October 2026 – Knowing the Numbers In Commercial Real Estate
Office Market
The Phoenix office market continues its gradual recovery as improving tenant demand and accelerating demolitions reduce excess inventory. Vacancy declined from a 17.3% peak in 2024 to 15.8%, with 344,000 SF of net absorption over the past year against 466,000 SF of deliveries. Leasing activity reached 9.5 million SF, approaching pre-pandemic levels, while asking rents increased 2.1%. Tenants continue favoring premium, amenity-rich buildings. Limited speculative development and ongoing removal of obsolete properties should support further stabilization, although recovery remains uneven.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 193M | 15.8% | $31.21 | -175K | 1.1M |
| 4 & 5 STAR | 69M | 24.5% | $37.43 | -58K | 744K |
| 3 STAR | 89M | 12.5% | $29 | -28K | 379K |
| 1 & 2 STAR | 35M | 7.3% | $24.43 | -89K | 0 |
INDUSTRIAL MARKET
The Phoenix industrial market continues to improve as strong tenant demand outpaces new construction. Vacancy declined from 12.3% a year ago to 10.5%, with 22.7 million SF of net absorption exceeding 15.3 million SF of deliveries. Logistics, advanced manufacturing, semiconductor operations, and data centers remain important demand drivers. Asking rents increased 3.5%, outperforming national growth. While modern facilities and large distribution properties remain competitive, mid-sized warehouses face elevated vacancy. Slowing deliveries should support gradual improvement through 2027, although excess inventory remains a challenge.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 529M | 10.5% | $13.28 | 468K | 21M |
| LOGISTICS | 380M | 12.2% | $12.30 | 236K | 13.4M |
| SPECIALIZED | 118M | 5.4% | $14.89 | 267K | 7.8M |
| FLEX | 30M | 9.4% | $19.22 | -35K | 86K |
MULTI-FAMILY MARKET
The Phoenix multifamily market continues its gradual recovery as renter demand outpaces new supply. Net absorption reached 22,443 units over the past year, exceeding 15,808 deliveries and helping vacancy decline to 10.5% from a 12.7% peak. Despite improving occupancy, asking rents remain down 0.8% annually, with aggressive concessions continuing at newly built properties. Approximately 16,000 units remain under construction, down more than 50% from peak levels. Slowing deliveries should support further vacancy improvement and a potential return to positive rent growth in 2027.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION UNITS | UNDER CONSTRUCT UNITS |
|---|---|---|---|---|---|
| TOTAL: | 439K | 10.5% | $1,568 | 17 | 16K |
| 4 & 5 STAR | 209K | 10.9% | $1,804 | 44 | 12K |
| 3 STAR | 165K | 10.5% | $1,410 | -21 | 4K |
| 1 & 2 STAR | 65K | 9.4% | $1,121 | -6 | 55 |
RETAIL MARKET
The Phoenix retail market remains fundamentally strong despite increased store closures and a modest rise in availability. Vacancy is holding at 4.6%, while 3.0 million SF of net absorption over the past year reflects healthy demand from retailers backfilling vacant space. Asking rents increased 4.2%, keeping Phoenix among the nation’s top five major markets for rent growth. With limited construction activity and much of the development pipeline already committed, constrained supply and continued tenant demand should keep vacancy low and support healthy market conditions through 2027.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 248M | 4.6% | $27.16 | 11K | 2.4M |
| POWER CENTER | 34M | 3.6% | $30.12 | -16K | 190K |
| NEIGHBORHOOD CENTER | 92M | 5.9% | $26.20 | 41K | 610K |
| GENERAL RETAIL | 90M | 3.8% | $26.30 | -12K | 1.2M |