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E-Commerce Driving Absorption in New Phoenix Logistics Buildings

CoStar Market Insights: Online Retailers Headline Largest Leases so Far in 2018
May 14, 2018
The first phase of Southwest Industrial Center in the Tolleson submarket. The 684,420-square-foot distribution building delivered in 2015.

E-commerce has underpinned demand for new industrial space in Phoenix over the past several years. In the first half of 2018, online retailers that require the clear heights and amenities of modern logistics buildings have signed many of the largest leases.

A pet-product supplier,, and a pair of online clothing merchants, ThredUP and Gwynnie Bee, are among the ecommerce tenants who have taken large chunks of industrial space., a subsidiary of PetSmart, will occupy 800,000 square feet of build-to-suit space in the Goodyear submarket after construction wraps up later this year. In the Tolleson submarket, ThredUP will take 122,000 square feet in May at the first phase of the Southwest Industrial Center, which delivered in 2015. This summer, Gwynnie Bee plans to move into nearly 100,000 square feet at Building 3 at Liberty Logistics Center II, which was built in 2017, and is also in the Tolleson submarket.

The outsized impact of e-commerce on the absorption of newly delivered logistics product is a continuation of a trend established last year. In 2017, UPS moved into 618,000 square feet at PV/303, Amazon took 473,000 square feet at Prologis Park Riverside 3 and FedEx occupied 310,000 square feet at Chandler Crossroads.

In addition to having access to the rapidly growing consumer base in the metro and heavily populated areas in California, Phoenix offers companies a low cost of doing business. This is enticing to many companies involved in the warehousing and distribution of goods, particularly those involved in global trade. Many logistics buildings fall within a Foreign Trade Zone, especially in the West Valley, which gives businesses within the trade zone eligibility to obtain up to a 72.9 percent reduction in real and personal property taxes.

As of publication, about 5 million square feet of logistics space was under construction in the metro, and roughly 80 percent was available for lease. Of the more than 12.5 million square feet of logistics product that delivered from 2016-17, around 35 percent was available for lease as of May 2018. Developers expect e-commerce growth will continue to prop up demand for new logistics space for the foreseeable future.

CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

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