— By Rob Martensen of Colliers — The Phoenix industrial market has always resembled a rough sea with lots of highs and lows. The market’s industrial real estate community is full of strong, confident captains who have weathered the high seas to reach the destination of a balanced market. The challenges of today are no different than those in any other market: how do we stay resilient, stay active and stay in business? Phoenix has experienced very strong absorption, mostly from the big-box market. User sales and leases have led the way, with Walmart and Dollar Tree among the most active. Then there’s the cherry on top: another big Amazon lease. What’s bigger than all of that? Retail discounter Burlington is closing on 178 acres in Buckeye to build a 2.1-million-square-foot distribution center. The latest quarterly numbers reinforce this momentum: fourth-quarter vacancy dipped below 10 percent to 9.7 percent, while year-to-date absorption totaled a healthy 18,228,088 square feet, representing some of the highest levels in the U.S. Yes, the big-box market is alive and well…but that’s only one side of today’s story. What’s struggling the most in Phoenix is mid-bay, the most common type of product built post-COVID. Some of …
— By Walt Brown Jr. of Diversified Partners — Metro Phoenix continues to post strong retail market conditions, supported by expansion-ready corridors, dense and established trade areas, sustained population growth and retail sites positioned at major intersections with strong traffic counts. Even with shifting capital markets and more disciplined underwriting, retail remains one of the metro’s more consistent performers heading into 2026. A defining constraint today is the limited availability of well-located, credit-tenant triple-net product for sale. This is particularly true in “A” locations within “A” trade areas. That scarcity is keeping competition elevated for stabilized assets and reinforcing pricing for deals that offer clean income, durable tenancy and long-term visibility. At the same time, demand for credit-tenant, triple-net transactions remains strong across Arizona, with Metro Phoenix continuing to attract a meaningful share of that activity. A key driver has been capital migration and reinvestment from higher-cost Western markets, including owners selling assets in California and the Pacific Northwest and redeploying proceeds into Phoenix-area retail. For many buyers, the appeal is straightforward: growth, demographics and a business climate that supports continued tenant expansion. On the development side, the market remains supply constrained at the top end of quality. Across the …
— By Karl Abert and Bret Zinn of Kidder Mathews — The Phoenix multifamily market is still digesting the effects of an unprecedented development cycle, while beginning to show early signs of stabilization. Although near-term operating fundamentals remain challenged, several forward-looking indicators suggest the market is gradually moving toward equilibrium as it enters 2026. Vacancy increased to 12.6 percent in the fourth quarter, up 80 basis points year over year, according to Kidder Mathews research. This reflects the cumulative impact of elevated construction deliveries over the past several years. Average asking rents declined 3 percent year over year to $1,529 per unit, underscoring the competitive leasing environment owners continue to face. These trends confirm that Phoenix remains in a tenant-favorable phase of the cycle, particularly in submarkets that experienced outsized levels of new supply. Encouragingly, the development pipeline is contracting meaningfully. Units under construction declined nearly 30 percent year over year, while last year’s deliveries fell sharply compared to 2024. This slowdown represents a critical inflection point for the market. As new supply tapers, demand will have greater opportunity to absorb existing inventory, setting the stage for gradual improvement in occupancy and rent growth. While net absorption remained positive in …
— By Sean Spellman of JLL — While Metro Phoenix’s best-of-the-best office submarkets are thriving, overall fundamentals are being shaped by our supply story. That narrative is one where new construction is metered and speculative development is expensive. The result is a lack of new inventory that could limit corporate location decisions, especially from tenants comparing top-tier availability across multiple markets. Today’s Metro Phoenix demand is definitively concentrated at the high end of the product spectrum. Downtown Tempe uniquely reflects this trend. During the pandemic — and on the heels of a flood of new office construction — this typically single-digit-vacancy office market skyrocketed to 30 percent vacancy. Fortunately for downtown Tempe, those new office deliveries were dominated by amenity-rich, Class A product. In the years since, a flight to quality has eased downtown Tempe’s office market vacancy back into the 5 percent range. Developments like Hayden Ferry Lakeside have absorbed almost all of the occupancy lost during the pandemic, and prospective tenants are actively competing for what Class A space remains. The highly amenitized Grove in the Camelback Corridor has enjoyed similar success. Along with the office space at Goodyear Civic Square, it’s one of the last speculative Class …
— By Bryan Ledbetter of Western Retail Advisors — Phoenix’s retail market continues to surge. Vacancies are dipping below 5 percent, gross absorption is exceeding 1.5 million square feet in the third quarter and asking triple-net rates continue to increase, reaching into the mid-$50 to $60 per square foot range for newly constructed space. West Valley Leads the Charge in New Development After decades of limited retail construction, metro Phoenix — and the West Valley, in particular — are flush with new space. Projects like SimonCRE’s Prasada in Surprise and Vestar’s Verrado in Buckeye are among the major new developments providing the high-end availability that tenants and residents have been asking for. Although elevated debt and construction costs have tempered new development, more than 1.2 million square feet is still under construction. The lion’s share of that product is already pre-leased. This keeps developers and investors bullish on Phoenix, and on the lookout for the Valley’s next development frontier. Though the West Valley reigns as Phoenix’s latest retail boom market, outliers in the East Valley are teeing up for their turn in the spotlight. Apache Junction is a great example… Far Southeast Valley Emerges as a Growth EngineA neighbor of …
— By Todd Hamilton of Citywide Commercial Real Estate — The Phoenix industrial market has felt like a game of pause and play over the past 12 months. A year ago, the sector hit pause amid election uncertainty. Post-election hopefulness reignited activity, but tariffs triggered another slowdown. Then came summer, which is always transactionally slow in Phoenix. This pattern was especially pronounced in the mid-size industrial segment, which was dominated by properties with less than 100,000 square feet. Typically owned by mom-and-pop investors or regional players, these groups lack institutional backing and are more sensitive to factors like interest rates, rising product costs and recession chatter. Despite the unpredictability, Phoenix industrial space has maintained its trademark resilience. Rents grew 4.7 percent year over year, per CoStar’s latest market report, while 787 sales were completed in the past 12 months, at an average price of $180 per square foot. Large-scale inventory (buildings 400,000 square feet and above) has also enjoyed a recent resurgence. At the start of the year, we were wringing our hands over multiple vacant, million-plus-square-foot buildings. Since then, five of those buildings have been leased or sold, with full occupancy expected by year-end. That activity accounts for a …
— By Jason Price of Commercial Properties Inc./CORFAC International — The Phoenix office market continues to show balance as leasing patterns shift and tenants prioritize smaller footprints. The metro’s office inventory totals 195.5 million square feet across roughly 9,000 buildings. Construction has edged upward year over year, with a little more than 900,000 square feet currently underway compared with 844,000 square feet a year ago. Another 1.5 million square feet is expected to deliver between 2025 and 2026, a restrained pace that should help prevent oversupply. This discipline has become critical as companies continue to right-size and lenders remain cautious. The overall market faces slower demand for large contiguous blocks, limited financing availability and an elevated level of sublease inventory that will take time to absorb. Most of the sublease space consists of second-generation Class A and B product in downtown and the Camelback Corridor, where tenants are evaluating long-term space requirements before recommitting. Even so, Phoenix’s fundamentals remain relatively healthy compared with many other metros. The city’s diversified economy, steady population inflow and expanding employment base continue to support leasing activity, particularly for move-in-ready suites of less than 10,000 square feet. Small-business confidence and the return-to-office movement among local …
— By Brett Meinzer of MMG Real Estate Advisors — Despite ongoing challenges, Phoenix’s multifamily market is showing signs of stabilization and strength in key areas. Record Demand, Even in a Cooling Market In first-quarter 2025, net absorption reached 5,149 units, more than double the 10-year quarterly average and the second-highest quarterly total on record. On a 12-month basis, the market absorbed 18,413 units, setting a new high. “We’re seeing demand return to peak levels,” said Brett Meinzer, advisor at MMG Real Estate. “The number of units leased in the last year shows Phoenix’s long-term story remains intact.” Supply Is Slowing, Signaling Potential Stabilization While new supply remains elevated, the pace is shifting. First-quarter deliveries declined 36 percent from the prior quarter, and the development pipeline is now nearly 50 percent below its recent peak. “After years of heavy deliveries, the pipeline is thinning,” Meinzer said. “This pullback could help stabilize rent and occupancy rates as we head into 2025.” Rent Trends Still Negative But Improving Phoenix’s effective rent currently stands at $1,560, down 2.3 percent year over year, with average occupancy at 91.9 percent. Rent softness is largely driven by concessions and intense lease-up competition from new construction. However, …
By Nellie Day Metro Phoenix’s population grew to include more than 5 million people in 2023, per the Census, making it the second fastest-growing large U.S. city that year. This increase in residents and employment opportunities naturally brought new, emerging and different retailers to the area, who quickly occupied both existing centers and new developments. Phoenix-headquartered Vestar’s activity paints a picture of how this retail market has grown with its population. In the last quarter of 2024 alone, Vestar broke ground on Verrado Marketplace, a 500,000-square-foot shopping center in Buckeye; ushered in a new wave of tenant openings at Las Tiendas Village in Chandler and Queen Creek Marketplace in Queen Creek; and brought back a seasonal pop-up inside a 50-foot spherical dome at the District at Desert Ridge Marketplace in Phoenix. Balancing Tenant Mix, Community Relevance The key to capitalizing on Metro Phoenix’s growth, the firm says, is focusing on tenant diversification and market positioning. Vestar actively seeks out curated tenant mixes that not only attract foot traffic but align with the demographic and economic profiles of each community. Las Tiendas Village, for example, recently welcomed Marshalls, beauty supply store Happy Beauty, luxury lash spa Revelashons and child-focused hair salon …
— Phillip Hernandez, Research Director, Colliers — The Phoenix industrial market showed resilience throughout 2024. Arizona ranked fifth in net migration as of October, with 62,533 new residents — 52.8 percent of whom relocated from California. This influx of residents has positively impacted the labor market, growing Phoenix’s workforce by 42,900 employees by November, a 1.7 percent increase from the previous year. Investor interest in Phoenix’s industrial sector also remains strong. Fourth-quarter sales volume reached $1.9 billion, a 74 percent increase compared to the previous quarter and a 91.8 percent year-over-year increase. This brought last year’s total sales volume to $4.3 billion, with average prices per square foot rising by 2 percent (to $204.20) compared to fourth-quarter 2023. Vacancy Trends and Absorption Despite strong investor activity, the Phoenix market is experiencing rising vacancy rates. New deliveries in the fourth quarter added 7.8 million square feet to the market, bringing total deliveries for 2024 to 34.8 million square feet. However, the vacancy rate increased to 10.6 percent, marking a year-over-year 390 basis points rise. This increase is largely attributed to the completion of vacant product. Net absorption reached 3.8 million square feet in the fourth quarter, contributing to a year-to-date total of …
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