Phoenix Industrial Market Overview

Phoenix’s industrial sector noted increased deliveries over the past few years, recording one of the highest vacancy rates nationally. The majority of the metro’s deliveries were for spaces larger than 100,000 square feet, and vacancy for these facilities is above 15%. However, leasing activity rose from previous levels, with 14.3 million square feet absorbed in the past 12 months. Moving forward, Phoenix has about 16 million square feet underway. The new construction makes the metro the second in the nation for ongoing construction, behind Dallas-Fort Worth. Most new additions are being added in the western part of Phoenix, specifically in the Glendale, Goodyear, and Tolleson submarkets. Deliveries are forecast to slow down in 2026, which should stabilize Phoenix’s performance levels.

 

• Absorption for the first quarter surpassed levels from Q1 2024, with 5.8 million square feet absorbed.
• The 17.6 million square feet underway makes up 3.5%of inventory, outpacing the U.S. level of 1.5%.
• The largest property underway totals 1 million square feet. It is expected for delivery in October 2025 in the Pinal County submarket.

 

Rents | Vacancy | Construction

While Phoenix’s industrial vacancy rate rose since 2023, it stabilized at 12.4% for Q1 2025. Leasing activity during the quarter was strongest for properties over 100,000 square feet, which saw increased deliveries in recent years. The most notable lease for the first quarter occurred in Goodyear, with Kenco leasing 641,906 square feet. Additionally, as the metro continues adjusting to new supply, rent growth decelerated to 3.1% this quarter. Rents for larger properties between 100,000 and 200,000 square feet record rents in the $10-$14 per square foot range, with the lowest rents in the western part of the metro

 

Larger facilities over 100,000 square feet will continue to see the most deliveries as more than 8 million square feet of unleased space for these properties is underway. While western submarkets recorded increased deliveries, construction in the eastern submarkets also noted an uptick. The Phoenix-Mesa Gateway Airport area saw 17 million square feet in deliveries since 2023, and 4 million square feet is currently on the way here. New deliveries are expected to decrease the rest of the year, but it will still take time for the metro to adjust to the oversupply.

 

Sales

The 12-month sales volume of $4.6 billion outperformed previous Phoenix transaction activity, with deals increasing each quarter in 2024. Sales volume dropped during Q1 2025 from year-end 2024 levels, but saw a total $737 million in transactions. The most notable sale for the first quarter occurred in March, with a warehouse in the Tolleson submarket selling for $54.2 million as part of a portfolio deal. This transaction stood out as the warehouse is made up of 331,398 square feet, while the bulk of other sales this quarter were for properties below 100,000 square feet. Looking ahead, transaction activity could recover for the rest of the year. There are several loan maturities coming up, which could lead owners to bring their assets to market.

 

Q1 2025 Total Sales Volume: $737M