Phoenix remains a standout market for industrial big-box activity in North America, fueled by strong demographics, economic incentives, and its strategic logistics network. This report highlights the trends shaping the market for 2025 and the opportunities that lie ahead.
Demographics: Rapid Growth and a Young Workforce
Phoenix continues to solidify its position as one of the nation’s fastest-growing metros:
- Population & Households: Nearly 5 million people across 1.9 million households live within 50 miles of Phoenix.
- Youthful Workforce: About 25% of residents in this radius are aged 18-34, ensuring a steady stream of young talent.
- Projected Growth: The city’s population is expected to grow by an impressive 2.9% over five years, outpacing many other U.S. metros.
Labor Market Strength
Phoenix boasts a growing and competitive labor force:
- Warehouse Workforce: With nearly 100,000 workers, the labor pool is projected to expand by 11.6% by 2034, supporting industrial growth.
- Wage Rates: Average wages for warehouse roles are $18.86/hour, 6.3% above the national average but still cost-competitive compared to markets like the Inland Empire.
Economic Incentives
The city has attracted significant investment through robust incentive programs:
- Arizona Competes Fund: Provides discretionary grants to companies meeting specific job creation and wage criteria.
- Quality Jobs Tax Credit Program: Offers up to $9,000 per job in income tax credits, spread over three years, to encourage high-wage employment.
These initiatives have resulted in over 260 deals and $550 million in incentives over the past five years, averaging $12,000 per new job, making Phoenix an attractive destination for industrial growth.
Logistics Infrastructure
Phoenix’s connectivity drives its appeal as a logistics hub:
- Highway Network: The city is serviced by major interstates such as I-10, I-8, and I-40, alongside improvements to Loops 202 and 303.
- Air Cargo Capabilities: Phoenix Sky Harbor International Airport is a growing hub for FedEx, DHL, and UPS, with planned expansions to accommodate increased air cargo demand.
With 130,000 miles of highways and robust air and rail systems, Phoenix offers seamless goods transportation to regional and national markets.
Market Trends: Supply & Demand
Phoenix’s industrial market saw significant shifts in 2024, laying the groundwork for 2025:
- Leasing Activity: In 2023, 7.9 million sq. ft. was leased, a sharp decline of 52.2% from the record-breaking activity of 2022.
- Vacancy Rates: Increased to 10.7%, up from 3.4% in 2022, largely due to record-high completions of 17.2 million sq. ft. of new construction.
- Rising Rents: Despite higher vacancies, average taking rents surged by 27% year-over-year, reaching $9.21 psf/yr.
The 23 million sq. ft. of space under construction—with only 26.4% preleased—signals continued development activity. However, a slowdown in construction starts at the end of 2023 and robust population and labor market growth are expected to stabilize the vacancy rate by late 2024, with a decline projected for 2025.
VidTech: Empowering Growth in Phoenix
VidTech provides advanced drone and satellite analytics tailored for Phoenix’s evolving industrial market. From site selection to vacancy monitoring, VidTech enables businesses to make data-driven decisions in this high-growth region.
Unlock the future of industrial growth in Phoenix—partner with VidTech for cutting-edge insights and strategic planning.
