Industrial fundamentals in Phoenix are stabilizing, though elevated vacancy continues to weigh on performance. A surge of deliveries since 2023 pushed vacancy to 11.5% in Q1 2026, though the pace of increase has flattened as completions slow and demand remains steady. The imbalance has been most pronounced in large-format logistics properties, where speculative development has driven higher availability. Demand remains positive but has moderated, with approximately 20.0 million square feet absorbed over the past 12 months. Recent quarterly absorption turned slightly negative as new supply continues to lease up. Leasing is concentrated in modern logistics space, while rent growth has slowed to 3.3%, with infill and small-bay assets outperforming larger formats.

 

Key Findings

• Industrial conditions are stabilizing, though vacancy remains elevated at 11.5% following more than 91 million square feet of deliveries over the past three years.
• Net absorption totaled 20.0 million square feet over the past 12 months, with recent demand softening as new bulk space continues to lease up.
• Sales volume reached approximately $1.1 billion in Q1 2026, with pricing near $188 per square foot, signaling continued investor demand despite softer fundamentals.

 

Phoenix Industrial Supply & Demand Dynamics

Source: CoStar Group, Inc.

 

Phoenix Demographics

Source: CoStar Group, Inc.

• Unemployment Rate: 4.0%
• Current Population: 5,280,492
• Households: 2,012,856
• Median Household Income: $92,514

 

Phoenix continues to benefit from strong population growth, favorable demographics, and a pro-business environment that support its position as a leading Southwest industrial market. In-migration, particularly from California, remains a key driver, supported by lower costs and business-friendly policies, alongside continued inflows from the Midwest. Economic momentum is anchored by large-scale industrial and advanced manufacturing investment, led by TSMC’s expanding semiconductor campus and a growing ecosystem of suppliers, data centers, and advanced manufacturing users that reinforce Phoenix’s role in national supply chains.

Top Phoenix Leases

Source: CoStar Group, Inc.

• Amazon
• Scotts Miracle-Gro
• Walmart
• CEVA Logistics

Population, Labor Force, & Income Growth

Source: CoStar Group, Inc.

 

Phoenix Industrial Construction

Construction activity remains a key force shaping Phoenix’s industrial market as the metro works through the back end of a historic supply wave. Over the past three years, more than 91 million square feet has delivered, an unprecedented expansion that pushed vacancy higher and created a sizable inventory overhang. The pace of completions slowed in 2025, with about 21.5 million square feet delivered, helping moderate some supply pressure. However, roughly 21.4 million square feet remains under construction, keeping Phoenix among the largest industrial pipelines in the country. Development has been concentrated in large logistics facilities, particularly in the West Valley and around Phoenix-Mesa Gateway Airport. While deliveries have slowed, construction levels have flattened over the past year, suggesting supply-side pressure may persist in the near term.

 

SF Construction Starts

Source: CoStar Group, Inc.

 

SF Under Construction

Source: CoStar Group, Inc.

 

Phoenix Industrial Sales

Industrial sales remain active across Phoenix. Approximately $5.1 billion in assets traded in 2025, nearly tripling the metro’s average annual total from 2015 to 2019 and rising about 11% year over year. The market has become increasingly institutional as a historic wave of development delivered a new generation of modern logistics facilities and elevated Phoenix’s role in national supply chains. Investor demand remains strongest for newly built, stabilized logistics assets pricing in the mid- to high-5% cap rate range, while infill small- and mid-bay properties have also attracted capital due to their rent growth potential and insulation from new supply.

 

Phoenix Industrial Sales Volume

Source: CoStar Group, Inc.

 

By the Numbers

Q1 2026 | Source: CoStar Group, Inc.

• Sales Volume: $1.1B
• Price Per SF: $187
• Cap Rate: 6.6%
• Vacancy Rate: 11.4%
• Rent Growth: 4.2%
• Asking Rent Per SF: $13.02
• SF Under Construction: 21.4M
• SF Delivered: 1.7M
• SF Absorbed: 6.2M