knowing the numbers

February 2025 – Knowing the Numbers In Commercial Real Estate

Office Market

The Phoenix office market remains in flux as the new year begins. Businesses continue to reassess their space needs, often leading to downsizing or closures. Meanwhile, job growth in key office-using sectors has been sluggish for over two years, further dampening demand. As a result, vacancy rates have risen by more than 550 basis points since Q4 2019, with further increases expected in the midterm as pre-pandemic leases expire.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 197M 16.9% $29.82 18K 537K
4 & 5 STAR 71M 26.5% $34.75 376K 384K
3 STAR 89M 13.0% $28.37 -259K 153K
1 & 2 STAR 37M 7.5% $23.82 -99K 0

INDUSTRIAL MARKET

A surge in new industrial developments continues to push Phoenix’s vacancy rate higher, a trend that may persist through 2026. Over the past year, builders have delivered a record 35 million square feet of net new industrial space, bringing market conditions closer to equilibrium. For context, Phoenix averaged just 8 million square feet of annual net deliveries in the three years preceding the pandemic.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 494M 12.1% $13.54 4.4M 21M
LOGISTICS 362M 14.8% $13.06 3.6M 16M
SPECIALIZED 99M 3.9% $13.44 853K 5M
FLEX 33M 7.7% $19.07 -128K 484K

MULTI-FAMILY MARKET

The Phoenix multifamily market made further strides toward recovery in 2024. With inflation easing and consumer confidence rising, renter household formation has accelerated, fueling a strong rebound in tenant demand. While new supply still exceeds leasing activity, the pace of occupancy decline has slowed, suggesting that a turnaround in property performance could begin this year.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION UNITS UNDER CONSTRUCT UNITS
TOTAL: 410K 11.7% $1,586 2061 27K
4 & 5 STAR 200K 13.4% $1,805 1392 21K
3 STAR 148K 10.6% $1,423 677 5K
1 & 2 STAR 63K 9.0% $1,175 -8 25

RETAIL MARKET

Despite a surge in store closures slowing net absorption last year, the Phoenix retail market remains fundamentally tight as 2025 begins. Strong demographics, rising incomes, and steady job growth continue to drive tenant demand. With limited new construction, these factors have kept vacancy rates low and rent growth strong.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 246M 5.0% $25.75 -272K 2.5M
POWER CENTER 34M 3.8% $28.16 71K 185K
NEIGHBORHOOD CENTER 92M 6.2% $24.93 -300K 181K
GENERAL RETAIL 88M 3.1% $25.08 -41K 1.3M