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.
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.
Click here to subscribe to Kidder Mathews market research.