Arizona's California Effect

It’s been a bumpy couple of years for Phoenix commercial real estate in general, but thanks in part to what some people are calling the California Effect, the Valley’s industrial market’s year-end net absorption stats are poised to wind up in the plus column for the first time since 2008. The California Effect refers to the impact of companies relocating from California or seeking a close-enough alternative to service Los Angeles/The Inland Empire. Although not entirely responsible for distribution buildings leading Phoenix industrial market activity this year, the increase in attention from these types of big-box users has been particularly noticeable. Even more encouraging is the fact that passage of Arizona’s tough new immigration law, SB 1070, has not had the negative effect on the market that some people feared. Not only has it not stemmed the flow of companies wanting to set up shop here, it’s not even been part of the conversation with most decision-makers. According to Joseph Vranich, an Irvine, Calif.-based business relocation expert who tracks the California outmigration trend, Arizona is the second most attractive state in the country for companies moving from or cancelling plans to locate in California. Texas is No. 1. Colorado, Nevada, Virginia and Utah round out the rest of the top 5.

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