— 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 notable slice of the 14.6 million square feet of industrial space absorbed over the past 12 months.
While we’re still contending with a historic wave of speculative construction — 21.6 million square feet of which remains underway — there’s optimism that 53.5 percent of the product under construction is already pre-leased. As absorption continues, vacancy rates are expected to decline from an elevated 12.4 percent.
Most big users feel that the trajectory of metro Phoenix warehouse, ecommerce and advanced manufacturing will only continue to trend positively. They are operating under a sense of opportunity, wanting to secure assets at today’s prices, before rents and sale values climb further.
Vacancy for smaller and mid-bay product has also tightened to nearly 5 percent, making it difficult for mom-and-pop and regional users to gain leverage, but placing landlords in a strong position. The hope is that interest rates will continue to ease, while market uncertainties will continue to settle. This would bring greater stability to all of Arizona’s industrial sectors. It would also allow investors and tenants to capitalize on the state’s ongoing manufacturing and logistics boom.
— By Todd Hamilton, Managing Partner and Designated Broker, Citywide Commercial Real Estate. This article was originally published in the October 2025 issue of Western Real Estate Business.