In Q3 2025, Phoenix’s retail market maintained solid fundamentals, with leasing activity supported by strong demographics and steady tenant demand. Availability edged up to 4.9% as bankruptcies from chains like 99 Cents Only and Joann freed big-box space, though much of it was quickly backfilled by off-price retailers, grocers, fitness operators, and experiential tenants. Smaller blocks under 5,000 SF remained the most competitive, particularly for quick-service restaurants, beverage shops, and wellness providers. On the rent side, annual growth slowed to 4.4%, down from above 7% in 2024, but still well above national levels. Landlords of high-quality centers retained pricing power, with multiple offers per space common and annual escalations standard. Looking forward, rent growth is expected to moderate further.
Key Findings
- Phoenix retail remains strong, with vacancy holding at 4.7% as closures by national chains freed up space that was quickly absorbed by off-price, grocery, and experiential retailers.
- Construction activity is rising, with 2.4M SF underway, mostly preleased in high-growth suburbs like Buckeye and Queen Creek, limiting oversupply risk despite continued demand for new space.
- Sales volume surpassed $600M in Q3, led by grocery-anchored centers and single-tenant deals, reflecting confidence in Phoenix’s long-term demographic and consumption growth.
Phoenix Retail Supply & Demand Dynamics
Source: CoStar Group, Inc.
Phoenix Demographics
Source: CoStar Group, Inc.
- Unemployment Rate: 3.7%
- Current Population: 5,260,019
- Households: 1,999,742
- Median Household Income: $89,948
Phoenix economy remained one of the nation’s fastest-growing, supported by strong in-migration, steady job creation, and a diverse business base. Population gains continued to fuel housing and consumer demand, while sectors such as technology, advanced manufacturing, and healthcare expanded their footprint in the region. Although construction activity has moderated compared to peak levels, Phoenix’s affordability relative to coastal markets and its pro-business climate kept both corporate relocations and investment interest elevated, reinforcing the metro’s role as a key growth hub in the Southwest.
Population, Labor, & Income Growth
Source: CoStar Group, Inc.
Phoenix Retail Construction
In Q3 2025, Phoenix’s retail construction pipeline remained modest, helping preserve tight market conditions. Builders delivered just 1.3 million SF in the past year, a sharp slowdown from the 2006–2008 peak of over 10 million SF annually. Currently, 2.4 million SF is underway, with less than one-third available, as most projects are preleased to anchors and shop tenants. Speculative big-box space is rare, and redevelopment of obsolete stock, including PV, Fiesta, and Metrocenter malls, is reducing availability further. Growth is concentrated on the metro’s periphery, especially Buckeye, Queen Creek, and Goodyear, where population gains support new centers like Verrado Marketplace and Buckeye Commons.
SF Construction Starts
Source: CoStar Group, Inc.
SF Under Construction
Source: CoStar Group, Inc.
Phoenix Retail Sales
In Q3 2025, Phoenix retail investment activity accelerated, with $2.2 billion in sales over the past year, up from $1.7 billion in 2023. Transaction volume in early 2025 was more than 25% higher than the same period in 2024, showing renewed investor confidence. Cap rates for non-grocery anchored centers generally ranged 7%–8%, while grocery-anchored assets traded tighter, around the 6% band. Private investors remained active at the $1–$5 million level, frequently acquiring single-tenant triple-net assets like a Black Rock Coffee sold at a 5.7% cap. Looking ahead, maturing CMBS loans may bring more properties to market, though widespread distress remains unlikely.
Phoenix Retail Sales Volume
Source: CoStar Group, Inc.
By the Numbers
Source: CoStar Group, Inc.
- Sales Volume: $641M
- Price Per SF: $267
- Cap Rate: 6.9%
- Vacancy Rate: 4.7%
- Rent Growth: 4.5%
- Asking Rent Per SF: $26.35
- Under Construction: 2.4M SF
- Delivered: 441K SF
- Absorbed: 48.2K SF
