Office Market
Office vacancy rates in Phoenix continue to climb as the third quarter draws to a close. Many companies are reevaluating their space needs, often leading to downsizing or closures. Job growth in sectors that typically rely on office space has also been sluggish for more than two years. As a result, vacancy rates have risen by over 550 basis points since Q4 2019, with expectations of further increases in the coming months as pre-pandemic leases expire.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 197M | 16.8% | $29.57 | 146K | 904K |
| 4 & 5 STAR | 69M | 27% | $34.21 | 100K | 732K |
| 3 STAR | 91M | 13% | $28.70 | 67K | 172K |
| 1 & 2 STAR | 38M | 7.3% | $23.14 | -21K | 0 |
INDUSTRIAL MARKET
A surge in new development completions continues to push Phoenix’s industrial vacancy rate upward, a trend that may persist through mid-2025. The second quarter marked the fourth straight quarter with over 10 million square feet of net deliveries, totaling an unprecedented 36.4 million square feet over the past year. By comparison, Phoenix averaged just 8 million square feet of annual net deliveries in the three years prior to the pandemic.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 479M | 11.8% | $13.55 | -1.8M | 29M |
| LOGISTICS | 350M | 14.4% | $13.05 | -1.8M | 23M |
| SPECIALIZED | 96M | 3.7% | $13.61 | 38K | 5.5M |
| FLEX | 33M | 7.8% | $18.83 | -17K | 451K |
MULTI-FAMILY MARKET
The Phoenix multifamily market showed signs of recovery in the first half of 2024. Easing inflation and growing consumer confidence have spurred renter household formation, boosting tenant demand. While new supply still exceeds leasing activity, the decline in occupancy and rents has started to stabilize, suggesting that a recovery in property performance could begin within the next year.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION UNITS | UNDER CONSTRUCT UNITS |
|---|---|---|---|---|---|
| TOTAL: | 400K | 10.8% | $1,578 | 175 | 29K |
| 4 & 5 STAR | 192K | 12.3% | $1,788 | 161 | 21K |
| 3 STAR | 144K | 9.9% | $1,429 | 22 | 7K |
| 1 & 2 STAR | 63K | 8.4% | $1,186 | -8 | 155 |
RETAIL MARKET
The Phoenix retail market remains exceptionally tight as summer comes to a close. Strong population growth, rising incomes, and solid job creation are driving strong tenant demand. These key factors, along with a modest construction pipeline and fewer store closures, have kept space availability low and rent growth near record highs.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 244M | 4.8% | $25.48 | 173K | 2.9M |
| POWER CENTER | 33M | 3.8% | $28.30 | 5K | 156K |
| NEIGHBORHOOD CENTER | 92M | 5.8% | $24.91 | -145K | 206K |
| GENERAL RETAIL | 85M | 3.1% | $24.33 | -27K | 1.7M |
