The Booming State of Industrial Development: Arizona

Industrial development is hot in Phoenix. The market is shattering absorption records for industrial development.

When JLL published their Q3 2022 Industrial Insight report, Phoenix had already surpassed 2021's total net absorption with a record-breaking 19.1 million square feet. This included more than seven million square feet of occupancy gains in Q3 alone. When 2022 numbers are calculated, Phoenix is expected to double 2021's total net absorption of 12 million square feet.

And there's a lot more coming.

“Two levers are contributing to this growth: the reshoring of manufacturing and the incredible growth of semiconductor production in the U.S." said Larry Pobuda, Executive Vice President & General Manager.

Currently under construction in the greater Phoenix area are two of the largest industrial projects in the country. In north Phoenix is Taiwan Semiconductor Manufacturing Co.'s (TSMC) mammoth $40 billion fabrication plant. And in the Southeast Valley, Intel has a $21 billion expansion to its Ocotillo campus. Those projects alone represent $61 billion in new industrial construction underway.

Dubbed by Forbes as “U.S. Semiconductor Central," Arizona has emerged as the number one location for new semiconductor investments.

At the same time, the state is attracting large electric vehicle and consumer goods manufacturers. In Pinal County, Proctor and Gamble announced a 2.4 million-square-foot expansion and Kohler a 1 million-square-foot expansion. Lucid Motors, Nikola and LG also chose the Phoenix area for new manufacturing operations. 

Arizona's Appeal

Companies are choosing to lay down roots in Arizona for compelling reasons.

“When compared to neighboring states, Arizona offers a significantly lower tax and regulatory burden. It's a pro-business environment," Larry said.

Arizona's geographic location also provides benefits. The state borders two of the world's largest GDP economies - California and Mexico - enabling ease of movement for goods, people and jobs. Phoenix is under five hours from the ports of Los Angeles with a straight-shot drive on I-10. Interstate travelers would find it hard to miss the incredible amount of truck traffic transporting goods back and forth.

Arizona's climate and workforce add to the appeal. While temperatures can soar into the triple digits, the weather is relatively calm with very few natural disasters, which can wreak havoc on manufacturing operations. With several world-class universities and community colleges, the state has an educated, ambitious workforce. That's especially beneficial to high-tech companies that need skilled labor.

For all these reasons, a significant number of manufacturers are settling in Arizona – and so are their suppliers. That is where our team comes in.

Suppliers Flock In

For suppliers, proximity to the manufacturers they serve provides many benefits, including more efficient collaboration and less costly transfer of goods. That's why companies like Chang Chung, a Taiwan-based supplier to the semiconductor industry, are landing in the greater Phoenix.

Many suppliers, big and small, need space. And some don't have time to engage in a build-to-suit scenario. Meanwhile, in Pinal County -- where Proctor & Gamble and Kohler are setting up shop -- there's virtually no speculative industrial space available.

That's about to change.

“Demand is skyrocketing for supplier-use industrial facilities in greater Phoenix, and we are delivering," said Matt Visnansky, Vice President of Real Estate Development.

Opus recently broke ground on Confluence Industrial Park in Casa Grande. Near the Proctor & Gamble and Kohler manufacturing facilities, the two-building speculative development totals more than 325,000 square feet on 21 acres. At the “confluence" of I-10 and I-8, it is next to the Union Pacific Railroad line. The buildings will be completed in late 2023.

To the north, our team started construction on Deer Valley 30 in December 2022. It is strategically located near the massive TSMC fab plant in north Phoenix. On 30 acres of land, it offers three speculative industrial buildings totaling 356,000-square-feet. With easy access to I-17 and the 101 and 303 loops, the buildings are slated for completion in fall 2023.

In Tempe, our team completed construction of Warner Commerce Center in November 2022. It is a two-building, 197,000-square-foot speculative industrial development on Warner Road. Available industrial sites are rare in Tempe, so this prime infill site falls into the “trophy" category. A former 6-story office building was demolished prior to construction to make way for the industrial project. The project is indicative of the incredible push for industrial facilities amidst wavering demand for office space.

“Arizona's commitment to supporting high-tech manufacturing and business development, the widening of I-10 south of Phoenix toward Pinal County, and the momentum from the recently passed bipartisan CHIPS Act are helping to propel growth in this region," Pobuda said.

Given the extraordinary demand, Opus will continue to support manufacturers and their suppliers by pursuing, developing, designing and building exceptional, state-of-the-art industrial buildings where they're most needed.​