June 2025 – Knowing the Numbers In Commercial Real Estate

Office Market

The Phoenix office market is under stress, with 16.8% vacancy and net absorption down nearly 291K SF over the past year. A move toward smaller, higher-quality spaces is evident, while large and older buildings struggle. Sublease availability is high, making Phoenix the fourth most sublet-impacted market nationally. Rent growth slowed to 1.7%, with landlords offering generous concessions. Limited new construction offers some balance, but elevated vacancies are likely to persist amid downsizing and lease expirations.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	195M	16.8%	$29.52	-14K	415K
4 & 5 STAR	70M	27.0%	$33.94	51K	294K
3 STAR	89M	12.8%	$28.55	-149K	121K
1 & 2 STAR	36M	7.2%	$23.32	84K	0

INDUSTRIAL MARKET

Phoenix’s industrial sector faces rising vacancy (12.5%) driven by an unprecedented 28.5M SF in deliveries, outpacing demand. Despite robust absorption of 13.4M SF—third highest in the U.S.—construction focused on large facilities (>100K SF) continues to oversaturate the market. Rent growth has cooled to 2.4%. Speculative development remains high, while tenant interest in smaller, urban-adjacent spaces shows more resilience. A supply pullback forecasted for 2026 could stabilize conditions and revive rent growth.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	502M	12.5%	$13.67	1M	18M
LOGISTICS	367M	15.1%	$13.10	1.2M	12M
SPECIALIZED	103M	4.8%	$14.09	-101K	5M
FLEX	32M	8.1%	$18.87	-116K	569K

MULTI-FAMILY MARKET

Phoenix’s multifamily market contends with a supply-demand mismatch. Although absorption reached 17,881 units, annual deliveries topped 23,988 units, lifting vacancy to 11.9%. Luxury properties are hardest hit, with rents down 2.7% and vacancy surging. Rent growth overall fell -2.6%, and concessions are widespread. Despite elevated inventory, stabilized occupancy has remained flat, and a construction slowdown by 2026 may ease pressures, paving the way for gradual recovery.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION UNITS	UNDER CONSTRUCT UNITS
TOTAL:	418K	11.9%	$1,584	3,030	23K
4 & 5 STAR	207K	13.6%	$1,800	2,544	18K
3 STAR	148K	10.8%	$1,418	518	4K
1 & 2 STAR	63K	9.0%	$1,174	-32	25

RETAIL MARKET

Phoenix retail remains fundamentally tight with a 4.6% vacancy rate, despite recent closures raising availability modestly to 5.1%. Net absorption of 899K SF trails the 2M SF in new deliveries, yet demand from off-price, experiential, and value-oriented tenants remains strong. Rent growth has moderated to 3.1% after years of outsized gains. Construction remains modest, primarily in high-growth suburbs. While macroeconomic risks exist, limited supply and strong demographics are expected to keep fundamentals stable.

SUB-MARKET	TOTAL SF AVAILABLE	VACANCY RATE	MARKET RENT	NET ABSORPTION SF	UNDER CONSTRUCT SF
TOTAL:	246M	4.6%	$25.75	776K	2.3M
POWER CENTER	34M	3.6%	$28.17	-18K	185K
NEIGHBORHOOD CENTER	92M	5.9%	$24.96	164K	354K
GENERAL RETAIL	88M	3.0%	$24.94	576K	1M