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 |
