March 2026 – Knowing the Numbers In Commercial Real Estate
Office Market
The Phoenix office market has reached an inflection point as demand improved in 2025, pushing vacancy down slightly to 16.4% after several years of deterioration. Roughly 700,000 SF of positive net absorption last year, driven in part by owner-user acquisitions and improving office attendance, helped stabilize conditions. Limited new construction has reduced supply pressure, though about 5.5 million SF of pandemic-era occupancy loss still needs to be absorbed. Rent growth remains modest at 1.6%, with demand concentrated in premium buildings while older suburban offices continue to lag.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 193M | 16.4% | $30.25 | -180K | 1M |
| 4 & 5 STAR | 69M | 25.2% | $35.27 | -455K | 645K |
| 3 STAR | 89M | 13.2% | $28.71 | 222K | 399K |
| 1 & 2 STAR | 35M | 7.1% | $24.22 | 53K | 0 |
INDUSTRIAL MARKET
The Phoenix industrial market is stabilizing after an unprecedented development surge pushed vacancy higher. Vacancy has risen from around 4% in 2022 to roughly 11.6% today as deliveries outpaced tenant demand, though steady leasing and strong logistics activity helped produce about 19 million SF of net absorption last year. Nearly 90% of recent construction has focused on large logistics buildings, where vacancy has increased the most. Rent growth has slowed to roughly 3.5% annually as new supply increases competition, though infill and small-bay properties continue to maintain stronger pricing power.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 519M | 11.6% | $12.98 | 4.2M | 21M |
| LOGISTICS | 375M | 13.7% | $12.06 | 5.3M | 13M |
| SPECIALIZED | 114M | 5.5% | $14.42 | -930K | 7.9M |
| FLEX | 30M | 9.5% | $18.88 | -148K | 174K |
MULTI-FAMILY MARKET
The Phoenix multifamily market continues to face a mismatch between strong renter demand and an unprecedented wave of new construction. Approximately 17,000 units were absorbed in 2025, well above pre-pandemic averages, but more than 21,000 new units delivered during the same period pushed vacancy to roughly 12.5%. Elevated vacancy and intense competition among newly built properties have driven rent declines of about 3% annually, with concessions increasingly common. Construction starts are beginning to slow, which should gradually ease supply pressure and allow the market to rebalance over the next several years.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION UNITS | UNDER CONSTRUCT UNITS |
|---|---|---|---|---|---|
| TOTAL: | 432K | 12.5% | $1,564 | 3681 | 18K |
| 4 & 5 STAR | 213K | 13.6% | $1,782 | 2871 | 15K |
| 3 STAR | 158K | 12.2% | $1,393 | 794 | 3K |
| 1 & 2 STAR | 61K | 9.5% | $1,147 | 16 | 0 |
RETAIL MARKET
The Phoenix retail market remains fundamentally tight despite a modest rise in vacancies caused by store closures. Availability has increased to about 4.9%, though it remains well below historical averages due to strong population growth, rising incomes, and a limited construction pipeline. New supply has largely focused on fast-growing suburban areas, while established submarkets continue to see strong competition for space. Off-price retailers, experiential tenants, and discount chains are actively expanding and backfilling vacant stores. Rent growth has moderated but remains strong at roughly 5.1%, outperforming national averages.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 245M | 4.6% | $26.94 | 406K | 2.7M |
| POWER CENTER | 33M | 4.4% | $29.83 | -84K | 24K |
| NEIGHBORHOOD CENTER | 92M | 5.8% | $26.07 | 43K | 740K |
| GENERAL RETAIL | 89M | 3.5% | $25.95 | -23K | 1.3M |
