January 2026 – Knowing the Numbers In Commercial Real Estate

Office Market

The Phoenix office market is beginning to stabilize after an extended correction. Vacancy has leveled off near the mid-16% range following multiple quarters of positive net absorption, supported by limited new supply and increased return-to-office activity. Rent growth remains modest, constrained by elevated tenant improvement and concession costs. Demand is concentrated in newer, well-located Class A properties, while older suburban assets continue to face leasing challenges. Overall recovery will hinge on backfilling obsolete inventory and broader tenant expansion beyond top-tier buildings.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	194M	16.4%	$30.43	-108K	1.1M
4 & 5 STAR	69M	24.9%	$35.32	-195K	710K
3 STAR	90M	13.5%	$29.17	78K	399K
1 & 2 STAR	35M	7.2%	$24.09	8K	0

INDUSTRIAL MARKET

The Phoenix industrial market is cooling from record highs but remains historically strong. Vacancy has increased modestly as new supply delivers, while net absorption has slowed amid softer logistics demand. Rent growth is decelerating from peak levels but remains positive, supported by long-term manufacturing, semiconductor, and population-driven demand. Construction activity is pulling back, which should help rebalance the market over time. While short-term conditions favor tenants, Phoenix’s role in advanced manufacturing and regional distribution supports a favorable long-term outlook.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	516M	12.3%	$12.89	450K	18M
LOGISTICS	373M	14.8%	$11.98	669K	10M
SPECIALIZED	112M	4.7%	$14.27	-122K	8M
FLEX	30M	9.4%	$18.95	-97K	174K

MULTI-FAMILY MARKET

The Phoenix multifamily market is transitioning toward balance after a period of heavy supply growth. Vacancy has risen as new deliveries outpaced demand, placing short-term pressure on rents, which have flattened to slightly negative growth. Leasing activity remains steady, supported by population growth and job formation, but concessions are common as operators compete with newly delivered Class A product. Construction is slowing meaningfully, which should help fundamentals stabilize over the next year. Long-term demand drivers remain intact despite near-term softness.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION UNITS	UNDER CONSTRUCT UNITS
TOTAL:	428K	12.7%	$1,561	220	21K
4 & 5 STAR	212K	14.0%	$1,775	140	16K
3 STAR	155K	12.0%	$1,391	92	5K
1 & 2 STAR	61K	9.7%	$1,155	-12	0

RETAIL MARKET

The Phoenix retail market remains fundamentally tight despite a modest rise in vacancy tied to recent store closures. Vacancy is holding near the mid-4% range, well below historical norms, supported by strong population growth, rising incomes, and limited new construction. Net absorption remains positive as off-price, experiential, and service-oriented tenants backfill space. Rent growth has moderated to the low-4% range but continues to outperform national averages. With most new projects pre-leased, overall retail fundamentals remain healthy entering 2026.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	245M	4.5%	$26.57	-97K	3.3M
POWER CENTER	33M	4.3%	$29.39	-44K	9K
NEIGHBORHOOD CENTER	92M	5.7%	$25.68	3K	798K
GENERAL RETAIL	89M	3.4%	$25.63	-62K	1.5M