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Phoenix Industrial vs. Los Angeles Industrial: A Comparative Study of Economic Dynamics & Growth Opportunities

The growth of the Phoenix MSA is similar to the “Path of Progress” that occurred in Southern California in the 1980s and 1990s. Los Angeles got expensive and crowded, which pushed its growth to Orange County. As Orange County grew, the Inland Empire became a desired location for businesses and homeownership. With high taxes and restrictions on development hindering investment in Southern California, the “Path” has transitioned to the Greater Phoenix market. Businesses have found it to be more corporate-friendly, tax-friendly, and affordable.


Back to the Future – Los Angeles

During World War II, Southern California became a hub for aircraft manufacturing, employing around two million people in the aeronautics industry. The subsequent space race and the Apollo program further diversified job opportunities, sustaining demand for industrial properties.


According to Commercial Café, Los Angeles played a pivotal role in aeronautics during the Cold War. Adding an astonishing 108 million square feet of new industrial space between 1970 and 1979, it marked its most prolific decade for construction.


In the 1980s, the Los Angeles industrial pipeline added approximately 84 million square feet. It was followed by a significant decline between 1990 and 1999, halving industrial construction. Although development picked up somewhat in the 2000s, with 58 million square feet of industrial space entering the market. Los Angeles has added just over 30 million square feet of new industrial space since 2010.


A significant majority of Los Angeles County’s industrial inventory, totaling around 169 million square feet, is concentrated within the Gateway Cities.

In The Present – Phoenix

In addition to the population growth, a diversifying economy, relative affordability, and business-friendly regulation have strengthened Phoenix’s value proposition. These characteristics attract an average of 175 net new people to the market daily.


Phoenix remains one of the nation’s best-performing markets for employment growth. It recorded more than 40,500 jobs in 2023 and has 159,000 more jobs than it did before the pandemic. As Phoenix continues to boom, many out-of-state investors, particularly from California, have expanded their portfolios due to proximity, higher yields, and stringer cap rates.


The Phoenix industrial sector faces one of the most aggressive construction pipelines in the U.S. According to CoStar Group, a record 22 million square feet were completed in the final two quarters of 2023. Currently, 4.1 million square feet are under construction, representing 9.8% of the market’s total square footage.


Approximately two-thirds of the space under construction remains unleased. Anticipated short-term effects include additional upward pressure on vacancy rates as these projects are completed and introduced to the market.


In the last two years, Phoenix has become a significant center for construction, with developers aiming to benefit from the region’s growth as a distribution and logistics hub. Approximately 50% of the metro’s construction projects are concentrated in the Glendale, Goodyear, and Surprise submarkets. The construction activity in the Loop 303 corridor in Phoenix’s West Valley has been notably high. Since 2020, industrial developers have successfully completed over 25 million square feet within a two-mile radius of the recently upgraded highway. This area is gaining prominence as a crucial link in national supply chains. One of the largest projects in the construction pipeline is the first phase of Camelback 303. The three-building industrial park by Merit Partners totals 1.75 million square feet and is located on the northwest corner of Loop 303 and Camelback Road. Parts Town, a restaurant equipment distributor, recently signed on to fully occupy 420,500 square feet at Building B upon delivery in early 2024. The area surrounding the Phoenix-Mesa Gateway Airport has been another target of development. In the five-mile radius around the airport, developers have completed more than 10 million square feet of industrial space since 2022. Additionally, another 11 million square feet remain underway, much of which is being built on spec.


This underlying demand is driven by Phoenix’s strong momentum in various industrial-related sectors. Phoenix also exhibits significant traction in advanced manufacturing and plays a pivotal role in national supply chains. Many employers have declared expansions and relocations in the last year. Taiwan Semiconductor Manufacturing Company (TSMC) gained widespread attention when it officially stated its intentions to construct a second fabrication plant in northern Phoenix. The expansion raises the company’s investment from $12 billion to $40 billion, generating 10,000 high-tech jobs. Initial assessments by city economic development authorities suggest that TSMC’s investment might attract around 45 more businesses to the Valley, providing support and supplies for the plant, according to CoStar Group.


Though TSMC and its $40 billion semiconductor facility often dominate the headlines, substantial investments in the battery, electric vehicle, and solar sectors, along with their associated support and supply chains, are fostering a dynamic ecosystem for advanced assembly. These favorable trends contribute to Phoenix maintaining a stronger net absorption compared to many other markets.



The Greater Phoenix area has become a significant focal point for industrial construction. Developers are seeking to take advantage of the region’s growing prominence as a distribution and logistics hub. Upgrading the Loop 303 freeway and convenient access to Southern California ports of entry through I-10 have spurred a notable increase in construction activities, particularly for the development of large, modern industrial parks.


Without a doubt, Phoenix is the rising star when it comes to being a prime industrial CRE market, proving yet again that history tends to repeat itself in one way or another.

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