Office Market
Office vacancy rates in Phoenix continue to climb steadily as the year comes to a close. Many businesses are reevaluating their space needs, often opting for reductions or closures. This trend is compounded by sluggish job growth in traditional office-using industries for over two years. As a result, vacancy rates have risen by more than 550 basis points since Q4 2019. With pre-pandemic leases nearing expiration, further increases in vacancy are anticipated in the medium term.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 197M | 16.8% | $29.57 | 166K | 753K |
| 4 & 5 STAR | 71M | 27.0% | $34.69 | 228K | 582K |
| 3 STAR | 90M | 12.7% | $28.12 | 69K | 171K |
| 1 & 2 STAR | 37M | 7.3% | $23.18 | -131K | 0 |
INDUSTRIAL MARKET
An unprecedented surge in new industrial completions continues to push Phoenix’s vacancy rate higher, a trend likely to persist into 2025. Over the past 12 months, developers delivered an extraordinary 36.4 million square feet of net new industrial space, signaling a shift toward more balanced market conditions. By contrast, Phoenix saw an average of just 8 million square feet of annual net deliveries in the three years preceding the pandemic, highlighting the magnitude of recent development activity.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 487M | 12.1% | $13.58 | 238K | 26M |
| LOGISTICS | 357M | 14.8% | $13.10 | -3K | 18M |
| SPECIALIZED | 96M | 3.8% | $13.58 | 296K | 7M |
| FLEX | 33M | 7.8% | $18.90 | -54K | 484K |
MULTI-FAMILY MARKET
Phoenix’s multifamily market showed signs of recovery in Q3 2024. With inflation easing and consumer confidence on the rise, renter household formation has picked up, boosting tenant demand. While new supply additions continue to exceed leasing activity, the pace of occupancy declines has slowed, signaling a potential turnaround in property performance within the coming year.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION UNITS | UNDER CONSTRUCT UNITS |
|---|---|---|---|---|---|
| TOTAL: | 405K | 11.3% | $1,572 | 3,445 | 29K |
| 4 & 5 STAR | 197K | 13.1% | $1,778 | 2,487 | 22K |
| 3 STAR | 145K | 9.9% | $1,426 | 1,005 | 7K |
| 1 & 2 STAR | 63K | 8.9% | $1,180 | -47 | 25 |
RETAIL MARKET
As 2024 draws to a close, the Phoenix retail market remains fundamentally tight, despite a recent surge in store closures leading to a sharp slowdown in net absorption. Strong demographic trends, rising incomes, and healthy job growth continue to drive robust tenant demand. This sustained demand, paired with a limited construction pipeline, has kept vacancy rates low and supported elevated rent growth levels.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 246M | 4.8% | $25.95 | -153K | 2.7M |
| POWER CENTER | 34M | 4.1% | $28.62 | -106K | 156K |
| NEIGHBORHOOD CENTER | 92M | 6.0% | $25.21 | -294K | 199K |
| GENERAL RETAIL | 87M | 3.1% | $24.97 | 132K | 1.6M |
