The Phoenix metro is aided by robust population growth, its strategic location, and industrial expansion. Major corporate expansions, such as Dutch Bros’ new headquarters in Tempe, highlight ongoing confidence in the metro’s workforce. Industrial activity is growing, led by Taiwan Semiconductor Manufacturing Company’s $100 billion campus expansion. The metro continues to attract high-tech industries and plays a vital role in national supply chains, aided by proximity to California ports, major interstates, and the U.S.-Mexico border.

 

Phoenix Demographics

Source: CoStar Group, Inc.

• Unemployment Rate: 3.7%
• Current Population: 5,262,479
• Households: 2,000,754
• Median Household Income: $90,040

 

Population, Labor, and Income Growth

Source: CoStar Group, Inc.

 

Key Findings

• Phoenix’s industrial market is beginning to stabilize after years of rapid expansion, with 14.3 million square feet absorbed over the past 12 months.
• Construction activity remains high with 23.1 million square feet underway. Most new developments are focused in the West Valley and Mesa Gateway submarkets.
• Investors are targeting newly-built logistics centers with stable yields in the mid- to high-5% range, signaling Phoenix’s continued transformation into an institutional-grade logistics hub.

 

Market Performance

The Phoenix industrial market is showing early signs of stabilization after a period of elevated vacancy driven by rapid construction. Vacancy was at 12.4% during Q3 2025, reflecting the lasting impact of the record supply wave that began in 2023. However, absorption remains positive, with 5.6 million square feet absorbed in Q3 2025 as logistics, retail, and advanced manufacturing tenants continue to expand.

 

While rent growth has decreased to 4.7% annually from double-digit peaks in 2022, steady demand for modern distribution and manufacturing space, especially in smaller bay and infill properties, supports market resilience. Moderating deliveries and persistent tenant interest are expected to gradually rebalance conditions by 2026, paving the way for renewed rent growth and tightening vacancies.

 

Phoenix Industrial Supply & Demand Dynamics

Source: CoStar Group, Inc.

 

Phoenix Construction

Phoenix’s industrial sector continues to note the impact of one of the most aggressive construction cycles in the U.S. Over the past three years, 92.1 million square feet of new industrial space has been delivered, which is more than the metro’s total output from 2007 to 2019. This record pace has elevated vacancies and slowed rent growth. 23.1 million square feet remain under construction as of the third quarter, half of which is speculative. Large-format facilities across the West Valley and the Phoenix-Mesa Gateway Airport area drive developments, where available land aids expansion. Around 17.5 million square feet has delivered within a five-mile radius of the airport since the start of 2023, and another 5 million square feet is underway.

 

SF Construction Starts

Source: CoStar Group, Inc.

 

SF Under Construction

Source: CoStar Group, Inc.

 

Sales

Sales momentum remains highly active, with $1.6 billion in sales volume recorded in Q3 2025 and $5.6 billion traded over the past year. Despite lagging the record highs of 2021, transaction activity continues to accelerate, up 40% year-over-year through the first three quarters of 2025. A surge of new, institutional-quality assets has transformed Phoenix into a premier logistics investment hub, attracting private equity and institutional buyers. Cap rates for stabilized assets now range in the mid- to high-5% range, reflecting improved yield stability. While elevated vacancies present challenges, strong buyer appetite for infill, small-bay properties with rent growth potential underscores Phoenix’s long-term investment appeal.

 

Sales Volume

Source: CoStar Group, Inc.