October 2025 – Knowing the Numbers In Commercial Real Estate

Office Market

The Phoenix office market is showing early signs of recovery. Vacancy has flattened at 16.3% following three straight quarters of positive net absorption totaling 900K SF. Demand is strongest for premium space in top submarkets, while older and suburban properties continue to struggle. New deliveries are limited, which is helping stabilize the market. Rent growth sits at 3.0%, but generous tenant improvement (TI) packages are compressing effective rents. Some obsolete buildings are being redeveloped or repurposed for industrial use. Recovery is expected to be slow and uneven across asset classes.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	195M	16.3%	$30.09	-89K	1.3M
4 & 5 STAR	70M	25.6%	$34.58	-54K	509K
3 STAR	89M	12.7%	$28.99	-43K	751K
1 & 2 STAR	36M	7.1%	$23.97	7K	0

INDUSTRIAL MARKET

Phoenix’s industrial market continues its rebalancing act, with vacancy rising slightly to 12.5% due to ongoing deliveries. Demand remains healthy, led by logistics and manufacturing users, resulting in over 15.5M SF of net absorption over the past 12 months. Construction has tapered, and developers have pulled back on speculative builds. Rent growth is flat at 0.0% year-over-year, down sharply from post-pandemic highs. Smaller bay and infill product continues to outperform large-scale logistics sites. Long-term fundamentals are intact, with Phoenix’s location, workforce, and infrastructure supporting demand even as the market normalizes.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	508M	12.4%	$12.85	780K	21M
LOGISTICS	371M	14.7%	$11.92	585K	12M
SPECIALIZED	105M	5.3%	$14.17	235K	8M
FLEX	32M	8.4%	$19.15	-40K	634K

MULTI-FAMILY MARKET

Phoenix’s multifamily sector remains under pressure from elevated vacancy, now at 11.5%, though down from recent highs. Deliveries continue at a strong pace, with nearly 19,000 units added over 12 months, outpacing absorption. Rents have declined by 1.1% year-over-year, but pricing trends have improved from earlier lows. High concessions persist in Class A assets, while more affordable properties remain stable. New starts have dropped sharply, signaling a likely recovery in 2026 as supply moderates. Strong demographic trends continue to underpin long-term demand, even as short-term softness lingers.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION UNITS	UNDER CONSTRUCT UNITS
TOTAL:	425K	12.3%	$1,563	440	20K
4 & 5 STAR	210K	13.6%	$1,772	340	15K
3 STAR	152K	11.5%	$1,404	106	5K
1 & 2 STAR	63K	9.8%	$1,161	-6	0

RETAIL MARKET

Phoenix’s retail market remains fundamentally strong despite a rise in store closures that pushed the availability rate to 4.9%. Demand remains robust, supported by low unemployment, rising incomes, and strong population growth. Big-box vacancies from national bankruptcies are being backfilled by off-price and experiential tenants, including T.J. Maxx, Aldi, and pickleball operators. Construction remains modest, limiting supply-side pressure. Rent growth has slowed to 4.4%, still outperforming the national average. Despite potential economic headwinds, tight inventory and strong demographic momentum suggest continued market stability.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	244M	4.7%	$26.34	-1M	2.4M
POWER CENTER	33M	5.0%	$29.07	-68K	37K
NEIGHBORHOOD CENTER	92M	5.9%	$25.50	-41K	491K
GENERAL RETAIL	88M	3.1%	$25.45	23K	1.2M