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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

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