Global Industrial REIT Secures Federal Foreign Trade Zone Status for Latest New Development in Phoenix
Prologis, one of the largest developers of industrial space
worldwide, is a big believer in foreign trade zones (FTZ).
The average vacancy rate in the big industrial property REIT's industrial parks that have the foreign trade zone designation has hovered at less than 3% since the end of 2011 through the first quarter of this year.
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Given that level of performance, Prologis pursued and just won approval last month for FTZ status for its latest park in Phoenix.
After a year-long process, U.S. Customs & the U.S. Departments of Treasury and Commerce awarded Prologis Park Riverside, a 150-acre industrial park in the Southwest submarket of Phoenix, its FTZ Magnet Status, reducing all tenants’ duty payments on foreign merchandise and providing for the abatement of property taxes for qualifying bona fide users.
Only 10 sites are active in Foreign Trade Zone 75, the zone overseen by the City of Phoenix, and few sites have obtained the magnet designation allowing tenants in an entire industrial park to save on duties. The zone includes Maricopa County and portions of Yavapai and Pinal counties.
At Prologis Park Riverside located at 5555 W. Lower Buckeye Road in Phoenix, retailer Marshalls is opening a 1.2 million-square-foot distribution and fulfillment center serving the Southwestern U.S.
Studley represented TJX in the purchase of 100 acres from ProLogis at this Phoenix site. TJX self developed and owns the building. The building is the first component of the development and is one of the largest build-to-suit warehousing projects ever completed within the Phoenix metropolitan area. The industrial park also includes a 486,000-square-foot speculative building.
The park’s magnet status and the new building’s features are drawing attention from prospective tenants in the food, e-fulfillment and third-party logistics sectors, according to Colliers International in Greater Phoenix. Twenty-six acres remain available at the site for expansions or build to suit up to 525,000 square feet.
Prologis expects to complete its spec facility by next April. Don MacWilliam, senior vice president of the Phoenix office of Colliers International, is in charge of leasing for Park Riverside.
According to MacWilliam, the marketing of space in the park will not be limited to firms that could benefit from the FTZ. He sees the designation as another important tool to attract tenants to industrial submarkets in Phoenix near its Sky Harbor International Airport in which the vacancy rates have hovered around 16% for the last three years.
In the past, Prologis has been granted FTZ status for nine other industrial parks across the country - eight of which are still active, according to data from the Department of Commerce’s International Trade Administration (ITA) and CoStar Group.
There are at least 21 existing industrial properties within those FTZs that as of the end of the first quarter of this year had a vacancy rate of just 1%.
Prologis has recently completed another spec building in its FTZ-designated park in the Dallas market. In addition, internet retailer Amazon plans to open a new fulfillment center being built in a Prologis FTZ-designated park in Tracy, CA, about 60 miles east of San Francisco.
The mere designation as an FTZ is not necessarily a guarantee of successful leasing.
Foreign trade zone status is generally awarded to the tenant that occupies the property and is not transferrable to successive tenants necessarily. Or as in the case with Prologis’ magnet designation for its sites, tenants still must be approved to receive the benefits accorded with being in the zones.
There are currently four other properties besides Prologis’ new spec building in Phoenix’s FTZ magnet zone designations as having available space, according to the city of Phoenix’s records and CoStar Group data. Total space available in the five properties comes to more than one million square feet, with Prologis having the largest individual block of space.
“Foreign trade zone status is a great asset to have, and you want to have it, but it doesn’t drive a deal,” said Pat Feeney, senior vice president for CBRE in Phoenix.
Feeney is currently marketing 182,000 square feet of sublease space at the Miller Brands Distribution Warehouse, one of five properties available in Phoenix’s magnet spaces. “When a user has a need for such status, it’s a big deal.”
Some of the major tenants benefiting from the designation in Phoenix’s FTZs include: Western Digital, The Michael Lewis Co., The Gap, Orbital Sciences Corp. and Clear Energy Systems Inc.
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