Why Amazon, UPS and Others Are Filling Warehouses Along This Arizona Highway | WSJ

- [Narrator] This is a strip of Arizona Highway, five years ago. These rooftops are warehouses. Then two years ago, more warehouses. And here's that area today. On this 17 mile stretch of road, there are now close to 40 warehouses with more coming soon. This strip has become one of the fastest growing markets for industrial real estate in the country, as companies look to shift how they move goods to avoid supply chain bottlenecks. But why are companies picking this desert lined highway specifically? - To my right would be the new Walmart Distribution Center. - [Narrator] Amazon, REI, Dick Sporting Goods, UPS and more fill out this strip known as Loop 303, which sits about 20 miles west of Phoenix, and follows an arc that connects Interstate 10 to Interstate 17. But much of the development is happening here between I-10 and US-60, an area that was once farmland. - Everything from cotton to other types of feed stock were were grown out here. And over time the land became increasingly valuable and so many of these farmers would sell to industrial developers or residential developers. And they'd come in and build the kind of product you see today. - [Narrator] That product, massive warehouse spaces like this building that will soon be a distribution center for sportswear brand Puma. - - We are trying to be prepared for the future and therefore we decided to go to Arizona, and we will build there 1.1 million square foot facility. - [Narrator] Companies through the second quarter had leased a net total of 16 million square feet of industrial space in the greater Phoenix area. That put it up there with Chicago and Dallas Fort Worth as one of the country's busiest sites for new logistics activity this year. Many of these buildings were built before they even had a tenant, including Puma's future space. - Developers are confident that there are more companies that wanna locate along this corridor. And they're saying, "We're gonna make a bet that this is gonna pay off if we build more warehouse space." - [Narrator] Another 19.8 million square feet of industrial space is now under construction in the Phoenix region which includes the Loop 303 corridor. To see why companies are doing this, look about 300 miles west where there is a bottleneck at the West Coast traditional freight hub, Southern California's Inland Empire. Many of the shipments from the ports of Los Angeles and Long Beach stop here after leaving the docks. But space here is tight. - In the Inland Empire, the warehousing market has a vacancy rate that's fallen below 1%. So that has forced companies that otherwise would've been leasing space there to look for alternatives. - [Narrator] Before picking the 303, Puma considered adding more space in Torrance where it has its existing Southern California facility. But there was a problem. - There is no space available right now in Torrance and you have to look into the future and I don't expect it's getting better out there. - [Narrator] So for Puma, that meant looking east, but not too far east. The company said about 95% of its product is imported from Asia, so it needed a facility that was still within driving distance of the ports. - You have six, eight hours to the time in transit. You go overnight anyway so I don't think it's a big deal. - [Narrator] Trucking goods over 350 miles to Phoenix versus 15 miles to Torrance can carry a cost. Some company's and developers say however that cheaper leasing rates along the 303 make it more cost effective overall. That's especially true when the consumer is in or near Phoenix. - Phoenix for years has been really a hotbed for industrial growth, but I think what's namely different today is these global brands, these well known consumer brands need to service the Southwest. It's the growth belt, it's where people are moving to. - [Narrator] Phoenix has a population of nearly 5 million and like other Sun Belt cities, it's been growing rapidly but it still pales in comparison to the 24 million person market in Southern California. - The reality is though many of these products now are serving the Sun Belt. So they're brought in, whether it's through the port of LA Long Beach into Phoenix, and now you can service West Texas, Colorado, New Mexico, Nevada, all from a central hub. - You can be either close to the port or close to the customer. So I think with the investment in Phoenix, we can actually serve for a certain area both. - [Narrator] So given the advantages companies and developers see in Phoenix, some hope it'll be the next Inland Empire, but for now it still has a long way to go. - What I envision over the next 30 to 40 years is you're gonna see a shift westward closer into California, but still be in Arizona, and servicing the Southern California basin from here. - [Narrator] Currently the Inland Empire has one and a half times the industrial space of the entire Phoenix market and Loop 303 is just one part of that. But this highway does still have a role to play. - I think Loop 303 is exactly the kind of solution companies are looking for with the end goal of helping all of us get that little package on your doorstep or pick up whatever it is at the store that much quicker and faster and cheaper. (mellow music)

Channel: The Wall Street Journal

Views: 1,329,188

Keywords: supply chain, warehouse space, supply chain crisis, loop 303, loop 303 arizona, loop 303 warehouses, warehouses, industrial real estate, real estate, supply chain management, phoenix arizona, phoenix az, amazon, walmart, ups, rei, dicks sporting goods, amazon warehouse, walmare warehouse, ups warehouse, rei warehouse, industrial development, business model, business strategy, puma, puma warehouse, inland empire supply chain, trucking, sunbelt, port of la, port of long beach, news

Id: b-LTkp039X0

Length: 4min 57sec (297 seconds)

Published: Wed Oct 12 2022