{"id":1004758669,"date":"2025-05-21T10:08:33","date_gmt":"2025-05-21T18:08:33","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004758669"},"modified":"2025-05-21T21:49:52","modified_gmt":"2025-05-22T05:49:52","slug":"qa-caprock-partners-on-western-industrial-trends","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/qa-caprock-partners-on-western-industrial-trends\/","title":{"rendered":"Q&A: CapRock Partners on Western Industrial Trends"},"content":{"rendered":"
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(From left to right)<\/em> Taylor Arnett and <\/strong>Bob O\u2019Neill. Images courtesy of CapRock Partners<\/em><\/figcaption><\/figure><\/div>\n\n\n

High interest rates, persistent inflation and ongoing geopolitical disruptions have intensified the focus on operational resilience and strategic capital deployment. How do industrial real estate developers and owners navigate risk and opportunity amid such macroeconomic and geopolitical uncertainty?<\/p>\n\n\n\n

Commercial Property Executive <\/em>put that question to Taylor Arnett, CapRock Partners\u2019 senior vice president of acquisitions, and Bob O\u2019Neill, executive vice president of acquisitions. They shared in-depth insights about the state of the industrial real estate market in the Western U.S. Since 2009, CapRock has acquired, developed and entitled more than 33 million square feet in Western and Central industrial markets.<\/p>\n\n\n\n

How do you see tenant demand evolving in 2025, especially in infill vs. exurban industrial locations?<\/strong><\/p>\n\n\n\n

O\u2019Neill<\/strong>: One of the pronounced trends CapRock Partners is seeing throughout our portfolio is the growing divide in tenant demand between infill and exurban locations. Across the Western and Central U.S., tenants are showing a strong preference for infill industrial assets, which are located closer to urban cores, established infrastructure and concentrated labor pools. These locations enable faster delivery, more predictable logistics, and improved access to skilled workers, which are mission-critical in today\u2019s environment.<\/p>\n\n\n\n

In Phoenix, for example, in the fourth quarter of 2024, the Southwest Valley accounted for roughly 90 percent of market net absorption, with more than a dozen leases signed for spaces over 100,000 square feet. Phoenix\u2019s population growth and infrastructure investments have strengthened tenant confidence in infill areas. We expect this momentum to continue throughout 2025, largely insulated from national economic volatility.<\/p>\n\n\n\n

Arnett<\/strong>: California\u2019s Inland Empire tells a similar story. While the broader market has seen a rise in vacancy, the Western industrial market, particularly the more urbanized submarkets, has experienced tightening conditions. The imbalance highlights how tenant demand is gravitating toward locations that balance cost with proximity to key transportation corridors and Foreign Trade Zones.<\/p>\n\n\n\n

Over the past few years, Las Vegas has shifted from an undersupplied to an oversupplied industrial market, giving tenants more choices and prompting a \u201cflight to location.\u201d As a result, the Southwest submarket continues to see steady demand from users seeking well-located, workforce-adjacent space. In contrast, exurban areas such as North Las Vegas and the APEX Industrial Park are experiencing slower lease-up despite offering newer product and lower rents. The tradeoff, which includes greater distance from labor, limited infrastructure and extended delivery routes, has caused many tenants to hesitate.<\/p>\n\n\n\n

That said, larger users with limited options in the Southwest are increasingly exploring North Las Vegas and East Henderson to meet their space requirements.<\/p>\n\n\n\n

What impact will fewer construction projects have on rental rates and vacancy in 2025?<\/strong><\/p>\n\n\n\n

O\u2019Neill<\/strong>: Muted construction starts in 2024 are serving as a pressure valve for the Western industrial real estate market in 2025. With a tightening in new supply, we\u2019re seeing a gradual shift toward equilibrium across several Western U.S. industrial markets, with notable variation based on local fundamentals.<\/p>\n\n\n\n

In the Inland Empire, the development pipeline has slowed, but vacancy has continued to rise due to a wave of recent industrial completions<\/a> coinciding with more cautious tenant activity. While this has placed temporary downward pressure on rents, the market\u2019s long-term fundamentals remain among the strongest in the nation. Once absorption catches up and the space delivered in 2023\u20132024 is leased, we anticipate sharp rental rate escalations, driven by persistent tenant demand tied to proximity to the ports, access to a massive consumer base and strong transportation infrastructure.<\/p>\n\n\n\n

The Phoenix MSA presents a different picture. While construction has slowed, the market entered 2024 with a sizable amount of speculative inventory in the pipeline. As that space continues to lease up, we expect rental rates to hold relatively steady in 2025. Phoenix remains a top destination for regional distribution due to its business-friendly climate, modern infrastructure, growing labor pool and proximity to major Western metros.<\/p>\n\n\n\n

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READ ALSO<\/strong>: U.S. Industrial Market Outlook \u2013 April 2025<\/a><\/p>\n\n\n\n

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Arnett<\/strong>: Las Vegas is likely to experience short-term volatility following a period of significant speculative construction that has resulted in market oversupply. While demand remains steady, the abundance of available space is expected to lead to elevated vacancies and downward pressure on rents throughout 2025. This environment will also bring a return to more traditional pricing differentiation between submarkets such as North Las Vegas, Southwest and Henderson, where rental rate spreads had previously compressed during the peak of pandemic-driven demand.<\/p>\n\n\n\n

How has the size of the industrial market changed, particularly in the Southwest?<\/strong><\/p>\n\n\n\n

O\u2019Neill<\/strong>: Over the past several years, the geographic footprint of industrial markets in the Southwest has transformed both in scale and complexity. Across the Western region, tenant demand, infrastructure investments and macroeconomic forces have driven significant expansion beyond traditional core submarkets, extending the reach of industrial market activity.<\/p>\n\n\n\n

In Phoenix, the pace of growth has been especially pronounced. This market added 54.7 million square feet of new industrial product<\/a> over just seven quarters, underscoring its emergence as a national logistics hub. Developers delivered large-scale projects in historically underbuilt areas, particularly in the West Valley, where land availability and proximity to California make it a magnet for institutional capital.<\/p>\n\n\n\n

In the Inland Empire, geographic expansion has moved eastward and into the High Desert. While infill submarkets remain land-constrained, new development in areas such as the Inland Empire East and High Desert corridors is opening up more capacity. These locations offer relative affordability and access to the Southern California ports, appealing to a wide spectrum of users and investors.<\/p>\n\n\n\n

Arnett<\/strong>: Las Vegas is also undergoing a notable transformation. Despite limitations on developable land, industrial growth is extending to both the north and south ends of the valley. The APEX Industrial Park has become a focal point for large-scale development, as users look beyond the core for opportunities to access the region\u2019s labor pool and transportation infrastructure.<\/p>\n\n\n\n

What types of industrial projects are in your current development pipeline?<\/strong><\/p>\n\n\n\n

O\u2019Neill<\/strong>: In Phoenix, CapRock is strategically evolving its development approach by shifting focus from exclusively large-scale \u201cmega-box\u201d facilities to smaller-format industrial buildings designed for a broader range of tenants. Demand remains strong from midsize and regional users who prioritize flexibility and speed to occupancy. This pivot positions CapRock to better serve Phoenix\u2019s increasingly diverse tenant base and accelerate lease-up across key submarkets.<\/p>\n\n\n\n