The Phoenix metro is one of the fastest-growing industrial markets in North America due to increasing demand for big-box (200,000 sq. ft. or larger) warehouse space, according to a new report from CBRE.

With a growth rate of 14.3% in 2022, Phoenix ranks as the top growth market in North America. The Valley’s industrial market continues to be driven by a diverse set of occupiers, led by 3PLs for the first time since CBRE began tracking the activity in 2012. 3PLs accounted for 34.1% of total leasing in Phoenix, far above the 21% rate in 2021.

3PLs typically operate companies’ logistics and warehousing operations on a contractual basis, gaining efficiencies by handling that work for multiple clients simultaneously. As a result of enduring pandemic-era shifts, companies have expanded their reliance on 3PL partners to create resilient supply chains and economically address customer needs.

In Phoenix, the previous leader in big-box leasing activity – retailers and wholesalers – fell to second place, taking 33.7% of the leasing share, following national trends.

“Demand from 3PLs continues to increase significantly throughout metro Phoenix,” said CBRE’s Executive Vice President Cooper Fratt. “We see 3PLs flock to our market for various reasons, including affordable lease rates, available labor and a new surge of Asian-based 3PLs, many of which are servicing our booming semiconductor industry.”

Direct vacancy in Phoenix hit a record low of 3.4%, despite construction completions doubling to 20.5 million sq. ft. year-over-year This propelled the taking rents to the sixth highest nationally. Record-low vacancies will reduce what could otherwise be oversupply. Over 30 million sq. ft. of big-box product was under construction at year-end, with 21% pre-leased. New product availability will increase vacancy rates, but it is expected that demand and fewer groundbreakings this year will keep rent growth over 10%.

CBRE analyzed warehouses of 200,000 sq. ft. and larger because warehouses of that size are used for  large-scale national and international product distribution. Encompassing the United States, Mexico and Canada, the big-box report found that industrial facilities had record-low vacancy rates and  unprecedented rent growth in 2022, despite record new construction deliveries. Demand was driven primarily by a desire to serve markets with growing populations, modernize space for automation and improve supply chain resilience.

Matching 2021’s record low, the 2022 direct vacancy rate for North America was 3.3% at year-end, which supported first-year base rent growth of 23% year-over-year. With demand for space at a high, and little space available, a record 455 million sq. ft. is currently under construction, of which 25.3% is pre-leased.

To read the full report, click here.