Office Market
Office vacancy rates in Phoenix continue to climb steadily as the fourth quarter begins. Businesses are increasingly reevaluating their space needs, often leading to downsizing or closures. Compounding this trend, job growth in traditional office-using sectors has remained sluggish for over two years. This sustained drop in demand has driven vacancy rates up by more than 550 basis points since Q4 2019. Further increases are anticipated in the midterm as pre-pandemic leases reach expiration.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 197M | 16.7% | $29.43 | 336K | 760K |
| 4 & 5 STAR | 69M | 27.1% | $34.56 | 235K | 602K |
| 3 STAR | 91M | 12.7% | $28.03 | 221K | 158K |
| 1 & 2 STAR | 38M | 7.5% | $23.28 | -121K | 0 |
INDUSTRIAL MARKET
An unprecedented wave of new industrial developments is pushing Phoenix’s vacancy rate higher, a trend likely to continue through mid-2025. Over the past 12 months, builders delivered a record 37.7 million square feet of net new industrial space, contributing to a normalization of market conditions. By contrast, Phoenix averaged just 8 million square feet of annual net deliveries in the three years prior to the pandemic.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 484M | 12.1% | $13.54 | -1M | 26M |
| LOGISTICS | 355M | 14.8% | $13 | -1.3M | 20M |
| SPECIALIZED | 96M | 3.8% | $13.77 | 247K | 6M |
| FLEX | 33M | 7.8% | $18.91 | -28K | 451K |
MULTI-FAMILY MARKET
The Phoenix multifamily market made further strides toward recovery in Q3 2024. With easing inflation and growing consumer confidence, renter household formation has gained momentum, fueling a rebound in tenant demand. Although new supply additions still exceed leasing activity, the decline in occupancy rates has started to level off, suggesting that property performance could begin to recover within the next year.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION UNITS | UNDER CONSTRUCT UNITS |
|---|---|---|---|---|---|
| TOTAL: | 402K | 10.9% | $1,573 | 1,797 | 27K |
| 4 & 5 STAR | 194K | 12.3% | $1,781 | 1,314 | 21K |
| 3 STAR | 145K | 10.1% | $1,422 | 489 | 6K |
| 1 & 2 STAR | 63K | 8.4% | $1,182 | -6 | 155 |
RETAIL MARKET
As the fourth quarter begins, the Phoenix retail market remains among the tightest on record. Robust tenant demand is driven by strong demographics, steady income growth, and solid job gains. These factors, combined with a modest construction pipeline and minimal store closures, have kept space availability low and rent growth near historic highs.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 244M | 4.9% | $25.58 | -395K | 2.9M |
| POWER CENTER | 33M | 4.0% | $28.26 | -73K | 156K |
| NEIGHBORHOOD CENTER | 92M | 6.0% | $25.02 | -305K | 206K |
| GENERAL RETAIL | 86M | 3.2% | $24.51 | -30K | 1.7M |
