MARKET DRIVERS
With exceptional connectivity and a growing logistics network, Phoenix continues to draw leading 3PL firms. Large mixed-use developments are being announced across the Valley, particularly in high-growth areas fueled by major manufacturing facilities such as TSMC. Total vacancy rates for 3Q25 rose to 13.4%, showing a 160 bps increase YOY. Total availability rate remains steady YOY at 14.9%.
Leasing and sale volume (SF) continues to be greater than pre-pandemic times, supported by the sustained demand from e-commerce, manufacturing, and logistics sectors. An ongoing trend of increasing sublet activity continues, reaching a record high of 1.8M SF in 3Q25, 3 times higher than the previous quarter.
Construction activity is continuing to slow down in 2025, with 11.8M SF currently underway, a significant decrease from 23.3M SF recorded in 3Q24. This slowdown in the pipeline may help alleviate absorption pressures for newly delivered, unleased industrial projects. The Northwest Valley continues to lead with YTD completions due to major projects such as The Base, Olive Logistics Center, and C|303.
Direct average asking lease rates for buildings over 10K SF in 3Q25 stand at $1.13 PSF NNN, a 5% increase YOY from $1.07 PSF NNN.
ECONOMIC REVIEW
Thriving industries in Arizona continue to be technology and innovation, advanced manufacturing, and aerospace. In 2025, the Arizona Commerce Authority secured company commitments to create over 24,000 new jobs and generate $31B in capital investments.
NEAR-TERM OUTLOOK
Occupiers of space have a unique near-term opportunity to take advantage of Lessors holding vacant, newly delivered speculative projects. The enormous amount of delivered warehousing will continue to be absorbed by companies seeking a reliable alternative to other regions. The current window of savings for mid and large bay warehousing tightens with every major deal inked.
3Q 2025 Phoenix Industrial Market: Key Data Points
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Explore our full Phoenix industrial market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Rate Rises: Phoenix’s industrial vacancy rate increased to 13.4% in Q3 2025, up 160 basis points year-over-year.
- Average Asking Lease Rate Up: Direct asking lease rate reached $1.13 PSF NNN, a 5% increase from Q3 2024.
- Construction Pipeline Contracts: Industrial space under construction dropped to 11.5M SF, down from 23.3M SF in Q3 2024.
- Sublease Activity Surges: Sublease leasing activity hit a record 1.8M SF, tripling quarter-over-quarter.
- Net Absorption Slows: Direct net absorption totaled 4.7M SF, a 4% decrease year-over-year.
- Leasing Volume Strong: Leasing activity reached 7.6M SF in Q3 2025, supported by demand from logistics and manufacturing sectors.
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