— 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 that wave was driven by developers and brokers, and some by city preference, as many municipalities have pushed back on big-box logistics and the truck traffic that can come with it. But city councils getting into the real estate advisory business is a slippery slope. It may satisfy constituents, but it has decimated certain submarkets in terms of vacancy, and it will take years to absorb the mid-bay product delivered in the Southeast Valley.
By contrast, what is doing well is small-bay and infill. Those segments are currently the most active product types and locations from a user standpoint and from a developer standpoint. Class B and C office buildings are being replaced with Class A industrial buildings where the zoning is appropriate. Small-bay rents are still elevated and are predicted to continue that trend.
Even with the unevenness across product types, Phoenix remains very strong, with companies still growing and expanding. Taiwan Semiconductor (TSMC), for instance, remains the gift that keeps on giving. TSMC just acquired another 900 acres for just under $200 million. Data centers are booming, helping fuel demand for a very strong third-party logistics market, while advanced manufacturing and big-box distribution will lead us to smoother seas ahead.
— By Rob Martensen, Vice Chair, Colliers. This article was originally published in the January 2026 issue of Western Real Estate Business.