MARKET DRIVERS
Arizona experienced a transformative year in 2025, marked by major wins across key industries such as semiconductors, aerospace, and AI, alongside robust job growth throughout the Valley. The state now ranks No. 1 nationally for semiconductors, with more than 60 industry expansions since 2020. This surge has been fueled by significant investments, including Amkor’s $7B advanced packaging campus, Busch Vacuum Solutions’ new Tempe service center, and the continued growth of TSMC. Leasing activity reflected this momentum, totaling 27M SF in 2025 and generating 14M SF of direct net absorption, with TSMC-driven demand sparking major deals in Glendale, Deer Valley, and Goodyear. North Chandler/Gilbert also posted strong absorption of 1.1M SF, driven by advanced manufacturing and logistics needs for warehouse, distribution, and fulfillment space.
Market fundamentals shifted as vacancy rates for 4Q25 rose slightly to 13.5%, a 20 bps increase year-over-year, while total availability declined by 70 bps to 14.9%. The construction pipeline contracted sharply as developers prioritized absorbing existing inventory, resulting in 15.8M SF of industrial space delivered a 54% YOY decline. Direct average asking rates for spaces 10K SF and above climbed to $1.19 PSF NNN in 4Q25, up 6% from $1.13 PSF NNN the previous year. These trends underscore Arizona’s evolving industrial landscape, where semiconductor-driven growth and advanced manufacturing continue to reshape demand and development strategies statewide.
ECONOMIC REVIEW
Arizona’s technology and innovation, advanced manufacturing, and aerospace sectors continue to thrive. In 2025, the Arizona Commerce Authority and its economic partners secured 90 competitive projects, committing to 27,749 jobs and more than $34B in capital investment.
NEAR-TERM OUTLOOK
Entering 2026, newer product is expected to continue leasing at a steady pace, while second generation space will likely experience longer vacancy periods compared to conditions in 2023–2024. Rental rates are anticipated to stabilize; however, elevated concessions are expected to persist in select markets such as Mesa Gateway.
4Q 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 Holds Near 13.5%: Up 20 bps year-over-year, reflecting modest softening in fundamentals.
- Average Asking Rent Climbs: Direct asking lease rates reached $1.19 PSF NNN, a 6% increase year-over-year.
- Construction Pipeline Contracts: Deliveries totaled 15.8M SF, down 54% from 2024 as developers focus on absorption.
- Leasing Activity Strong: Q4 leasing reached 4.3M SF, contributing to 27M SF for the year, up 3% YOY.
- Net Absorption Slows: Direct net absorption for 2025 was 13.9M SF, a 10% decline from 2024.
- Semiconductor Expansion Drives Demand: Over 60 industry expansions since 2020, including Amkor’s $7B campus and TSMC-related deals.
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