Phoenix Industrial Market Report

Growing semiconductor ecosystem draws suppliers. Taiwan Semiconductor Manufacturing Company’s (TSMC) ongoing, $40 billion expansion in Deer Valley represents a major channel that will stimulate demand for Phoenix industrial space this year. Citing the state’s inexpensive energy costs and low disaster risk compared to nearby markets, TSMC’s presence will grow the metro’s semiconductor ecosystem, as suppliers and other supporting companies — such as Rinchem — establish local operations. At the same time, Phoenix’s abundance of available land and labor, paired with its regionally low cost of doing business, are enticing expansions from manufacturers. Nestlé, for example, moves into a 500,000-square-foot facility in West Phoenix this year, obtaining access to California’s ports at a fraction of that state’s cost. Locally, asking rates remain the lowest among major Southwest markets, and programs like the Foreign-Trade Zone designation — which allows up to a 71 percent annual reduction in property taxes — enhance feasibility for operational expansions. Despite these tailwinds, vacancy will rise this year amid a nationally transitioning economy and the completion of more than 16 million square feet.