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May 2026 – Knowing the Numbers In Commercial Real Estate

Office Market

The Phoenix office market continues to stabilize as improving tenant demand combines with a sharp slowdown in new construction and increased demolition of obsolete properties. Vacancy has improved to approximately 16.3%, down from peak levels in 2024, while leasing activity has rebounded to nearly pre-pandemic norms . Demand remains concentrated in premium buildings and highly amenitized submarkets such as Tempe, Scottsdale, and the Camelback Corridor, while older commodity office product continues to face challenges. With very limited speculative development underway, long-term supply pressure remains muted, supporting gradual recovery despite broader economic uncertainty.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 192M 16.3% $30.47 175K 1M
4 & 5 STAR 69M 25.4% $35.82 157K 609K
3 STAR 89M 12.9% $28.70 -71K 399K
1 & 2 STAR 35M 7.0% $24.43 88K 0

INDUSTRIAL MARKET

Phoenix industrial fundamentals remain healthy, though the market continues transitioning from the exceptionally rapid growth experienced over the past several years into a more balanced environment. Demand from logistics, manufacturing, semiconductor suppliers, and distribution users remains strong, supported by Phoenix’s strategic location and expanding population base. While elevated construction activity has pushed vacancy modestly higher, leasing activity continues at a solid pace and long-term fundamentals remain favorable. Rent growth has moderated from peak levels but continues to trend positively as the region benefits from reshoring initiatives, infrastructure investment, and continued business migration.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 521M 11.7% $13.11 -1.3M 22M
LOGISTICS 376M 13.9% $12.23 -1.4M 13M
SPECIALIZED 115M 5.0% $14.34 149K 8.7M
FLEX 30M 9.9% $19.38 -36K 174K

MULTI-FAMILY MARKET

The Phoenix multifamily market continues to face near-term pressure from an unprecedented wave of new apartment deliveries that has outpaced otherwise strong renter demand. Vacancy has risen to approximately 11.8%, while asking rents have declined 2.5% over the past 12 months as operators compete aggressively through concessions and discounted lease terms . Despite these challenges, absorption remains exceptionally strong, ranking Phoenix among the top apartment demand markets nationally. Construction starts have begun to slow, which should gradually ease supply pressure over the next several years and position the market for eventual recovery once excess inventory is absorbed.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION UNITS UNDER CONSTRUCT UNITS
TOTAL: 436K 11.8% $1,567 2,130 17K
4 & 5 STAR 215K 12.8% $1,784 1,483 14K
3 STAR 159K 11.4% $1,402 593 4K
1 & 2 STAR 63K 9.2% $1,145 54 0

RETAIL MARKET

The Phoenix retail market remains one of the strongest commercial real estate sectors in the Valley, supported by sustained population growth, consumer spending, and limited available space. Tenant demand remains healthy across neighborhood centers, grocery-anchored retail, and experiential concepts, while new development continues to lag demand in many submarkets. Although some retailers are moderating expansion plans amid economic uncertainty, overall vacancy remains historically low and landlords continue to maintain pricing power in well-located centers. The combination of limited new supply and continued in-migration is expected to support steady long-term performance.

SUB-MARKET TOTAL SF AVAILABLE VACANCY RATE MARKET RENT NET ABSORPTION SF UNDER CONSTRUCT SF
TOTAL: 246M 4.7% $27.39 -4K 2.8M
POWER CENTER 33M 4.4% $30.46 4K 24K
NEIGHBORHOOD CENTER 92M 5.9% $26.47 -69K 729K
GENERAL RETAIL 89M 3.6% $26.31 -1K 1.4M