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March 2026 – Knowing the Numbers In Commercial Real Estate

Office Market

The Phoenix office market has reached an inflection point as demand improved in 2025, pushing vacancy down slightly to 16.4% after several years of deterioration. Roughly 700,000 SF of positive net absorption last year, driven in part by owner-user acquisitions and improving office attendance, helped stabilize conditions. Limited new construction has reduced supply pressure, though about 5.5 million SF of pandemic-era occupancy loss still needs to be absorbed. Rent growth remains modest at 1.6%, with demand concentrated in premium buildings while older suburban offices continue to lag. 

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 193M 16.4% $30.25 -180K 1M
4 & 5 STAR 69M 25.2% $35.27 -455K 645K
3 STAR 89M 13.2% $28.71 222K 399K
1 & 2 STAR 35M 7.1% $24.22 53K 0

INDUSTRIAL MARKET

The Phoenix industrial market is stabilizing after an unprecedented development surge pushed vacancy higher. Vacancy has risen from around 4% in 2022 to roughly 11.6% today as deliveries outpaced tenant demand, though steady leasing and strong logistics activity helped produce about 19 million SF of net absorption last year. Nearly 90% of recent construction has focused on large logistics buildings, where vacancy has increased the most. Rent growth has slowed to roughly 3.5% annually as new supply increases competition, though infill and small-bay properties continue to maintain stronger pricing power. 

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 519M 11.6% $12.98 4.2M 21M
LOGISTICS 375M 13.7% $12.06 5.3M 13M
SPECIALIZED 114M 5.5% $14.42 -930K 7.9M
FLEX 30M 9.5% $18.88 -148K 174K

MULTI-FAMILY MARKET

The Phoenix multifamily market continues to face a mismatch between strong renter demand and an unprecedented wave of new construction. Approximately 17,000 units were absorbed in 2025, well above pre-pandemic averages, but more than 21,000 new units delivered during the same period pushed vacancy to roughly 12.5%. Elevated vacancy and intense competition among newly built properties have driven rent declines of about 3% annually, with concessions increasingly common. Construction starts are beginning to slow, which should gradually ease supply pressure and allow the market to rebalance over the next several years. 

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION UNITS UNDER CONSTRUCT UNITS
TOTAL: 432K 12.5% $1,564 3681 18K
4 & 5 STAR 213K 13.6% $1,782 2871 15K
3 STAR 158K 12.2% $1,393 794 3K
1 & 2 STAR 61K 9.5% $1,147 16 0

RETAIL MARKET

The Phoenix retail market remains fundamentally tight despite a modest rise in vacancies caused by store closures. Availability has increased to about 4.9%, though it remains well below historical averages due to strong population growth, rising incomes, and a limited construction pipeline. New supply has largely focused on fast-growing suburban areas, while established submarkets continue to see strong competition for space. Off-price retailers, experiential tenants, and discount chains are actively expanding and backfilling vacant stores. Rent growth has moderated but remains strong at roughly 5.1%, outperforming national averages. 

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 245M 4.6% $26.94 406K 2.7M
POWER CENTER 33M 4.4% $29.83 -84K 24K
NEIGHBORHOOD CENTER 92M 5.8% $26.07 43K 740K
GENERAL RETAIL 89M 3.5% $25.95 -23K 1.3M
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