June 2025 – Knowing the Numbers In Commercial Real Estate
Office Market
The Phoenix office market is under stress, with 16.8% vacancy and net absorption down nearly 291K SF over the past year. A move toward smaller, higher-quality spaces is evident, while large and older buildings struggle. Sublease availability is high, making Phoenix the fourth most sublet-impacted market nationally. Rent growth slowed to 1.7%, with landlords offering generous concessions. Limited new construction offers some balance, but elevated vacancies are likely to persist amid downsizing and lease expirations.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 195M | 16.8% | $29.52 | -14K | 415K |
| 4 & 5 STAR | 70M | 27.0% | $33.94 | 51K | 294K |
| 3 STAR | 89M | 12.8% | $28.55 | -149K | 121K |
| 1 & 2 STAR | 36M | 7.2% | $23.32 | 84K | 0 |
INDUSTRIAL MARKET
Phoenix’s industrial sector faces rising vacancy (12.5%) driven by an unprecedented 28.5M SF in deliveries, outpacing demand. Despite robust absorption of 13.4M SF—third highest in the U.S.—construction focused on large facilities (>100K SF) continues to oversaturate the market. Rent growth has cooled to 2.4%. Speculative development remains high, while tenant interest in smaller, urban-adjacent spaces shows more resilience. A supply pullback forecasted for 2026 could stabilize conditions and revive rent growth.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 502M | 12.5% | $13.67 | 1M | 18M |
| LOGISTICS | 367M | 15.1% | $13.10 | 1.2M | 12M |
| SPECIALIZED | 103M | 4.8% | $14.09 | -101K | 5M |
| FLEX | 32M | 8.1% | $18.87 | -116K | 569K |
MULTI-FAMILY MARKET
Phoenix’s multifamily market contends with a supply-demand mismatch. Although absorption reached 17,881 units, annual deliveries topped 23,988 units, lifting vacancy to 11.9%. Luxury properties are hardest hit, with rents down 2.7% and vacancy surging. Rent growth overall fell -2.6%, and concessions are widespread. Despite elevated inventory, stabilized occupancy has remained flat, and a construction slowdown by 2026 may ease pressures, paving the way for gradual recovery.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION UNITS | UNDER CONSTRUCT UNITS |
|---|---|---|---|---|---|
| TOTAL: | 418K | 11.9% | $1,584 | 3,030 | 23K |
| 4 & 5 STAR | 207K | 13.6% | $1,800 | 2,544 | 18K |
| 3 STAR | 148K | 10.8% | $1,418 | 518 | 4K |
| 1 & 2 STAR | 63K | 9.0% | $1,174 | -32 | 25 |
RETAIL MARKET
Phoenix retail remains fundamentally tight with a 4.6% vacancy rate, despite recent closures raising availability modestly to 5.1%. Net absorption of 899K SF trails the 2M SF in new deliveries, yet demand from off-price, experiential, and value-oriented tenants remains strong. Rent growth has moderated to 3.1% after years of outsized gains. Construction remains modest, primarily in high-growth suburbs. While macroeconomic risks exist, limited supply and strong demographics are expected to keep fundamentals stable.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 246M | 4.6% | $25.75 | 776K | 2.3M |
| POWER CENTER | 34M | 3.6% | $28.17 | -18K | 185K |
| NEIGHBORHOOD CENTER | 92M | 5.9% | $24.96 | 164K | 354K |
| GENERAL RETAIL | 88M | 3.0% | $24.94 | 576K | 1M |
