Phoenix Industrial Market Report

The following reflects Phoenix industrial market conditions as of Q1 2026.

MARKET DRIVERS

Arizona continues to position itself as a national leader in innovation and industrial growth. The state ranks No. 1 in the country for semiconductors, recording more than 60 industry expansions since 2020, and also leads the nation in international investment with over $195.7B announced during that period. This momentum is further reinforced by the recent groundbreaking of the $7B mixed-use Halo Vista development, which is expected to create thousands of jobs across multiple industry sectors tied to TSMC and strengthen the region’s long-term economic outlook.

The total vacancy rate declined to 12.4%, marking a 120 bps YOY decrease, while total availability fell 150 bps to 14.4%. Leasing activity reached 7.5M SF, supported by 4.4M SF of direct net absorption, with Glendale, North Chandler/Gilbert, and Goodyear posting the strongest gains due to advanced manufacturing and logistics demand. At the same time, new construction slowed significantly—only 1.2M SF delivered, an 82% YOY decline—as the market focused on absorbing existing inventory. Direct average asking rents for spaces 10,000 SF and larger increased 5% year over year to $1.18 PSF NNN.

ECONOMIC REVIEW

According to the Arizona Office of Economic Opportunity, Phoenix metro’s unemployment rate in December increased by 70 bps YOY to 4.3%. Arizona’s 2026 hiring trends are tightening labor supply, slowing project timelines, and increasing competition for specialized talent due to ongoing semiconductor expansion, advanced manufacturing investment, and infrastructure growth.

NEAR-TERM OUTLOOK

Vacancy rates are expected to continue declining through the remainder of 2026; however, West Phoenix is still experiencing new warehouse development, which will increase the amount of space under construction.

Frequently Asked Questions

How is the Phoenix industrial market performing in Q1 2026?

The Phoenix industrial market showed broad improvement in Q1 2026. The total vacancy rate declined to 12.4% — down 120 basis points year over year — while total availability fell to 14.4%, a 150 bps YOY decrease. Leasing activity reached 7.5 million SF, up 31% from Q1 2025, and direct net absorption totaled 4.4 million SF. New construction slowed sharply, with only 1.2 million SF delivered in the quarter, an 82% YOY decline. (Data source: CoStar.)

What is the Phoenix industrial vacancy rate in Q1 2026, and how does it compare to prior periods?

The Phoenix industrial total vacancy rate was 12.4% in Q1 2026. That is down from 13.5% in Q4 2025 and 13.6% in Q1 2025, a 120 basis-point year-over-year improvement. The total availability rate also declined, from 15.9% in Q1 2025 to 14.4% in Q1 2026. (Data source: CoStar.)

Why is Phoenix industrial vacancy declining in 2026?

Vacancy is declining because leasing demand is outpacing new supply. Direct net absorption reached 4.4 million SF in Q1 2026 while new deliveries slowed to just 1.2 million SF — an 82% drop from the same quarter in 2025. Submarkets including Glendale, North Chandler/Gilbert, and Goodyear posted the strongest absorption gains, driven by advanced manufacturing and logistics demand. Arizona’s position as the top U.S. state for semiconductor expansion, with more than 60 industry expansions since 2020, is a key demand driver. (Data source: CoStar.)

What are Phoenix industrial asking rents in Q1 2026?

The average direct asking rent for Phoenix industrial space (10,000 SF and larger) was $1.18 per SF per month NNN in Q1 2026, unchanged from Q4 2025 and up 5% from $1.12 in Q1 2025. Submarket rents ranged from $0.78 PSF NNN in SC South of Salt River to $1.81 PSF NNN in Scottsdale/Salt River. (Data source: CoStar.)

Which Phoenix industrial submarket has the lowest vacancy, and which has the highest?

Among major Phoenix industrial submarkets in Q1 2026, SC South of Salt River had the lowest total vacancy rate at 5.1%, followed by South Airport South of Roeser at 2.1% direct vacancy. Surprise posted the highest total vacancy at 27.3%, followed by North Black Canyon at 19.9% and Glendale at 21.4%. (Data source: CoStar.)

How much leasing activity occurred in the Phoenix industrial market in Q1 2026?

Total leasing activity in the Phoenix industrial market reached 7.5 million SF (7,524,022 SF) in Q1 2026, a 31% increase over Q1 2025’s 5.7 million SF. Year-to-date total leasing activity stands at 27.0 million SF across all submarkets. The Northwest submarket led all areas with 2.5 million SF of Q1 leasing, followed by the Southeast with 1.8 million SF and the Southwest with 2.5 million SF. (Data source: CoStar.)

What was net absorption for the Phoenix industrial market in Q1 2026?

Direct net absorption totaled 4.4 million SF (4,410,073 SF) in Q1 2026. Positive net absorption means tenants occupied more space than they vacated during the quarter — a sign of healthy demand. The Northwest submarket contributed the most at 1.85 million SF, followed by the Southeast at 1.39 million SF and the Southwest at 1.25 million SF. Year-over-year, Q1 2026 absorption was down 12% from Q1 2025’s 5.0 million SF. (Data source: CoStar.)

Last updated: Q1 2026. Data source: CoStar, AZ Office of Economic Opportunity, PBJ. Compiled by the Kidder Mathews Research Group.

1Q 2026 Phoenix Industrial Market: Key Data Points

Explore our full Phoenix industrial market review for deeper insights into leasing trends, sale activity, and submarket performance.

Vacancy Continues to Compress: Total vacancy declined to 12.4% in 1Q 2026, a 120-basis-point decrease year-over-year, while availability fell 150 basis points to 14.4%.
Leasing and Absorption Remain Strong: Leasing activity totaled 7.5M SF in 1Q 2026, supported by 4.4M SF of direct net absorption, led by Glendale, Goodyear, and North Chandler/Gilbert.
Construction Deliveries Drop Sharply: New deliveries fell to just 1.2M SF, an 82% year-over-year decline, shifting market momentum toward absorption of existing space.
Asking Rents Continue to Rise: Average direct asking rents increased 5% year-over-year to $1.18 PSF NNN for spaces 10,000 SF and larger.
Manufacturing and Logistics Drive Demand: Advanced manufacturing, semiconductor growth, and logistics users continue to anchor leasing demand, reinforcing Phoenix’s role as a national industrial hub.

Submarket Statistics

Submarket	Total Inventory (SF)	Direct Vacancy Rate	Total Vacancy Rate	1Q26 Direct Net Absorption (SF)	SF Under Construction	1Q26 Total Leasing Activity (SF)	YTD Total Leasing Activity (SF)	Average Direct Rental Rate (NNN)

Phoenix Industrial Submarket Statistics 1Q 2026 — Airport Area: includes North Airport, South Airport North of Roeser, South Airport South of Roeser, SC North of Salt River, SC South of Salt River
Submarket	Total Inventory (SF)	Direct Vacancy Rate	Total Vacancy Rate	1Q26 Direct Net Absorption (SF)	SF Under Construction	1Q26 Total Leasing Activity (SF)	YTD Total Leasing Activity (SF)	Average Direct Rental Rate NNN
North Airport	13,235,911	5.2%	5.6%	51,161	46,060	656,345	656,345	$1.29
South Airport North of Roeser	14,581,691	8.7%	10.3%	-63,793	88,324	108,695	692,815	$1.27
South Airport South of Roeser	4,522,875	1.8%	2.1%	3,779	0	70,252	138,547	$1.43
SC North of Salt River	14,806,084	6.3%	8.7%	-69,179	0	227,237	585,363	$1.16
SC South of Salt River	2,387,900	5.1%	5.1%	-62,207	357,721	0	25,916	$0.78
Airport Area	49,534,461	6.3%	7.6%	-191,397	1,253,378	546,993	2,098,986	$1.23

Phoenix Industrial Submarket Statistics 1Q 2026 — Central Phoenix and Northeast: includes Central Phoenix, Scottsdale Airpark, Scottsdale/Salt River
Submarket	Total Inventory (SF)	Direct Vacancy Rate	Total Vacancy Rate	1Q26 Direct Net Absorption (SF)	SF Under Construction	1Q26 Total Leasing Activity (SF)	YTD Total Leasing Activity (SF)	Average Direct Rental Rate NNN
Central Phoenix	3,340,217	2.5%	2.5%	41,615	70,000	11,550	108,616	$1.34
Scottsdale Airpark	6,566,097	5.5%	6.4%	-11,204	0	135,504	381,852	$1.72
Scottsdale/Salt River	5,582,297	10.2%	10.8%	84,111	267,051	50,876	129,692	$1.81
Northeast	15,488,611	6.6%	7.2%	114,522	337,051	197,930	620,160	$1.66

Phoenix Industrial Submarket Statistics 1Q 2026 — Northwest: includes Deer Valley/Pinnacle Park, Glendale, Grand Avenue, North Black Canyon, Surprise, West Phoenix North of Thomas Road, West Phoenix South of Thomas Road
Submarket	Total Inventory (SF)	Direct Vacancy Rate	Total Vacancy Rate	1Q26 Direct Net Absorption (SF)	SF Under Construction	1Q26 Total Leasing Activity (SF)	YTD Total Leasing Activity (SF)	Average Direct Rental Rate NNN
Deer Valley/Pinnacle Park	21,226,408	8.6%	9.2%	245,844	1,031,267	271,864	1,571,115	$1.29
Glendale	59,696,073	18.4%	21.4%	1,513,647	3,683,542	1,944,668	3,954,863	$1.09
Grand Avenue	14,566,952	8.9%	9.8%	-322,568	468,642	123,644	313,858	$0.85
North Black Canyon	4,719,408	19.9%	19.9%	6,284	428,011	33,745	189,071	$1.13
Surprise	7,751,854	27.3%	27.3%	521,167	0	53,684	403,671	$1.24
West Phoenix North of Thomas Rd	7,232,673	4.4%	4.7%	9,703	0	77,146	321,245	$0.84
West Phoenix South of Thomas Rd	6,583,223	3.7%	3.9%	-119,917	0	9,427	196,593	$1.06
Northwest	121,776,591	14.5%	16.3%	1,854,160	5,611,462	2,514,178	6,950,416	$1.14

Phoenix Industrial Submarket Statistics 1Q 2026 — Southeast: includes Chandler Airport, Chandler, Chandler North/Gilbert, Falcon Field/Apache Junction, Mesa, Tempe East, Tempe Northwest, Tempe Southwest
Submarket	Total Inventory (SF)	Direct Vacancy Rate	Total Vacancy Rate	1Q26 Direct Net Absorption (SF)	SF Under Construction	1Q26 Total Leasing Activity (SF)	YTD Total Leasing Activity (SF)	Average Direct Rental Rate NNN
Chandler Airport	9,608,196	10.5%	18.3%	49,416	375,913	62,502	519,456	$1.51
Chandler	23,764,687	7.9%	8.5%	-83,973	315,961	178,816	1,100,490	$1.45
Chandler North/Gilbert	44,305,473	22.0%	22.4%	1,739,379	1,685,127	941,635	4,572,604	$1.37
Falcon Field/Apache Junction	5,869,330	5.1%	5.2%	18,455	778,121	63,821	213,902	$1.38
Mesa	6,664,210	6.5%	7.1%	16,454	0	56,646	400,753	$1.00
Tempe East	5,977,579	7.5%	8.0%	-792	689,109	35,432	387,492	$1.39
Tempe Northwest	9,818,395	8.6%	9.2%	-313,181	45,944	89,794	713,913	$1.22
Tempe Southwest	21,935,299	9.7%	10.8%	-38,142	331,591	340,822	999,981	$1.21
Southeast	127,943,169	13.2%	14.3%	1,387,616	4,221,766	1,769,468	8,908,591	$1.30

Phoenix Industrial Submarket Statistics 1Q 2026 — Southwest: includes Goodyear, Southwest North of Buckeye Road, Southwest South of Buckeye Road, Tolleson
Submarket	Total Inventory (SF)	Direct Vacancy Rate	Total Vacancy Rate	1Q26 Direct Net Absorption (SF)	SF Under Construction	1Q26 Total Leasing Activity (SF)	YTD Total Leasing Activity (SF)	Average Direct Rental Rate NNN
Goodyear	39,447,919	13.0%	13.2%	1,319,884	0	1,495,144	4,560,783	$0.99
Southwest North of Buckeye Rd	37,952,511	9.9%	10.8%	269,155	670,514	795,898	1,538,621	$0.93
Southwest South of Buckeye Rd	20,497,641	7.9%	7.9%	61,531	0	70,612	462,774	$1.23
Tolleson	49,545,010	5.5%	7.5%	-405,398	0	133,799	1,861,720	$0.84
Southwest	147,443,081	9.0%	10.0%	1,245,172	670,514	2,495,453	8,423,898	$0.95

Phoenix Industrial Market Total 1Q 2026 — combined totals for all submarkets
Submarket	Total Inventory (SF)	Direct Vacancy Rate	Total Vacancy Rate	1Q26 Direct Net Absorption (SF)	SF Under Construction	1Q26 Total Leasing Activity (SF)	YTD Total Leasing Activity (SF)	Average Direct Rental Rate NNN
Phoenix Total	462,185,913	11.2%	12.4%	4,410,073	12,094,171	7,524,022	27,002,051	$1.18

Phoenix Industrial Submarket Statistics 1Q 2026 — Property Type Breakdown: Manufacturing and Warehouse, General Industrial, Flex
Submarket	Total Inventory (SF)	Direct Vacancy Rate	Total Vacancy Rate	1Q26 Direct Net Absorption (SF)	SF Under Construction	1Q26 Total Leasing Activity (SF)	YTD Total Leasing Activity (SF)	Average Direct Rental Rate NNN
Manufacturing & Warehouse	266,829,960	10.5%	11.5%	229,166	10,784,920	5,631,775	12,618,020	$1.13
General Industrial	165,467,917	11.7%	13.5%	3,642,858	1,136,635	1,452,115	12,530,664	$0.82
Flex	27,542,725	9.0%	9.7%	-146,156	172,616	256,273	1,496,238	$1.37

Significant Sale Transactions 1Q 2026

Phoenix Industrial Significant Sale Transactions 1Q 2026: property name, submarket, square footage, sale price, price per square foot, buyer, and seller for major industrial sales in Phoenix metro
Property	Submarket	SF	Sale Price	$/SF	Buyer	Seller
Cotton 303 Logistics Center	Glendale	915,160	$104,000,000	$113.64	Prologis	Heitman
91st Avenue & Roosevelt St (2 Prop)	Tolleson	662,804	$94,125,000	$142.01	Transwestern Investment Group	EQT Real Estate
15784 W Hatcher Rd – Bldg. A	Glendale	566,121	$90,579,360	$160.00	Electric Research & Manu. Co-op.	Indicap
Surprise Point Commerce Center	Surprise	418,400	$70,035,000	$167.39	Immigration & Customs Enforcement	Rockefeller Group
9014 N 23rd Ave (11 Prop)	N Black Canyon	227,603	$43,000,000	$188.93	BKM Capital	Terracore Capital & BKM Cap.

Significant Lease Transactions 1Q 2026

Phoenix Industrial Significant Lease Transactions 1Q 2026: property name, submarket, square footage, transaction date, landlord, tenant, and lease type for major industrial leases in Phoenix metro
Property	Submarket	SF	Transaction Date	Landlord	Tenant	Lease Type
Kyrene 202 Business Park VI	Chandler	38,152	February 2026	EastGroup Properties	CRST Home Solutions	Direct
Elliot Business Park	Tempe	25,075	February 2026	Transpacific Development SW	The RK Logistics Group	Direct
Tempe Commerce Park	Tempe	40,675	February 2026	BH Properties	ValleyPrecision Sheetmetal	Direct
Broadway Industrial Park SW	Tempe	35,033	February 2026	Equus Capital Partners	Phoenix Winsupply Co.	Direct

Significant Under Construction

Phoenix Industrial Significant Under Construction 1Q 2026: property name, address, submarket, square footage, owner, and expected delivery date for major industrial projects under construction in Phoenix metro
Property	Address	Submarket	SF	Owner	Delivery
Northern Parkway Logistics – Bldg D	Reems Rd & Northern Pky	Glendale	1,184,591	Merit Partners	4Q 2026
West 101 Logistics – Bldg 1,2,3,4,5	SEC Loop 101 & Indian School Rd	Glendale	1,088,806	Undisclosed	3Q 2026
ReDiscover – Bldg A,B,C,D	2402 W Beardsley Rd	Deer Vly/Pinnacle Pk	807,437	ViaWest Group & Barings	1Q 2027
Next Wave – Bldg 1,2,3	1500 McClintock Dr	Tempe East	500,591	Undisclosed	2Q 2026

Data as of Q1 2026. Source: CoStar, AZ Office of Economic Opportunity, PBJ. Prepared by the Kidder Mathews Research Group.

Contact

GARY BARAGONA
Vice President, Research
gary.baragona@kidder.com
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