March 2026 – Knowing the Numbers In Commercial Real Estate

Office Market

The Phoenix office market has reached an inflection point as demand improved in 2025, pushing vacancy down slightly to 16.4% after several years of deterioration. Roughly 700,000 SF of positive net absorption last year, driven in part by owner-user acquisitions and improving office attendance, helped stabilize conditions. Limited new construction has reduced supply pressure, though about 5.5 million SF of pandemic-era occupancy loss still needs to be absorbed. Rent growth remains modest at 1.6%, with demand concentrated in premium buildings while older suburban offices continue to lag.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	193M	16.4%	$30.25	-180K	1M
4 & 5 STAR	69M	25.2%	$35.27	-455K	645K
3 STAR	89M	13.2%	$28.71	222K	399K
1 & 2 STAR	35M	7.1%	$24.22	53K	0

INDUSTRIAL MARKET

The Phoenix industrial market is stabilizing after an unprecedented development surge pushed vacancy higher. Vacancy has risen from around 4% in 2022 to roughly 11.6% today as deliveries outpaced tenant demand, though steady leasing and strong logistics activity helped produce about 19 million SF of net absorption last year. Nearly 90% of recent construction has focused on large logistics buildings, where vacancy has increased the most. Rent growth has slowed to roughly 3.5% annually as new supply increases competition, though infill and small-bay properties continue to maintain stronger pricing power.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	519M	11.6%	$12.98	4.2M	21M
LOGISTICS	375M	13.7%	$12.06	5.3M	13M
SPECIALIZED	114M	5.5%	$14.42	-930K	7.9M
FLEX	30M	9.5%	$18.88	-148K	174K

MULTI-FAMILY MARKET

The Phoenix multifamily market continues to face a mismatch between strong renter demand and an unprecedented wave of new construction. Approximately 17,000 units were absorbed in 2025, well above pre-pandemic averages, but more than 21,000 new units delivered during the same period pushed vacancy to roughly 12.5%. Elevated vacancy and intense competition among newly built properties have driven rent declines of about 3% annually, with concessions increasingly common. Construction starts are beginning to slow, which should gradually ease supply pressure and allow the market to rebalance over the next several years.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION UNITS	UNDER CONSTRUCT UNITS
TOTAL:	432K	12.5%	$1,564	3681	18K
4 & 5 STAR	213K	13.6%	$1,782	2871	15K
3 STAR	158K	12.2%	$1,393	794	3K
1 & 2 STAR	61K	9.5%	$1,147	16	0

RETAIL MARKET

The Phoenix retail market remains fundamentally tight despite a modest rise in vacancies caused by store closures. Availability has increased to about 4.9%, though it remains well below historical averages due to strong population growth, rising incomes, and a limited construction pipeline. New supply has largely focused on fast-growing suburban areas, while established submarkets continue to see strong competition for space. Off-price retailers, experiential tenants, and discount chains are actively expanding and backfilling vacant stores. Rent growth has moderated but remains strong at roughly 5.1%, outperforming national averages.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	245M	4.6%	$26.94	406K	2.7M
POWER CENTER	33M	4.4%	$29.83	-84K	24K
NEIGHBORHOOD CENTER	92M	5.8%	$26.07	43K	740K
GENERAL RETAIL	89M	3.5%	$25.95	-23K	1.3M