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May 2025 – Knowing the Numbers In Commercial Real Estate

Office Market

The Phoenix office market remains under pressure as evolving workplace strategies drive continued disruption. Many occupiers are reassessing how much space they truly need, leading to widespread downsizing and consolidations. Meanwhile, job growth in core office-using industries has remained muted for more than two years, weakening overall demand. As a result, vacancy has risen by over 550 basis points since late 2019, with more upward pressure expected as legacy leases roll off.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 195M 16.8% $29.29 -117K 449K
4 & 5 STAR 70M 26.9% $33.83 8K 294K
3 STAR 89M 12.8% $28.10 -182K 155K
1 & 2 STAR 36M 7.3% $23.42 57K 0

INDUSTRIAL MARKET

A wave of new industrial developments continues to elevate vacancy rates across the Phoenix market—an upward trend that may extend into 2026. Over the past 12 months alone, developers delivered a record-breaking 31 million square feet of net new industrial space. This surge marks a significant shift toward market normalization, especially when compared to the pre-pandemic annual average of just 8 million square feet delivered between 2017 and 2019.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 499M 12.5% $13.63 49K 18M
LOGISTICS 366M 15.2% $13.12 -266K 12M
SPECIALIZED 101M 4.5% $13.85 292K 5M
FLEX 32M 7.8% $18.82 23K 483K

MULTI-FAMILY MARKET

A continued imbalance between supply and demand is weighing on Phoenix’s apartment market. A historic surge in new construction is outpacing solid leasing activity, keeping vacancy rates elevated and rent growth in negative territory. The Valley saw 18,000 units of net absorption over the past year—well above the pre-COVID five-year annual average of 7,200 units. That level of demand places Phoenix among the top 10 apartment markets nationwide.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION UNITS UNDER CONSTRUCT UNITS
TOTAL: 416K 11.7% $1,585 1,737 23K
4 & 5 STAR 205K 13.3% $1,801 1,363 19K
3 STAR 148K 10.7% $1,420 382 4K
1 & 2 STAR 63K 8.9% $1,174 -8 25

RETAIL MARKET

Despite a spike in store closures that slowed net absorption last year, the Phoenix retail market remains fundamentally tight as 2025 begins. Solid population growth, rising incomes, and steady job creation continue to drive strong tenant demand. This resilient demand, paired with a restrained development pipeline, has kept space availability limited and supported elevated rent growth across the metro.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 247M 4.8% $25.70 -398K 2.4M
POWER CENTER 33M 3.6% $28.15 -5K 185K
NEIGHBORHOOD CENTER 92M 6.1% $24.91 -117K 412K
GENERAL RETAIL 89M 3.1% $24.93 470K 1M
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