The Eye of the Beholder

This installment of the Python Mapping and Uber H3 series focuses on availability within the industrial & logistics dataset. By visualizing data within Uber H3 hexagons at resolution 7, we gain more granular insights compared to a traditional submarket analysis. This reveals that high availability is confined to smaller areas within submarkets, while other sections are competitive with the overall market.

The areas around Buckeye, Goodyear and south of Surprise appear to lack investment opportunities at the submarket level, but at the hexagon level, the availability issues appear to be more confined to the area around Surprise. Goodyear has a fair amount of availability, but Buckeye looks relatively tight. 

Mesa Gateway’s availability looks challenging at its core and thus would reflect a tough part of the market at any geographic level, consistent with our current statistics available on cbre-ea.com. See the challenged submarkets in light green.

Comparing availability maps to the "Total SQ FT Built in the Last 15 Years" maps reveals a striking similarity between high construction and high availability areas.

Where they differ is equally as striking. The areas along the I-10 corridor, west of central Phoenix, have substantial construction but lower relative availability. This is consistent with our previous findings about the strategic desirability of this area. 

To understand the pace of absorption for new buildings, we analyzed the lease-up times for buildings constructed over a 15-year period.  We count those periods and create an average for each building within each area:

The results show that lease-up times are longer in submarkets with high construction rates, such as Buckeye, South Goodyear, and Chandler Airport. This could translate to buildings taking six to nine months to find a suitable tenant. When visualized on the map, lease-up times for all of Phoenix look remarkably consistent market wide.

This gives us insight into current construction trends, but what about older buildings in the market? To that end, we look at long-term pockets of availability which should be much more concerning. Analyzing the proprietary EA database, which stretches back 30 years, we found that areas with the highest long-term availability are those with older buildings. This indicates that it might be more challenging to lease out an older building than it is to lease out a newer construction.  Logically, this makes sense and suggests that there is a fair number of tenants trading up for more modern space in this market and leaving the older space vacant.

Investors should carefully evaluate the investment strategy in areas with high construction rates and potential for prolonged vacancy. If the strategy can hold for up to nine months of vacancy, the investment may be a safe bet. However, if this seems an unusually long time, investing in these areas may pose a problem.