Internet-commerce providers such as Amazon.com are driving a dramatic resurgence in demand for industrially zoned commercial real estate in the Phoenix area, according to reports from local real-estate brokerages.
Users of industrial real estate snapped up 1.6 million square feet of empty space in the third quarter, which marked the seventh consecutive quarter of rising demand, said a report from commercial-real-estate firm Colliers International in Phoenix.
The Colliers report said industrial tenants have absorbed about 9.3 million square feet of vacant space during the past seven quarters.
The surge in demand is likely to continue, as large e-commerce providers continue to seek out additional space for order-fulfillment and distribution centers to serve Arizona, California and other Western states.
Seattle-based Amazon announced plans in July to open a 1.2 million-square-foot distribution center at 800 N. 75th Ave. in Phoenix, its fourth such facility in the Phoenix area.
Now, the company has Phoenix-area commercial-real-estate brokers scouting for an additional 2 million square feet of distribution-center space.
That additional space would bring Amazon’s total usage in the Phoenix area to about 6 million square feet, the brokers said.
Amazon, the nation’s leading online retailer, has said its expansion plans would bring hundreds of jobs to the area.
Most would be relatively low-level positions performing unskilled labor. An even higher percentage would be seasonal, available only during the busy holiday shipping season that lasts from October through January.
Still, those jobs might look appealing to local residents who have been unable to find work in months or even years, economic analysts said.
Because of companies such as Amazon, the vacancy rate among industrially zoned properties has plummeted at an unprecedented rate, from nearly 18 percent in the first quarter of 2010 to 14.6 percent at the end of the third quarter this year, said Don MacWilliam, senior vice president for industrial properties at Colliers.
High demand also is driving new construction, according to Colliers’ third-quarter analysis, with nearly 3.7 million square feet of warehouse and distribution-center space currently under development.
The industrial sector has not seen such a high level of activity since before the commercial-real-estate market crashed in 2008, brokers said.
In addition to recently signed warehouse-property leases by Home Depot, the Gap, Home Shopping Network and Amazon, MacWilliam said there are “a couple of big ones yet to be announced.”
He said the vacancy rate in the industrial sector should be down to about 14 percent by year’s end and could fall below 13 percent in 2012.
By comparison, the vacancy rate for office properties in the Phoenix area was about 22.3 percent in the third quarter, with new leases absorbing a net 262,000 square feet of available space so far in 2011, said Charles Miscio, Colliers’ senior vice president for office properties.
Unlike office properties, which have experienced a relatively high rate of lender foreclosures and short sales, MacWilliam said the industrial market has remained surprisingly stable.
“We never saw the buildings go back to the bank,” he said.
That is due at least in part to the major e-commerce providers’ decision to make Phoenix into a major distribution hub for products they sell online.
In addition to Amazon’s recent expansion activity, several other retailers recently have signed new leases on big warehouse properties, and investment firms have been purchasing distribution-center space in the area.
The biggest lease transaction in the third quarter was a 400,000-square-foot distribution-center lease signed by Home Depot, at 7200 W. Buckeye Road in Phoenix, according to Colliers.
On the purchasing side, Denver-based industrial-property owner and management company Prologis Inc. invested about $19 million in Phoenix-area warehouse and distribution-center properties in August, expanding its local footprint to more than 3 million square feet.
Prologis closed in late August on the biggest warehouse purchase of the third quarter, a 302,640-square-foot distribution center at 9704 W. Roosevelt St. in Tolleson, for about $10 million, according to commercial-real-estate services company Jones Lang LaSalle in Phoenix, which brokered the deal.
Prologis also purchased a 250,800-square-foot warehouse property at 2225 S. 43rd Ave. in southwest Phoenix, for about $9 million in mid-August, according to Anthony Lydon, managing director at Jones Lang LaSalle.
A few, including Target .com, have chosen Tucson’s west side for their warehouse facilities.
Macys.com in the first quarter purchased vacant land to expand its existing 600,000-square-foot warehouse in Goodyear, and the Home Shopping Network recently announced plans to build a facility of between 1 million and 1.5 million square feet in the Phoenix area.
In general, most e-commerce providers have chosen not to locate their West Coast distribution centers in California because of its much higher real-estate costs.
Analysts said many Web-based retailers have settled on a two-pronged strategy, with order-fulfillment centers in metro Phoenix to serve Southern California, and in Reno, Nev., to serve Northern California.
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