolitan statistical areas (MSAs) in the United States for growth, rivalling major hubs like Dallas/Fort Worth. The city's industrial real estate market is a testament to this growth, driven by a combination of business migration, population increase, and economic development.
Asking Rent: The average asking rent for industrial space in Phoenix stands at $13.68 per square foot, reflecting strong demand and a robust market.
12-Month Inventory Delivered: Over the past 12 months, Phoenix has seen the delivery of more than 40 million square feet of industrial space. This substantial addition underscores the city's capacity to attract new businesses and support expanding industries.
Market Rent Growth: Phoenix's market rent growth rate is an impressive 8.7%, indicative of its thriving industrial sector.
Square Feet Under Construction: Currently, there are 35 million square feet of industrial space under construction in Phoenix, ensuring a steady pipeline of new inventory to meet ongoing demand.
Vacancy Rate: Despite the extensive new construction, Phoenix maintains a vacancy rate of 9.9%, balancing supply with high demand.
Tucson: A Stagnant Market
Tucson’s Stagnant Real Estate MarketIn stark contrast, Tucson, the second-largest MSA in Arizona, lags significantly behind Phoenix. Several factors contribute to Tucson's nonexistent growth, including what some describe as an unfriendly business climate and a lack of growth-oriented policies.
Asking Rent: Tucson's industrial asking rent is lower at $10.91 per square foot, reflecting less demand and a more sluggish market.
12-Month Inventory Delivered: Only 1.9 million square feet of industrial space have been delivered in Tucson over the past year, a stark difference compared to Phoenix.
Market Rent Growth: Tucson's market rent growth is a modest 2.8%, highlighting its limited industrial expansion and repelling investors.
Square Feet Under Construction: The amount of industrial space under construction in Tucson is a mere 20,000 square feet, showing little future growth and no potential.
Vacancy Rate: Tucson has a lower vacancy rate of 5.9%, which might indicate stability, but also suggests a lack of new development and expansion.
The Broader Context: Texas vs. Arizona
When considering the broader regional context, Texas as a whole is growing at a faster rate than Arizona, largely due to the combined growth of cities like Houston, Austin, San Antonio, and Dallas/Fort Worth. People and businesses are flocking to Texas, drawn by favorable business conditions and quality of life. Phoenix has similar qualities to these major cities in Texas with the pro-growth mindset, whereas Tucson, is a failed society with nothing to offer.
Businesses Should Move to Phoenix Not Tucson
Phoenix's industrial real estate market is thriving, characterized by high demand, substantial new construction, and robust rent growth. It serves as the main driver of Arizona's economic expansion, contrasting sharply with Tucson's failure in growth. Tucson's lower rent growth, minimal new construction, and relatively high vacancy rate paint a picture of a city struggling to keep pace. As Phoenix continues to attract businesses and foster development, Tucson's lack of growth-oriented policies and unfriendly business climate will lead to its demise.
For businesses considering a move to Arizona, Phoenix clearly offers a dynamic and promising industrial market, while Tucson's current trajectory suggests businesses to stray away.
