William B. Cassidy, Senior Editor | Aug 20, 2024, 4:33 PM EDT
Rising cross-border trade with Mexico and the growth of high-tech manufacturing in Arizona, including semiconductor plants, is injecting more logistics investment into the Phoenix area, already a key inland hub for US imports headed east from California.
BNSF Railway in June announced plans to build a 4,321-acre intermodal rail and logistics center, with a warehousing and distribution campus, in northwest Maricopa County. That came after Union Pacific Railroad opened a new intermodal terminal in Phoenix earlier this year.
Global logistics provider DSV last year established air charter operations at Phoenix-Mesa International Airport to link Arizona with Europe and Asia. Smaller companies such as RK Logistics are expanding in the Phoenix market as well, following their customers.
Demand for industrial space is high enough that development is being pushed further from downtown Phoenix, Chris Camacho, president and CEO of the Greater Phoenix Economic Council, told the Journal of Commerce.
“We added 50 million square feet to the industrial market here last year, and a lot of that was new build,” Camacho said. Much of that new construction is in what Camacho called “frontier corridors,” such as the Loop 303 corridor north and west of Phoenix.
“In the last five years we’ve had 45 companies move to the 303 corridor, adding 15,000 jobs,” he said.
Unlike Southern California, there is no shortage of space in which to build or lease in central Arizona. “Everything is moving outward” from Phoenix, said Camacho.
Following shippers
Shippers moving into the area, especially technology companies, are drawing logistics and transportation providers in their wake. RK Logistics acquired a temperature-controlled warehouse in Phoenix this month to support semiconductor production in Arizona.
Taiwan Semiconductor Manufacturing Co. (TSMC) is investing more than $65 billion to build three chip plants in Arizona. The first of those factories is north of Phoenix, near Loop 303 and I-17, and is expected to begin production in 2025.
“We’ve had 30-plus semiconductor companies announce here since 2022,” Camacho said. In addition to TSMC, chip makers such as Intel, Onsemi, Microchip, NXP and Benchmark Electronics have facilities in and around Phoenix, he said.
RK Logistics, with headquarters in California’s Silicon Valley, focuses on shippers producing advanced technology. The company acquired a facility and other assets from Southwest Supply Chain Solutions in Tempe, Ariz., to serve semiconductor and battery manufacturers.
“Semiconductor equipment is the new gold,” Joe MacLean, CEO of RK Logistics, said. “Companies are asking us to engineer specific solutions on the warehousing and transportation side to address the sheer enormity of the value density of these products.”
Ports of entry
Phoenix’s proximity to Southern California ports and the US-Mexico border continues to draw technology firms and other companies to the region, Camacho said.
“When you have very low [industrial real estate] vacancy rates in the Inland Empire, that real estate compression leads companies to look here,” he said. Phoenix’s industrial vacancy rate rose to 11.9% in the second quarter, according to real estate firm Avison Young.
Avison Young reported a 7.7% second-quarter industrial vacancy rate in California’s Inland Empire region.
In Phoenix, “with many construction projects nearing completion and new starts reducing, the market’s vacancy rates should stabilize soon and begin to trend lower,” the real estate company said.
Increased railroad activity and investment in Phoenix is aimed squarely at intermodal containers headed to the area from the ports of Long Beach and Los Angeles.
UP opened its new facility in February and will continue construction on the intermodal site throughout 2024. Duncan & Son Lines in Buckeye, Ariz., provides the location’s drayage.
BNSF is planning an intermodal transfer hub on 1,770 acres in Surprise, Ariz., northwest of Phoenix, along with a logistics park with warehousing and distribution facilities and a separate logistics center. The railroad has not announced a date for completion of its project.
Phoenix is looking south as well as west, however, expecting greater volumes of freight from Mexico.
”We see tremendous opportunities for growth in northwest Mexico, and we have an initiative under way to support manufacturers who want to locate in Mexico or Arizona,” Camacho said. “That’s the next horizon.”
Contact William B. Cassidy at bill.cassidy@spglobal.com
