The Phoenix industrial market shifted again in Q3 2025. New supply slowed. Tenant demand held steady. Together, these forces reshaped vacancy and rent trends across the Valley.
Vacancy eased slightly this quarter. Developers pulled back after years of record construction. That pullback is starting to show results. Fewer new buildings hit the market, which gave tenants time to fill existing space. The Phoenix industrial market still carries elevated vacancy compared to 2022 levels. But the direction has changed. Vacancy is stabilizing, not climbing.
Net absorption told a similar story. Logistics, retail, and manufacturing tenants kept leasing space through the quarter. Smaller bay and infill properties performed especially well. Larger big-box buildings saw softer demand. That gap matters. It shows tenants want flexible, well-located space — not just square footage.
Construction activity remains high, but it’s cooling. Millions of square feet are still underway across the Valley. Most of that new supply sits in the West Valley and Southeast Valley submarkets. Deliveries are expected to slow further into 2026. That slowdown should help rebalance the market.
Rent growth cooled from its 2022 peak. Landlords aren’t pushing double-digit increases anymore. Instead, rent growth has settled into a steadier, more sustainable pace. Infill locations and small-bay spaces are holding pricing power best.
Semiconductor and advanced manufacturing investment continues to anchor long-term demand. TSMC’s expansion alone keeps drawing suppliers and support companies to the region. That pipeline gives the Phoenix industrial market a growth story that goes beyond any single quarter.
Want the full picture? Download our complete Q3 2025 newsletter below. It breaks down vacancy, absorption, construction, and rent data by submarket — plus what to watch heading into 2026.
