Sept 2025 – Knowing the Numbers In Commercial Real Estate

Office Market

Phoenix’s office market shows signs of stabilization, with vacancy at 16.3% after three quarters of positive absorption totaling 850K SF. Demand is focused on premium buildings in top submarkets, while older, non-premium stock continues to struggle. New supply remains minimal, reducing pressure on leasing fundamentals. Rent growth hit 2.0%, though effective rents may be flat or declining due to elevated tenant improvement (TI) concessions. The future recovery hinges on how quickly tenants absorb lower-tier space and whether obsolete buildings are repurposed or removed from inventory.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	195M	16.3%	$29.48	972K	868K
4 & 5 STAR	70M	25.6%	$34.35	564K	517K
3 STAR	89M	12.6%	$27.95	413K	351K
1 & 2 STAR	36M	7.1%	$23.70	-5K	0

INDUSTRIAL MARKET

Phoenix’s industrial market is adjusting to elevated vacancy, now at 12.3%, driven by the recent delivery of nearly 28M SF over 12 months. Absorption remains solid at 17M SF, with tenant demand led by logistics and manufacturing users. The construction pipeline has slowed considerably, easing future supply pressure. Asking rent growth has moderated to 1.2%, reflecting normalization after the pandemic boom. Smaller bay properties outperform larger assets, and long-term fundamentals remain favorable thanks to Phoenix’s strategic location, population growth, and infrastructure investment .

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	503M	12.0%	$13.53	4.6M	25M
LOGISTICS	368M	14.2%	$12.88	4.7M	15M
SPECIALIZED	103M	5.4%	$14.16	125K	9M
FLEX	32M	8.1%	$19.00	-128K	634K

MULTI-FAMILY MARKET

The multifamily market in Phoenix remains oversupplied, with vacancy at 11.7% and over 21,000 units delivered in the past year. Renter demand is strong, yet new construction continues to outpace absorption. Rent growth remains negative at -1.6%, though it has improved from prior lows. Concessions are widespread, particularly in Class A properties, while workforce housing shows resilience. Starts have slowed considerably, signaling an eventual rebalancing. Recovery is likely in late 2026, assuming supply pressure eases and Phoenix’s demographic strengths continue to drive household formation .

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION UNITS	UNDER CONSTRUCT UNITS
TOTAL:	422K	12.0%	$1,572	3,873	22K
4 & 5 STAR	209K	13.4%	$1,786	3,345	17K
3 STAR	150K	11.2%	$1,409	598	5K
1 & 2 STAR	64K	9.4%	$1,168	-70	142

RETAIL MARKET

Phoenix’s retail market remains fundamentally tight, with a 4.7% vacancy rate despite a modest uptick in closures. Strong demographics, income growth, and low unemployment are driving healthy tenant demand. Availability rose to 5.1%—still below pre-pandemic norms—due to national brand bankruptcies and small business exits. Limited new supply, concentrated in growing suburbs, supports long-term fundamentals. Rent growth eased to 4.3% from 6.1% a year ago but remains well above national averages. While risks from tariffs and slower consumption loom, the lack of overbuilding should cushion downside impacts.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	244M	4.7%	$26.18	-476	2.2M
POWER CENTER	33M	4.6%	$28.83	-134K	29K
NEIGHBORHOOD CENTER	92M	5.8%	$25.32	-43K	450K
GENERAL RETAIL	88M	3.2%	$25.27	2K	977K