February 2026 – Knowing the Numbers In Commercial Real Estate
Office Market
The Phoenix office market has reached an inflection point, with vacancy declining year-over-year to 16.3% following 840,000 SF of positive net absorption in 2025. Limited new construction has reduced supply pressure, helping stabilize fundamentals. However, recovery remains uneven as demand concentrates in trophy 4 & 5 Star assets while commodity suburban buildings struggle. Rent growth stands at 1.9%, lagging inflation, and elevated tenant improvement packages continue to pressure effective rents. A gradual recovery is expected as obsolete space is repurposed and premium availability tightens.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 194M | 16.3% | $30.52 | -98K | 1M |
| 4 & 5 STAR | 69M | 25.0% | $35.41 | -309K | 632K |
| 3 STAR | 89M | 13.3% | $29.25 | 147K | 399K |
| 1 & 2 STAR | 35M | 7.0% | $24.13 | 65K | 0 |
INDUSTRIAL MARKET
The Phoenix industrial market is normalizing after record expansion, as new deliveries have pushed vacancy modestly higher while absorption slows from peak levels. Construction activity remains elevated but is beginning to taper, reducing future supply pressure. Rent growth is decelerating from historic highs yet remains positive compared to national trends. Long-term demand drivers, including advanced manufacturing investment and logistics tied to regional population growth, continue to support fundamentals. Near-term conditions favor tenants, though the broader outlook remains constructive.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 516M | 11.7% | $12.86 | 3.7M | 19M |
| LOGISTICS | 374M | 13.9% | $11.99 | 4.3M | 11M |
| SPECIALIZED | 112M | 5.1% | $14.11 | -433K | 8M |
| FLEX | 30M | 9.6% | $19.03 | -143K | 174K |
MULTI-FAMILY MARKET
The Phoenix multifamily market is absorbing a wave of new deliveries, leading to elevated vacancy and softer rent growth. Concessions remain common as operators compete with newly delivered Class A product. However, construction starts have slowed meaningfully, which should help rebalance supply and demand over the coming year. Population growth and steady household formation continue to underpin long-term fundamentals. While short-term performance remains pressured, improving absorption and reduced pipeline activity are expected to support stabilization into 2026.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION UNITS | UNDER CONSTRUCT UNITS |
|---|---|---|---|---|---|
| TOTAL: | 431K | 12.6% | $1,564 | 1683 | 19K |
| 4 & 5 STAR | 213K | 14.0% | $1,782 | 1533 | 14K |
| 3 STAR | 157K | 12.0% | $1,392 | 141 | 5K |
| 1 & 2 STAR | 61K | 9.5% | $1,147 | 9 | 0 |
RETAIL MARKET
The Phoenix retail market remains fundamentally tight, with vacancy at 4.7% despite a modest rise in store closures. Strong population growth and income gains continue to fuel tenant demand, while limited construction keeps supply-side pressure muted. Net absorption remains positive at 1.9 million SF over the past year. Rent growth has moderated to 5.5% but still ranks among the strongest nationally. Though economic headwinds may temper momentum, demographic tailwinds and minimal speculative development support a stable outlook.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 245M | 4.7% | $26.96 | -283K | 3.2M |
| POWER CENTER | 33M | 4.4% | $29.83 | -84K | 9K |
| NEIGHBORHOOD CENTER | 92M | 5.8% | $26.06 | -73K | 737K |
| GENERAL RETAIL | 89M | 3.5% | $26.01 | -117K | 1.4M |
