JLL Income Property Trust's Phoenix Play: Leveraging Sun Belt Logistics and Long-Term Leases in a Rising-Rate World

In a market where industrial real estate is increasingly seen as a haven for stable income, JLL Income Property Trust's recent $140 million acquisition of the Glendale Distribution Center in Phoenix, Arizona, stands out as a masterclass in strategic positioning. The deal, which adds a 1 million-square-foot, newly constructed asset to JLL's portfolio, underscores the company's focus on capitalizing on Sun Belt logistics tailwinds while securing long-term cash flow stability in a rising-rate environment.

Phoenix: A Logistics Hub in the Sun Belt's Spotlight

The Glendale Distribution Center is more than just a real estate asset—it's a gateway to one of the U.S.'s fastest-growing industrial markets. Phoenix's appeal lies in its trifecta of advantages: affordable housing, a highly educated workforce, and proximity to major transportation infrastructure. The property's location near Loop 303 and Interstate 10 positions it as a critical node for logistics operations, while its inclusion in a Foreign Trade Zone (FTZ) offers tenants like the global sportswear manufacturer that currently occupies it significant cost savings on customs duties.

The Sun Belt's broader economic momentum further amplifies the strategic value of this acquisition. Population growth in Phoenix alone has surged, with Texas and Florida collectively adding over 1 million residents in the past two years. This migration, driven by job opportunities and a favorable business climate (including no state income tax in Arizona and Texas), has fueled demand for logistics infrastructure. Meanwhile, reshoring and nearshoring trends—prompted by companies seeking to shorten supply chains—are accelerating the need for U.S.-based warehousing.

Long-Term Leases as a Hedge Against Rate Volatility

One of the most compelling aspects of JLL's acquisition is the 10-year lease with the global sportswear tenant, which includes annual rent escalations of 3.25%. This structure provides a buffer against rising interest rates, a persistent concern for REITs in 2025. As the 10-year Treasury yield hovers between 3.5% and 4.0%, REITs with long-term leases gain a critical edge: predictable cash flows that can offset higher financing costs.

JLL's portfolio, which now includes $2 billion in industrial assets across 58 properties, is a testament to this strategy. Industrial REITs as a category have outperformed the broader equity REIT market this year, with total returns of 3.8% compared to 0.7%. Their occupancy rates remain above 95%, and same-store net operating income (NOI) has grown by 5.8% year-over-year. These metrics highlight the sector's resilience, even as rising rates weigh on other real estate segments.

Institutional Demand and the Sun Belt's Structural Tailwinds

The Sun Belt's logistics sector has also attracted institutional capital, with transactions like Mapletree Investments' recent $241.2 million sale of a 2.4 million-square-foot industrial portfolio to EQT Real Estate. These deals reflect a shift in investor sentiment: capital is flowing toward high-quality, well-located assets in markets with structural growth drivers. JLL's acquisition aligns perfectly with this trend, as the Glendale facility's state-of-the-art infrastructure—including 40-foot clear heights, LED lighting, and above-market power capacity—caters to modern logistics needs.

Moreover, the Sun Belt's economic resilience is bolstered by its role in the global “industrial sunbelt,” a term now applied to regions like India, Egypt, and Brazil that are emerging as clean energy production hubs. While the U.S. remains a key player, the Sun Belt's combination of low-cost renewable energy, favorable policies, and proximity to major ports positions it to dominate domestic logistics for years to come.

The Case for JLL in a Rising-Rate Environment

For investors, JLL's strategy offers a compelling blend of defensive and growth-oriented qualities. The company's industrial assets, which now represent 33% of its $6.5 billion portfolio, are supported by long-term leases with investment-grade tenants. This structure not only stabilizes cash flows but also enhances the company's ability to service debt in a higher-rate environment.

Historically, REITs have thrived during periods of rising long-term rates, averaging 16.55% returns over four quarters when Treasury yields increased. JLL's focus on high-barrier infill submarkets—like Phoenix—positions it to outperform peers in low-supply, high-demand areas. With the industrial sector projected to grow at a 5% annualized rate through 2026, JLL's disciplined approach to capital recycling and portfolio diversification appears well-suited to the current cycle.

Investment Implications

JLL Income Property Trust's Phoenix acquisition is a microcosm of a broader real estate strategy: leveraging Sun Belt growth while hedging against macroeconomic risks. For income-focused investors, the company's 3.25% rent escalations and 100% occupancy rates provide a degree of certainty rare in today's market. Meanwhile, its alignment with Sun Belt logistics trends offers upside potential as e-commerce and reshoring continue to reshape the industrial landscape.

In a rising-rate environment, REITs with long-term leases and strong balance sheets are likely to outperform. JLL's industrial portfolio, with its high-quality tenants, strategic locations, and defensive cash flow structure, exemplifies this profile. As the Sun Belt remains a key growth corridor, JLL's ability to capitalize on this momentum—while navigating rate volatility—makes it a standout play for investors seeking both income and long-term value.