Crista Dillinger, Author at ARCO Construction /author/cdillingerarco1-com/ The Design-Build Construction Experts Tue, 04 Aug 2026 19:23:40 +0000 en-US hourly 1 /wp-content/uploads/2024/06/cropped-Icon-32x32.jpg Crista Dillinger, Author at ARCO Construction /author/cdillingerarco1-com/ 32 32 Phoenix Industrial Performance Report and 2025 Outlook /phoenix-industrial-performance-report-and-2025-outlook/ Fri, 18 Apr 2025 15:59:01 +0000 https://www.arconational.com/?p=13975 The post Phoenix Industrial Performance Report and 2025 Outlook appeared first on ARCO Construction.

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Current industrial and manufacturing work is being driven by power availability, equipment integration, and startup dates. Owners are still funding projects, but they’re doing it with tighter feasibility requirements, more disciplined phasing, and higher expectations for early price and schedule certainty. The projects that move forward are the ones that can validate load, define process requirements early, and control procurement and commissioning risk.

UPDATE: AUGUST 2025

ARCO’s 2024 Phoenix Industrial Outlook predicted the market was approaching an inflection point — and the latest Q2 2025 data confirms it.

  • New supply continues to decline: With deliveries now trailing historic absorption, excess supply is being absorbed and overall balance is improving.
  • Vacancy has peaked: Q2 posted the first quarterly decline in more than three years, and with several large leases already announced for Q3, vacancy is expected to continue declining.
  • Predictions aligned with reality: Q3 2024 trendlines for absorption, new supply and construction were remarkably accurate.

The takeaway for developers remains clear: now is the time to begin design and permitting to be positioned with leasable space as demand strengthens.

ORIGINAL POST DATE: SPRING 2025

Over the last two years, the Phoenix industrial market experienced notable shifts, defined by a steady decline in construction activity, rising vacancy rates and consistent yet insufficient absorption to offset new supply. These trends suggest an impending rebalancing of the market. As construction slows and absorption remains steady, a predictable shift is approaching, with vacancies likely to peak then begin their decline. For developers, preparing to act ahead of this curve will be critical to success in 2025 and beyond.

The following information highlights key market trends, data insights and the implications for developers in the Phoenix industrial market. By examining construction activity, vacancy rates and absorption patterns, this report provides a clear understanding of the challenges and opportunities ahead. Equipped with these insights and the support of a trusted partner, developers can make informed decisions and strategically position themselves to act.

Key Report Takeaways

  • Construction activity reduced significantly from 49.3M SF in  to 19.3M SF in , indicating a cautious approach by developers amid rising vacancies.
  • Vacancy rates increased from 6.7% in  to 10.6% in , with new supply consistently outpacing absorption. Certain submarkets are especially oversaturated and have vacancy rates in excess of 20%.
  • Net absorption remained positive but modest, highlighting demand for high-quality, move-in-ready spaces.
  • Linear decline in construction activity quarter-over-quarter, coupled with consistency in absorption quarter-over-quarter suggests a relatively predictable inflection point in the near future, where vacancy rates are likely to peak before beginning to decline.
  • In 2025, developers are uniquely positioned to plan strategically alongside a trusted partner.

Market behavior in 2026 reflects a clear preference for flexibility and controlled risk. Phased expansions are increasingly replacing single large development commitments, allowing owners to deploy capital in stages while matching capacity to demand. Automation and process-driven layouts are also becoming standard, which increases the importance of early equipment coordination and drives more complex MEP and life safety requirements. Owners are also demanding faster startup timelines, which changes how teams plan sequencing, procurement, commissioning, and turnover.

2024 Market Performance Review

Construction Activity Trends

Construction activity in Phoenix displayed a steady, linear decline. This suggests a strategic response by developers to rising vacancies (as noted below) and the broader economic landscape. This trend, coupled with data on new construction starts, highlights a level of market predictability, indicating that construction activity will continue to slow until vacancy rates start to stabilize.

Vacancy & Absorption Rate Trends

Vacancy rates in Phoenix climbed significantly in 2024, yet net absorption remained stable quarter-over-quarter. This stability indicates that despite elevated vacancies, the demand for high-quality, move-in-ready spaces remains, particularly in submarkets less impacted by oversupply.

New Supply & Leasing Trends

  • Q1: 9.7M SF delivered
  • Q2: 10.0M SF delivered
  • Q3: 6.7M SF delivered
  • Q4: 7.87M SF delivered

New supply trends, which typically lag behind construction activity, also reflected a decline in 2024. Notably, nearly 33% of Q4 deliveries were pre-leased, highlighting the continued demand for tenant-improved spaces. For developers, focusing on ready-to-occupy properties with high-quality finishes will be critical in attracting leases quickly.

2025 Implications for Developers to Consider

Market Predictability & Strategic Development Planning

The predictable trends defined above provide developers with a unique opportunity to plan strategically. Developers who prepare now by focusing on tenant-improved, move-in-ready spaces will gain a competitive advantage as the market rebalances.

What Developers Can Expect

As market preferences evolve, the focus is expected to shift away from large-scale projects and toward smaller, demisable spaces that offer greater flexibility for tenants. This trend reflects the growing demand for adaptable spaces that can accommodate a variety of uses, from last-mile distribution to light manufacturing.

Developers who incorporate these elements will not only appeal to a broader range of tenants but also position themselves to respond quickly to changing market needs if necessary. Emphasizing customizable layouts built on strategically located sites can further enhance the appeal of these smaller, versatile spaces, making them an attractive option for both regional and national tenants looking for efficiency and scalability.

Taking Action: Strategic Next Steps

Although elevated vacancies present challenges, the predictability of market trends points to a cautiously optimistic outlook for 2025. Developers who act now, prioritizing tenant-ready spaces, will be better positioned to capitalize on the approaching inflection point in vacancy rates.

Starting the planning process now allows developers to get ahead of the competition and take advantage of competitive subcontractor pricing.  By driving preliminary design and pre-construction services during the due diligence period at no cost, ARCO minimizes developers’ risk without the financial burden of traditional contractors. This service provides developers with valuable insights and planning support early in the process, helping them make informed decisions without financial commitments.

Engaging with a trusted partner like ARCO early helps developers navigate the shifting market, align developments with tenant demands and streamline project timelines. Scheduling a consultation with our team is the first step toward optimizing your next industrial project. If you’re a developer looking to set yourself up for success in 2025, partnering with ARCO Phoenix can help you minimize risks and position your developments strategically for the future.

To start the conversation, please email Vice President of Phoenix Operations, BJ Keane, at bjkeane@arco1.com, or call 602.805.9082.

The information provided is based on data from the  2024 Quarterly Arizona Industrial Market Reports. All market performance statistics and trends referenced are derived from this report unless otherwise noted.

ABOUT ARCO PHOENIX

ARCO National Construction is a premier, full-service design-build general contractor delivering industrial, commercial, and mission-critical facilities throughout Arizona and nationwide. With a single point of responsibility, ARCO provides cost certainty, accelerated schedules, and reduced risk in large scale developments. Its Phoenix team supports clients with detailed preconstruction, equipment-driven facility planning, utility and infrastructure coordination, and milestone-based execution focused on operational readiness.

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ARCO Delivers Distribution Facility for Scannell Properties and Five Below in Buckeye, Arizona /arco-delivers-distribution-facility-for-five-below-buckeye-arizona/ Thu, 03 Oct 2024 17:06:27 +0000 https://www.arconational.com/?p=13988 The post ARCO Delivers Distribution Facility for Scannell Properties and Five Below in Buckeye, Arizona appeared first on ARCO Construction.

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ARCO National Construction has completed an 858,000-square-foot distribution facility for Scannell Properties and Five Below in Buckeye, Arizona. The project was developed to support large-scale retail distribution and e-commerce operations within the rapidly growing Phoenix industrial market.

Constructed using tilt-up concrete, the facility features a 40-foot clear height and a fully conditioned warehouse environment designed to maintain operational efficiency and employee comfort. The building includes 161 dock positions and two drive-in doors to support high-volume logistics and distribution throughput.

The facility incorporates a conveyor system with catwalks to streamline material handling and improve operational flow throughout the warehouse. Office space within the building includes an 11,569-square-foot main office, a 7,254-square-foot shipping and receiving office, and a 4,352-square-foot e-commerce office to support administrative and operational functions.

Additional building systems include an ESFR sprinkler system to support fire protection requirements for high-pile storage and distribution operations.

The completed facility provides Five Below with a modern, high-capacity distribution hub designed to support continued growth and efficient delivery across its retail and e-commerce network.

automated equipment within the five below buckeye arizona distribution center
inside the five below buckeye arizona distribution facility
warehouse interior of the five below distribution facility in buckeye arizona
five below ship center station in buckeye arizona
breakroom within the five below distribution facility in buckeye arizona
fornt entrance to the five below distribution facility in buckeye arizona
ABOUT SCANNELL PROPERTIES

Scannell Properties is a privately held commercial real estate development and investment company specializing in build-to-suit and speculative industrial facilities across the United States. The firm partners with clients to deliver high-quality logistics and distribution facilities tailored to operational needs.

ABOUT FIVE BELOW

Five Below is a leading specialty value retailer offering a wide range of trend-right products targeted to teens and pre-teens. With stores nationwide and a growing e-commerce presence, the company continues to expand its distribution network to support retail and online operations.

ABOUT ARCO NATIONAL CONSTRUCTION

ARCO National Construction Company is a leading design-build general contractor providing integrated design and construction solutions nationwide. With a single-source delivery model, ARCO delivers cost certainty, schedule control, and accountability from concept through completion across a wide range of markets, including industrial, distribution, and e-commerce facilities.

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ARCO Completes New Speculative Warehouse in El Mirage, AZ /arco-completes-new-speculative-warehouse-in-el-mirage-az/ Tue, 01 Oct 2024 14:25:22 +0000 https://www.arconational.com/?p=13972 The post ARCO Completes New Speculative Warehouse in El Mirage, AZ appeared first on ARCO Construction.

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ARCO is proud to announce the successful completion of a 217,000 square foot speculative warehouse for repeat clients Silver Creek Development and Stonemont Financial. This state-of-the-art facility is located on a 13.26-acre site, featuring cutting-edge construction and design, ideal for tenants in need of modern, adaptable industrial space.

The single-story, free-standing facility was constructed using concrete tilt-up construction, boasting 48 dock doors, a 32-foot interior clear height and 162 parking stalls complemented by 44 trailer storage parking spaces. Designed to meet both immediate and future needs, the warehouse offers a 3,000 square foot speculative tenant improvement office suite.

With a focus on long-term sustainability, the facility incorporates eight onsite drywells for private stormwater management. The building’s infrastructure includes a 3,000-amp electrical service with rough-in for an additional 3,000 amps, providing flexibility for future expansion. Additionally, the under-slab sanitary sewer rough-in “E” allows for the future streamlining of tenant improvements at building corners and primary elevations.

The project also included significant public infrastructure improvements, enhancing the surrounding area with half a mile of new public roadway, street paving, sidewalks, water and sewer services, as well as bike lane striping. These improvements are a key contribution to the region’s growing industrial sector, promoting both traffic efficiency and community safety.

“We are excited to bring this facility to market, as it offers unmatched flexibility for industrial tenants,” said Bob Micera of Silver Creek Development. “This project represents a significant investment in the region’s economic growth and provides a modern solution for the evolving demands of the logistics and warehousing industry.”

Stonemont Financial Group’s Josh Wheeler shared that completing this project “marks a significant milestone for Stonemont as we continue expanding our footprint in the Phoenix area. Working with ARCO provided a seamless experience, with their team demonstrating exceptional expertise and attention to detail throughout the process. This facility is well-positioned to attract a tenant looking for strategic access to the Phoenix market and beyond.”

ABOUT SILVER CREEK DEVELOPMENT

Silver Creek Development is a Phoenix-based private real estate development and investment group focused on ground up development, as well as stabilized industrial, multifamily and office assets. The company currently has five industrial development projects representing nearly 1 million SF in various stages of development in Surprise, Avondale, Mesa, and El Mirage.

ABOUT STONEMONT FINANCIAL

Stonemont Financial Group specializes in investing across a broad spectrum of real estate asset classes and geographies, specializing in industrial real estate. The firm offers diversified and differentiated real estate investment strategies and vehicles tailored to institutions, family offices, trusts, and high net-worth individuals.

ABOUT ARCO

ARCO is a leader in the design-build industry, with more than 30 years of experience and offices in 40+ major markets. As the #3 design-build construction firm in the United States, ARCO offers the strength and presence of a national builder with the personalized attention of a small company. ARCO provides clients with complete, turnkey project delivery from site selection to building turnover.

Check Out What's Happening at ARCO

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As Tenant Demand Soars in Phoenix Market, ARCO and Contour Partner on 1.5 Million Square Foot Industrial Park /arco-and-contour-partner-on-1-5-million-square-foot-industrial-park/ Tue, 21 Jun 2022 13:46:55 +0000 https://www.arconational.com/?p=13963 The post As Tenant Demand Soars in Phoenix Market, ARCO and Contour Partner on 1.5 Million Square Foot Industrial Park appeared first on ARCO Construction.

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ARCO has recently entered a partnership with Contour, a leading privately held real estate and development company, as the design-build partner of a two-phased construction project. At the end of 2021, Contour acquired 112 acres of land located in the city of Mesa, Arizona. This land sits in the southeast corner of Sossaman 202 Industrial Park. Over the course of development, ARCO will design and build eight new industrial warehouses totaling more than 1.5 million square feet. The first phase of construction will commence in 2022 and will include the development of five new structures.

Patrick Clay, Director of Business Development, ARCO said, “ARCO is excited to be Contour’s industrial design-build partner for the Sossaman 202 Industrial Park in Mesa, Arizona. Contour’s national presence and reputation as a design-build-focused developer have led to a strong partnership. We are thrilled to build on that partnership while helping markets like Phoenix meet the high tenant demand for industrial space.”

This development at the Sossaman 202 Industrial Park will bring great accessibility to future tenants Located off Loop 202 and Sossaman Road, the large infill site has excellent highway visibility.

Joe Rook, Principal, ARCO said, “the Phoenix industrial market has been experiencing great momentum and growth. We’re excited to be partnering with Contour who has a proven, national track record.”

BJ Keane, Vice President of Operations, ARCO said “The ARCO Mountain West office is thrilled to have another national development partner active in the Valley! This corridor of the 202 will continue to a focal point for industrial development in the East Valley for the foreseeable future and we are excited to be a part of it.”

ARCO is gearing up to begin construction this summer.

ABOUT CONTOUR

Contour is a national real estate investment and development firm creating high-quality, resilient assets across select markets in the United States. They combine disciplined underwriting, thoughtful design, and operational expertise to deliver enduring value for investors, partners, and communities.

ABOUT ARCO NATIONAL CONSTRUCTION

ARCO National Construction Company is a leading design-build general contractor providing integrated design and construction solutions nationwide. With offices across the country and a single-source delivery model, ARCO delivers cost certainty, schedule control, and accountability from concept through completion across a wide range of markets, including industrial, distribution, and e-commerce facilities.

Check Out What's Happening at ARCO

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