November 2025 – Knowing the Numbers In Commercial Real Estate

Office Market

The Phoenix office market is stabilizing after years of contraction. Vacancy improved to 16.3%, down from 17.0% a year ago, following four consecutive quarters of positive absorption totaling 1.6 million SF. Demand is strongest in premium submarkets like Camelback Corridor and Tempe, while older suburban properties continue to struggle. New construction remains minimal, limiting supply pressure and supporting gradual recovery. Asking rents rose 2.5%, though generous tenant improvement packages are keeping effective rents flat. Some obsolete offices are being redeveloped or repurposed, and recovery is expected to remain slow and uneven across building classes.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	195M	16.3%	$30.27	-249K	911K
4 & 5 STAR	70M	25.2%	$34.74	51K	560K
3 STAR	89M	12.9%	$29.20	-237K	351K
1 & 2 STAR	36M	7.4%	$24.08	-62K	0

INDUSTRIAL MARKET

The Phoenix industrial market is showing early signs of stabilization. Vacancy has leveled off at 12.1% after a historic wave of speculative construction outpaced tenant demand. Net absorption reached 16.9 million SF over the past year, driven largely by logistics and manufacturing users, though still lagging behind new deliveries. Smaller bay properties remain tighter, while large modern buildings face elevated vacancy near 16%. Rent growth slowed to 4.0% as landlords compete for tenants amid abundant new supply. With 18 million SF still under construction, vacancy may remain high through mid-2026 before moderating as deliveries slow and demand gradually catches up.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	508M	12.1%	$12.86	3.3M	18M
LOGISTICS	370M	14.4%	$11.96	1.7M	11M
SPECIALIZED	106M	5.0%	$14.13	1.5M	6.8M
FLEX	32M	8.8%	$18.98	112K	634K

MULTI-FAMILY MARKET

The Phoenix multifamily market remains under pressure from an unprecedented supply surge. Vacancy has climbed to 12.4%—a 15-year high—as 22,000 new units delivered outpaced healthy absorption of 16,000. Rent growth turned negative at -3.3%, with concessions widespread across all property classes. Developers have 23,000 more units underway, signaling continued oversupply through 2026. While long-term fundamentals like population and wage growth remain strong, a meaningful recovery will likely depend on absorption catching up to inventory by late 2026 or 2027.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION UNITS	UNDER CONSTRUCT UNITS
TOTAL:	462K	12.4%	$1,558	1,428	23K
4 & 5 STAR	211K	13.4%	$1,765	1,251	19K
3 STAR	153K	12.1%	$1,394	199	4K
1 & 2 STAR	63K	9.7%	$1,163	-22	0

RETAIL MARKET

Phoenix’s retail market remains fundamentally tight despite a modest rise in availability to 5.1%. Strong population growth, job gains, and resilient consumer spending continue to drive demand, even as store closures among national chains and small businesses add some vacant space. Net absorption reached 1.3 million SF over the past year while new deliveries totaled 2.2 million SF, keeping vacancy low at 4.7%. Rent growth slowed to 4.5% but remains well above national averages. With limited new supply and steady tenant interest, property performance is expected to stay stable through 2026 despite softer economic conditions.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	244M	4.7%	$26.62	-95K	2.7M
POWER CENTER	33M	4.9%	$29.44	-40K	37K
NEIGHBORHOOD CENTER	92M	5.8%	$25.73	25K	546K
GENERAL RETAIL	88M	3.2%	$25.64	-50K	1.3M