Phoenix, AZ Industrial Market Report Q2 2026

Phoenix industrial asking rents climbed to $13.17 per square foot, representing 3.4% annual growth and demonstrating that landlords continue to achieve positive rent gains despite moderating market conditions. Vacancy reached 10.5% as newly completed projects expanded available inventory across the market. Tenant demand remained active, generating 6.2 million square feet of net absorption, well above the 1.5 million square feet of new deliveries completed during the quarter. Strong leasing activity helped offset much of the incoming supply and prevented a more significant increase in vacancy.

 

Logistics, manufacturing, and distribution users accounted for much of the leasing volume as businesses sought modern, high-quality facilities. Greater availability has provided tenants with additional negotiating leverage, particularly within newer Class A product. Even so, rent growth has stayed positive as well-located buildings continue to attract healthy interest. Current market conditions suggest Phoenix is transitioning toward a more balanced leasing environment following several years of exceptionally tight fundamentals.

 

Key Findings

• Industrial demand stayed healthy during the quarter, with net absorption significantly outpacing new deliveries and helping stabilize market fundamentals.
• Elevated construction activity continued to expand available inventory, contributing to a higher vacancy rate despite sustained leasing demand.
• Investment sales exceeded $1 billion, highlighting continued investor confidence in Phoenix’s long-term industrial performance.

 

Phoenix Industrial Supply & Demand Dynamics

Source: CoStar Group, Inc.

 

Phoenix Demographics

Source: Oxford Economics

• Unemployment Rate: 4.0%
• Current Population: 5,276,303
• Households: 2,013,678
• Median Household Income: $92,932

 

Phoenix benefited from sustained population growth, corporate expansion, and ongoing domestic migration that supported industrial space demand. A diverse economic base anchored by advanced manufacturing, logistics, technology, healthcare, and construction continued to generate occupier activity across the region. Major investments in semiconductor manufacturing and related supply chain industries further strengthened the market’s competitive position in the Southwest. Employers were drawn to the area’s growing labor force, favorable business climate, and strategic location. Consumer spending and regional distribution needs also fueled warehouse demand across a wide range of users. Continued investment in transportation infrastructure reinforced Phoenix’s role as a key logistics hub serving the western United States. Market fundamentals continue to provide a solid foundation for industrial real estate performance.

 

Top Industrial Leases in PHX

Source: CoStar Group, Inc.

• Elwood Logistics Center: 1,302,434 SF
• Luke Field (1): 1,278,653 SF

 

Population, Labor Force, & Income Growth

Annualized Rates of Growth | Source: Oxford Economics

 

Phoenix Industrial Construction

Development activity remained elevated, with 21.2 million square feet under construction at the end of the quarter. Much of the pipeline consists of large-scale distribution and advanced manufacturing facilities designed to accommodate evolving tenant requirements. New completions have expanded leasing options while also contributing to higher market vacancy. Capital is increasingly being directed toward build-to-suit developments and projects supported by strong preleasing commitments. Several projects located near major transportation corridors continue to attract significant tenant interest before delivery. The pace of future construction is expected to moderate as developers evaluate current supply levels and leasing velocity.

 

SF Construction Starts

Source: CoStar Group, Inc.

 

SF Under Construction

Source: CoStar Group, Inc.

 

Phoenix Industrial Sales

Industrial investment activity generated approximately $1.1 billion in sales volume during the quarter. Average pricing reached $189 per square foot, illustrating that investors continue to assign strong value to Phoenix industrial assets. Cap rates averaged 6.7%, reflecting a market that has largely adjusted to today’s financing environment. Institutional investors, private capital, and owner-users all remained active participants in the marketplace. Acquisition strategies continued to favor modern logistics facilities with durable cash flows and long-term rent growth potential. Pricing has moderated from peak levels, yet buyer interest remains supported by the region’s favorable economic and demographic outlook. Competition for high-quality assets persisted, particularly in established industrial submarkets with limited future land availability. Looking ahead, improving capital market conditions and sustained occupier demand should continue to support healthy investment activity.

 

Sales Volume

Source: CoStar Group, Inc.

 

By the Numbers

Q2 2026 | Source: CoStar Group, Inc.

• Sales Volume: $1.1B
• Price Per SF: $189
• Cap Rate: 6.7%
• Vacancy Rate: 10.5%
• Rent Growth: 3.4%
• Asking Rent Per SF: $13.17
• Under Construction: 21.2M SF
• SF Delivered: 1.5M
• SF Absorbed: 6.2M