Phoenix Arizona Real Estate Market Predictions 2024
Phoenix Industrial Real Estate 20242023 Market Recap
The year 2023 presented a nuanced narrative in the Phoenix metro area. Despite a decrease in investment sales attributed to the prevailing high interest rates across asset classes, the industrial sector exhibited remarkable resilience. Notably, the absorption rate for big box industrial properties witnessed a slowdown compared to the preceding years. Meanwhile, the landscape of new construction underwent a shift, with developers pivoting toward the build-to-suit model amidst soaring borrowing costs.
Vacancy rates experienced a slight uptick owing to the influx of new property deliveries. However, the overall vacancy rates remained within a healthy range despite the substantial square footage additions. Surprisingly, rent growth maintained a robust trajectory despite the heightened supply.
In Tucson, investment sales remained stagnant in 2023, with no new construction projects, contributing to sustained low vacancy rates. However, the scarcity of new small bay inventory persisted.
Phoenix, Arizona2024 Market Predictions
Looking ahead to 2024, the Phoenix metro market appears promising. Despite anticipated new construction deliveries, the trajectory of rent growth is expected to persist, while vacancy rates might marginally increase but stay within healthy parameters. The construction pipeline is predicted to remain smaller than the previous year, a trend aligned with the Federal Reserve's decision to reduce rates. This consolidation may lead to the absorption of existing inventory, potentially stimulating accelerated rent growth in 2025.
Forecasts suggest a continued scarcity of small to mid-bay industrial inventory due to high demand and limited new construction, maintaining resilience in leasing, particularly in this sector. As the year progresses, investment sales might witness an uptick, contingent on Federal Reserve policies possibly shifting towards a quantitative easing environment.
Phoenix will continue attracting businesses and developers from other States with its business-friendly and development-friendly environment as it solidifies itself as the EV and manufacturing hotbed in the Nation.
In Tucson, while investment sales activity might see a slight uptick in late 2024, the leasing landscape is expected to mirror 2023, characterized by a dearth of new small bay products for tenants.
