- [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)