October 2025 – Knowing the Numbers In Commercial Real Estate
Office Market
The Phoenix office market is showing early signs of recovery. Vacancy has flattened at 16.3% following three straight quarters of positive net absorption totaling 900K SF. Demand is strongest for premium space in top submarkets, while older and suburban properties continue to struggle. New deliveries are limited, which is helping stabilize the market. Rent growth sits at 3.0%, but generous tenant improvement (TI) packages are compressing effective rents. Some obsolete buildings are being redeveloped or repurposed for industrial use. Recovery is expected to be slow and uneven across asset classes.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 195M | 16.3% | $30.09 | -89K | 1.3M |
| 4 & 5 STAR | 70M | 25.6% | $34.58 | -54K | 509K |
| 3 STAR | 89M | 12.7% | $28.99 | -43K | 751K |
| 1 & 2 STAR | 36M | 7.1% | $23.97 | 7K | 0 |
INDUSTRIAL MARKET
Phoenix’s industrial market continues its rebalancing act, with vacancy rising slightly to 12.5% due to ongoing deliveries. Demand remains healthy, led by logistics and manufacturing users, resulting in over 15.5M SF of net absorption over the past 12 months. Construction has tapered, and developers have pulled back on speculative builds. Rent growth is flat at 0.0% year-over-year, down sharply from post-pandemic highs. Smaller bay and infill product continues to outperform large-scale logistics sites. Long-term fundamentals are intact, with Phoenix’s location, workforce, and infrastructure supporting demand even as the market normalizes.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 508M | 12.4% | $12.85 | 780K | 21M |
| LOGISTICS | 371M | 14.7% | $11.92 | 585K | 12M |
| SPECIALIZED | 105M | 5.3% | $14.17 | 235K | 8M |
| FLEX | 32M | 8.4% | $19.15 | -40K | 634K |
MULTI-FAMILY MARKET
Phoenix’s multifamily sector remains under pressure from elevated vacancy, now at 11.5%, though down from recent highs. Deliveries continue at a strong pace, with nearly 19,000 units added over 12 months, outpacing absorption. Rents have declined by 1.1% year-over-year, but pricing trends have improved from earlier lows. High concessions persist in Class A assets, while more affordable properties remain stable. New starts have dropped sharply, signaling a likely recovery in 2026 as supply moderates. Strong demographic trends continue to underpin long-term demand, even as short-term softness lingers.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION UNITS | UNDER CONSTRUCT UNITS |
|---|---|---|---|---|---|
| TOTAL: | 425K | 12.3% | $1,563 | 440 | 20K |
| 4 & 5 STAR | 210K | 13.6% | $1,772 | 340 | 15K |
| 3 STAR | 152K | 11.5% | $1,404 | 106 | 5K |
| 1 & 2 STAR | 63K | 9.8% | $1,161 | -6 | 0 |
RETAIL MARKET
Phoenix’s retail market remains fundamentally strong despite a rise in store closures that pushed the availability rate to 4.9%. Demand remains robust, supported by low unemployment, rising incomes, and strong population growth. Big-box vacancies from national bankruptcies are being backfilled by off-price and experiential tenants, including T.J. Maxx, Aldi, and pickleball operators. Construction remains modest, limiting supply-side pressure. Rent growth has slowed to 4.4%, still outperforming the national average. Despite potential economic headwinds, tight inventory and strong demographic momentum suggest continued market stability.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 244M | 4.7% | $26.34 | -1M | 2.4M |
| POWER CENTER | 33M | 5.0% | $29.07 | -68K | 37K |
| NEIGHBORHOOD CENTER | 92M | 5.9% | $25.50 | -41K | 491K |
| GENERAL RETAIL | 88M | 3.1% | $25.45 | 23K | 1.2M |
