Dwindling warehouse space in EV triggers first new buildings since 2008 - East Valley Tribune: Business

Dwindling warehouse space in EV triggers first new buildings since 2008

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Posted: Wednesday, August 22, 2012 8:59 am

Some of the Valley’s first new industrial buildings constructed since the recession’s onset are coming out of the ground in Tempe as the East Valley’s warehouse vacancy rate continues to fall.

Two buildings totaling 316,000-square feet are in response to vacancy rates falling below 8 percent for warehouse distribution centers in the East Valley. That compares with recession-level vacancies of more than 12 percent in the East Valley and 16 percent Valleywide, said Jerry McCormick, a senior vice president with real estate brokerage CBRE.

The buildings are the first speculative warehouses in the East Valley since 2008. The lack of new buildings has resulted in a bit of a shortage, as the East Valley has only three available warehouse spaces larger than 100,000 square feet. More than 1 million square feet of East Valley warehouse space has been newly leased this year.

McCormick credits the area’s improvement with the proximity to the East Valley’s high-tech and aerospace companies like Boeing, Intel, Microchip and Honeywell.

“We’ve got some really good, strong companies that have weathered the storm,” McCormick said.

A number of suppliers are required to support those companies, and they typically locate warehouses nearby, he said.

The new Tempe buildings are underway at Elliot Business Park, on Hardy Drive near Elliot Road. The buildings will complete a complex of 1 million square feet that’s been under development since 1999 by Phoenix-based Transpacific Development Southwest.

The company decided to construct new warehouses because of a tight supply in the East Valley, Transpacific President Vincent Curci said.

“We’re very bullish on what’s going on,” Curci said.

While many developers can’t secure financing in today’s economy, Transpacific can move forward because it’s a self-financed project. The new buildings will be complete in early 2013.

Transpacific has leased half the new space to Clear Energy Systems, a generator manufacturer that plans to employ 225 workers. The developer has several potential tenants interested in the remaining building, Curci said.

Even in a struggling economy, price isn’t driving the East Valley growth. Warehouse space is more expensive here, at $0.28 to $0.35 per square foot, compared with $0.38 to $0.50 per square foot in the West Valley.

The East Valley is more attractive to high-tech companies and employers who want a more educated workforce, McCormick said. The West Valley is sought after by companies that want to place distribution centers in the lowest-cost space available.

Most warehouse tenants prefer existing buildings so they can move in quickly, rather than waiting for a custom design. That has contributed to the East Valley losing some potential employers because the West Valley has more large spaces for lease, McCormick said.

“It’s hard to tell how many, but yes, anybody who needed space larger than 150,000 square feet really had no option,” he said. “They had to go to the West Valley.”

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