May 2025 – Knowing the Numbers In Commercial Real Estate

Office Market

The Phoenix office market remains under pressure as evolving workplace strategies drive continued disruption. Many occupiers are reassessing how much space they truly need, leading to widespread downsizing and consolidations. Meanwhile, job growth in core office-using industries has remained muted for more than two years, weakening overall demand. As a result, vacancy has risen by over 550 basis points since late 2019, with more upward pressure expected as legacy leases roll off.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	195M	16.8%	$29.29	-117K	449K
4 & 5 STAR	70M	26.9%	$33.83	8K	294K
3 STAR	89M	12.8%	$28.10	-182K	155K
1 & 2 STAR	36M	7.3%	$23.42	57K	0

INDUSTRIAL MARKET

A wave of new industrial developments continues to elevate vacancy rates across the Phoenix market—an upward trend that may extend into 2026. Over the past 12 months alone, developers delivered a record-breaking 31 million square feet of net new industrial space. This surge marks a significant shift toward market normalization, especially when compared to the pre-pandemic annual average of just 8 million square feet delivered between 2017 and 2019.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	499M	12.5%	$13.63	49K	18M
LOGISTICS	366M	15.2%	$13.12	-266K	12M
SPECIALIZED	101M	4.5%	$13.85	292K	5M
FLEX	32M	7.8%	$18.82	23K	483K

MULTI-FAMILY MARKET

A continued imbalance between supply and demand is weighing on Phoenix’s apartment market. A historic surge in new construction is outpacing solid leasing activity, keeping vacancy rates elevated and rent growth in negative territory. The Valley saw 18,000 units of net absorption over the past year—well above the pre-COVID five-year annual average of 7,200 units. That level of demand places Phoenix among the top 10 apartment markets nationwide.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION UNITS	UNDER CONSTRUCT UNITS
TOTAL:	416K	11.7%	$1,585	1,737	23K
4 & 5 STAR	205K	13.3%	$1,801	1,363	19K
3 STAR	148K	10.7%	$1,420	382	4K
1 & 2 STAR	63K	8.9%	$1,174	-8	25

RETAIL MARKET

Despite a spike in store closures that slowed net absorption last year, the Phoenix retail market remains fundamentally tight as 2025 begins. Solid population growth, rising incomes, and steady job creation continue to drive strong tenant demand. This resilient demand, paired with a restrained development pipeline, has kept space availability limited and supported elevated rent growth across the metro.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	247M	4.8%	$25.70	-398K	2.4M
POWER CENTER	33M	3.6%	$28.15	-5K	185K
NEIGHBORHOOD CENTER	92M	6.1%	$24.91	-117K	412K
GENERAL RETAIL	89M	3.1%	$24.93	470K	1M