Phoenix’s industrial market is beginning to stabilize after a sharp rise in vacancies since 2023, now holding at 12.5 percent, the highest level since the Great Recession. Over the past year, net absorption reached 13.2 million square feet, ranking fourth nationally and supported by demand from logistics, construction, retail, and advanced manufacturing sectors. Larger buildings over 100,000 square feet face higher vacancy rates above 16 percent, while small-bay spaces remain tighter at around 5 percent. Rent growth has slowed significantly to 2.1 percent from 13.8 percent in 2022, and continued supply pressures are expected to keep growth subdued in the near term.
Leasing activity remains steady, with major commitments from tenants such as Amazon, Logisticus Group, and Kenco in the West Valley. Smaller spaces in submarkets like Laveen and Maryvale are seeing faster lease-up, while large-format availability remains elevated. Although construction remains high, with nearly 91 million square feet delivered in the past three years and 22.8 million more underway, slowing starts should help vacancies peak in 2025 before improving. The market may see gradual rent recovery by 2026 and 2027 as new deliveries decline, though oversupply in large buildings will take time to rebalance.
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