Office Market
Office vacancy in Phoenix continues to rise steadily as the year comes to a close. Many businesses are reevaluating their space needs, often leading to downsizing or closures. Additionally, job growth in traditional office-using sectors has remained sluggish for over two years. This sustained drop in demand has driven vacancy rates up by more than 550 basis points since Q4 2019. Further increases are anticipated in the midterm as pre-pandemic leases reach expiration.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 197M | 16.9% | $29.97 | -359K | 567K |
| 4 & 5 STAR | 71M | 27.3% | $34.93 | -192K | 384K |
| 3 STAR | 89M | 12.7% | $28.72 | -129K | 183K |
| 1 & 2 STAR | 37M | 7.4% | $23.40 | -37K | 0 |
INDUSTRIAL MARKET
A surge in new industrial developments continues to push Phoenix’s vacancy rate higher, a trend likely to extend through 2025. Over the past 12 months, builders have delivered a record-breaking 37.3 million square feet of net new industrial space, contributing to the market’s normalization. By contrast, Phoenix averaged just 8 million square feet of annual net deliveries in the three years preceding the pandemic.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 491M | 12.5% | $13.53 | 781K | 22M |
| LOGISTICS | 360M | 15.3% | $13.05 | 889K | 15M |
| SPECIALIZED | 98M | 3.8% | $13.47 | -12K | 6M |
| FLEX | 33M | 7.6% | $19.10 | -95K | 484K |
MULTI-FAMILY MARKET
The Phoenix multifamily market showed further signs of recovery in the third quarter of 2024. With inflation easing and consumer confidence on the rise, renter household formation has accelerated, fueling a rebound in tenant demand. While new supply still outpaces leasing activity, the decline in occupancy rates has started to stabilize, suggesting that property performance could begin to recover in the coming year.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION UNITS | UNDER CONSTRUCT UNITS |
|---|---|---|---|---|---|
| TOTAL: | 408K | 11.4% | $1,571 | 158 | 27K |
| 4 & 5 STAR | 199K | 13.2% | $1,777 | 134 | 21K |
| 3 STAR | 145K | 10.2% | $1,422 | 35 | 6K |
| 1 & 2 STAR | 63K | 8.9% | $1,180 | -11 | 25 |
RETAIL MARKET
Despite an uptick in store closures slowing net absorption this year, the Phoenix retail market remains fundamentally tight as 2024 draws to a close. Strong demographics, rising incomes, and steady job growth continue to drive robust tenant demand. These solid demand factors, combined with a limited construction pipeline, have maintained low availability and sustained elevated rent growth.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 246M | 4.9% | $26.04 | -22K | 2.4M |
| POWER CENTER | 34M | 4.1% | $28.73 | -6K | 156K |
| NEIGHBORHOOD CENTER | 92M | 5.9% | $25.23 | -13K | 178K |
| GENERAL RETAIL | 88M | 3.0% | $25.14 | 4K | 1.3M |
