February 2026 – Knowing the Numbers In Commercial Real Estate

Office Market

The Phoenix office market has reached an inflection point, with vacancy declining year-over-year to 16.3% following 840,000 SF of positive net absorption in 2025. Limited new construction has reduced supply pressure, helping stabilize fundamentals. However, recovery remains uneven as demand concentrates in trophy 4 & 5 Star assets while commodity suburban buildings struggle. Rent growth stands at 1.9%, lagging inflation, and elevated tenant improvement packages continue to pressure effective rents. A gradual recovery is expected as obsolete space is repurposed and premium availability tightens.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	194M	16.3%	$30.52	-98K	1M
4 & 5 STAR	69M	25.0%	$35.41	-309K	632K
3 STAR	89M	13.3%	$29.25	147K	399K
1 & 2 STAR	35M	7.0%	$24.13	65K	0

INDUSTRIAL MARKET

The Phoenix industrial market is normalizing after record expansion, as new deliveries have pushed vacancy modestly higher while absorption slows from peak levels. Construction activity remains elevated but is beginning to taper, reducing future supply pressure. Rent growth is decelerating from historic highs yet remains positive compared to national trends. Long-term demand drivers, including advanced manufacturing investment and logistics tied to regional population growth, continue to support fundamentals. Near-term conditions favor tenants, though the broader outlook remains constructive.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	516M	11.7%	$12.86	3.7M	19M
LOGISTICS	374M	13.9%	$11.99	4.3M	11M
SPECIALIZED	112M	5.1%	$14.11	-433K	8M
FLEX	30M	9.6%	$19.03	-143K	174K

MULTI-FAMILY MARKET

The Phoenix multifamily market is absorbing a wave of new deliveries, leading to elevated vacancy and softer rent growth. Concessions remain common as operators compete with newly delivered Class A product. However, construction starts have slowed meaningfully, which should help rebalance supply and demand over the coming year. Population growth and steady household formation continue to underpin long-term fundamentals. While short-term performance remains pressured, improving absorption and reduced pipeline activity are expected to support stabilization into 2026.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION UNITS	UNDER CONSTRUCT UNITS
TOTAL:	431K	12.6%	$1,564	1683	19K
4 & 5 STAR	213K	14.0%	$1,782	1533	14K
3 STAR	157K	12.0%	$1,392	141	5K
1 & 2 STAR	61K	9.5%	$1,147	9	0

RETAIL MARKET

The Phoenix retail market remains fundamentally tight, with vacancy at 4.7% despite a modest rise in store closures. Strong population growth and income gains continue to fuel tenant demand, while limited construction keeps supply-side pressure muted. Net absorption remains positive at 1.9 million SF over the past year. Rent growth has moderated to 5.5% but still ranks among the strongest nationally. Though economic headwinds may temper momentum, demographic tailwinds and minimal speculative development support a stable outlook.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	245M	4.7%	$26.96	-283K	3.2M
POWER CENTER	33M	4.4%	$29.83	-84K	9K
NEIGHBORHOOD CENTER	92M	5.8%	$26.06	-73K	737K
GENERAL RETAIL	89M	3.5%	$26.01	-117K	1.4M