PHOENIX REMAINS A WELL-POSITIONED MARKET FOR INDUSTRIAL TENANTS: HERE’S WHY

PHOENIX ARIZONA REAL ESTATE

Phoenix Remains A Well-Positioned Market For Industrial Tenants: Here’s Why

By AZBigMedia, azbigmedia.com | October 16, 2025

Despite Phoenix industrial construction activity continuing to slow down in 2025, 11.9 million square feet remain in the pipeline, helping Phoenix remain a well-positioned market for industrial tenants, according to an analysis from Kidder Mathews.

Market Highlights

CONSTRUCTION activity totaled 11.9 million square feet.
DIRECT NET ABSORPTION reached 2.4 million square feet.
TOTAL LEASING ACTIVITY YTD is 11.3 million square feet.

MARKET DRIVERS

Phoenix remains a well-positioned market for industrial tenants with 460 million square feet in total inventory, making it a booming hub for manufacturing and emerging technologies. The total inventory in Phoenix for manufacturing and warehouse space is 284 million square feet.
Construction activity is continuing to slow down in 2025, with 11.9 million square feet currently underway, a significant decrease from 28 million square feet reported in 2Q24. This trend is expected to persist throughout the year, which may help address the demand-supply imbalance.
Construction deliveries in 2Q25 totaled 2.9 million square feet, approximately 8M SF below YOY. Glendale leads all Phoenix submarkets in YTD deliveries with 4.3 million square feet, followed by Deer Valley with 1.3 million square feet.
Total availability rates increased by 150 bps YOY to 16% and remained steady QOQ. Total vacancy rates rose by 220 bps YOY and 20 bps QOQ to 13.4%.
Sales volume totaled 4.8 million square feet in 2Q25 coupled with 6 million square feet in total leasing activity.
Manufacturing and warehouse vacancies continue to rise with 39.7 million square feet of vacant space across the valley. An additional 10M SF of warehouse and manufacturing space are under construction.

ECONOMIC OVERVIEW

According to the Arizona Office of Economic Opportunity, Phoenix metro’s unemployment rate in May increased by 70 bps YOY to 3.6%. This compares to the state’s seasonally adjusted unemployment rate of 4.1% and national rate of 4.2%. The labor market remains stable despite a decrease in hiring momentum, with Arizona nonfarm employment increasing by 18,300 jobs.
In June 2025, the Federal Open Market Committee (FOMC) unanimously decided to maintain the target range for the federal funds rate. Median projections indicate an estimate of two rate cuts later this year, however, ongoing inflation concerns may delay that action in the short term.

NEAR TERM OUTLOOK

Due to market uncertainty, a decrease in leasing activity may persist as warehouse tenants delay signing new leases until there is more clarity on the impact of enacted tariffs. In the long term, demand could rise in the logistics and manufacturing sectors.
The North Chandler/Gilbert submarket, which includes the Mesa-Gateway Airport, has a large vacant inventory due to deliveries surpassing net absorption figures since 2023. As construction volume continues to slow, the submarket is expected to stabilize in upwards of four years.

Significant Sale Transactions

Property	Submarket	Square Feet	Sale Price	Price Per Square Foot	Buyer	Seller
Sarival Logistics Center – Bldg A	Glendale	1,156,860	$128,200,000	$110.82	EQT Exeter Real Estate Income Trust	Blackstone Inc.
Sight Logistics Park	Tempe Southwest	357,103	$103,050,000	$288.57	CBRE Investment Management	ViaWest Group
Tailwinds at Gateway	Chandler N/Gilbert	172,451	$51,500,000	$298.64	McCarthy Cook & Co	Cedar Point Enterprises
Seventy5 Business Park	Tolleson	222,396	$46,750,000	$210.21	MIG Real Estate	Baron Properties
Blue Cactus Logistics	Surprise	257,920	$44,500,000	$172.53	Hillwood Development Corp	BlueScope Properties Group

Significant Lease Transactions

Property	Submarket	Square Feet	Transaction Date	Landlord	Tenant
Litchfield Palms – Bldg C	Goodyear	521,302	Jun-25	Johnson Development Associates	Project Braves
Commerce @ 303	Glendale	331,683	May-25	Steelwave	Vestgroup Logistics
Centris Industrial at Mesa – Bldg B	Chandler N/Gilbert	324,800	May-25	Centris Industrial	Undisclosed
Coldwater Depot Logistics Center	Goodyear	302,609	Jun-25	Avondale City Engineering	Freeport Logistics
95th Avenue Logistics – Bldg 2	Tolleson	272,497	Apr-25	KKR & Co LP	JA Solar