Office Market
As the third quarter begins, office vacancy in Phoenix continues to rise steadily. Many businesses are reassessing their space needs, often leading to reductions or closures. Additionally, job growth in traditional office-using sectors has been sluggish for over two years. This structural decline in space demand has driven vacancy up by more than 550 basis points since Q4 2019, with further increases expected in the midterm as pre-pandemic leases come to an end.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 198M | 16.9% | $29.65 | -998K | 962k |
| 4 & 5 STAR | 71M | 25.9% | $34.37 | -353K | 560K |
| 3 STAR | 88M | 13.8% | $28.64 | -484K | 402K |
| 1 & 2 STAR | 38M | 7.4% | $23.10 | -160K | 0 |
INDUSTRIAL MARKET
A surge in new developments is pushing Phoenix’s industrial vacancy rate higher, a trend that may continue into mid-2025. The second quarter marked the fourth straight quarter with over 10 million square feet of net deliveries, bringing the total to an unprecedented 43.1 million square feet over the past year. In contrast, Phoenix averaged just 8 million square feet of annual net deliveries in the three years prior to the pandemic.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 476M | 10.9% | $13.61 | -1.9M | 29M |
| LOGISTICS | 348M | 13.1% | $13.10 | 1.5M | 24M |
| SPECIALIZED | 95M | 3.5% | $13.63 | 304K | 4M |
| FLEX | 34M | 9.2% | $19.14 | 32K | 451K |
MULTI-FAMILY MARKET
In the first half of 2024, the Phoenix multifamily market showed signs of recovery. With inflation easing and consumer confidence on the rise, more renter households are forming, leading to a rebound in tenant demand. Although new supply still exceeds leasing activity, the decline in occupancy and rents is slowing down, suggesting that the market may be approaching a low point in property performance.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION UNITS | UNDER CONSTRUCT UNITS |
|---|---|---|---|---|---|
| TOTAL: | 396K | 11.0% | $1,559 | 2173 | 30K |
| 4 & 5 STAR | 188K | 12.5% | $1,768 | 1,097 | 23K |
| 3 STAR | 145K | 10.4% | $1,419 | 1,113 | 7K |
| 1 & 2 STAR | 63K | 8.2% | $1,156 | -37 | 130 |
RETAIL MARKET
As the third quarter begins, the Phoenix retail market remains near record-tight levels. Strong demographics, ongoing income growth, and solid job gains are driving robust tenant demand. These factors, along with a modest construction pipeline and limited store closures, have kept space availability low and rent growth near all-time highs.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 243M | 4.8% | $25.14 | -3K | 2.9M |
| POWER CENTER | 33M | 4.3% | $28.06 | -59K | 156K |
| NEIGHBORHOOD CENTER | 92M | 5.6% | $24.60 | -62K | 152K |
| GENERAL RETAIL | 85M | 3.1% | $23.94 | 34K | 1.8M |
