The Phoenix industrial market is showing early signs of stabilization, but near-term conditions remain uncertain. Vacancy, which had been rising sharply since early 2023 due to a surge in new construction, has flattened as completions ease and tenant demand remains steady. Despite this, vacancy remains at its highest level since the Great Recession, and rent growth continues to be subdued. Over the past 12 months, 16.3 million square feet of net absorption occurred, driven largely by logistics, retail, and advanced manufacturing tenants, with most demand concentrated in newly built properties.
The accumulation of vacant space has been most pronounced in large buildings over 100,000 square feet, where vacancy has reached a 15-year high of about 16 percent, and an additional 7 million square feet of unleased large-format space is under construction. Smaller properties under 50,000 square feet have fared better, with vacancy remaining in the low-5 percent range, though it has been gradually rising. Overall, while steady tenant demand has helped moderate the impact of oversupply, elevated vacancy in large industrial buildings continues to weigh on market performance.
For a deeper dive into the evolving dynamics of the Phoenix industrial market, including detailed projections and expert analyses, view the full newsletter below, where you can download and share additional insights.
