Industrial vacancy in Deer Valley (Phoenix) dropped to 7.90% in Q2 2026 as TSMC’s semiconductor supply chain shifts from leasing to owning outright, tightening an already constrained submarket and pushing small-bay pricing toward $400/SF.
Deer Valley continues to solidify its position as one of the most dynamic industrial submarkets in the Phoenix market. After several years of outsized demand and record absorption, new supply is catching up and tenant decision times are lengthening. Vacancy ticked higher earlier in the year, and availability has remained elevated due to the delivery of large blocks of new space and space returning from build-to-suit projects.
Leasing velocity has moderated from recent peaks, with activity concentrated among quality bulk users and owner/occupiers. Asking rates held firm quarter-over-quarter, supported by limited supply in strategic infill locations and strong long-term demand from e-commerce, advanced manufacturing, and logistics users. Investment sales volume remains below historic averages as buyers and sellers continue to recalibrate on pricing.
The dominant force shaping the submarket is TSMC’s supplier ecosystem. Vendors and subcontractors that have spent years as tenants near the fab are now buying land and buildings outright to secure long-term operational control, shifting demand from lease to ownership and compounding an already tight supply picture. That imbalance is most acute at the small end of the market, where quality buildings in the 10,000–30,000 SF range are scarce enough to push pricing toward levels once considered unthinkable.
Key Takeaways
- Vacancy is tightening, not loosening. Deer Valley’s 7.90% vacancy rate in Q2 2026 is down 230 basis points year-over-year, even as availability rose, reflecting strong underlying absorption.
- TSMC’s supplier ecosystem is the primary demand driver. Suppliers and subcontractors are increasingly buying rather than leasing to lock in long-term proximity to the fab, with at least 3 supplier-linked acquisitions and land sales of 52 and 28 acres in the last quarter alone.
- Small-bay industrial is the tightest segment. Buildings in the 10,000–30,000 SF range are scarce enough that new product pricing is approaching $400/SF, a seller’s market for owners in this size range.
- Leasing activity has slowed, but fundamentals remain healthy. SF leased fell 30.26% year-over-year as decision times lengthen, but direct net absorption rose 75.75% year-over-year, and asking rates held steady at $1.32/SF NNN.
- Nearly 1.5M SF of new industrial product is proposed or under construction, led by a 807,437 SF project at 2402 W Beardsley Rd, expected to deliver in 1Q27.
- Investment sales volume remains below historic norms as buyers and sellers continue to recalibrate on pricing, though sales volume (SF) still rose 15.76% year-over-year.
Deer Valley (Phoenix) Industrial Market Snapshot — Q2 2026
| Metric | 2Q26 | 1Q26 | 2Q25 | YoY Change |
|---|---|---|---|---|
| Total Vacancy Rate | 7.90% | 8.80% | 10.20% | -230 bps |
| Total Availability Rate | 14.40% | 14.60% | 10.70% | +370 bps |
| Direct Asking Lease Rate | $1.32 | $1.31 | $1.43 | -7.82% |
| Leasing Activity (SF) | 412,035 | 348,718 | 590,824 | -30.26% |
| Sales Volume (SF) | 288,094 | 306,244 | 248,875 | +15.76% |
| Direct Net Absorption (SF) | 191,744 | 316,966 | 109,102 | +75.75% |
Data as of Q2 2026. Source: Kidder Mathews Research. Prepared by the Kidder Mathews Research Group.
Deer Valley (Phoenix) Top Proposed & Under Construction Projects — Q2 2026
| Property | # Bldgs | Total SF | Expected Delivery | Status |
|---|---|---|---|---|
| 2402 W Beardsley Rd | 4 | 807,437 | 1Q27 | Under Construction |
| 20022 N 31st Ave | 3 | 394,885 | 2Q27 | Proposed |
| 23777 N 3rd Ave | 2 | 155,150 | 3Q26 | Under Construction |
| 22305 Black Canyon Hwy | 1 | 130,000 | 3Q27 | Proposed |
| 1616 W Alameda Rd | 1 | 37,887 | 3Q26 | Under Construction |
| Total | 11 | 1,525,359 | — | — |
Data as of Q2 2026. Source: Kidder Mathews Research. Prepared by the Kidder Mathews Research Group.
Frequently Asked Questions
What is the current industrial vacancy rate in Deer Valley, Phoenix, AZ?
Deer Valley’s total industrial vacancy rate was 7.90% in Q2 2026, down from 8.80% in Q1 2026 and 10.20% in Q2 2025, a 230-basis point year-over-year improvement.
Why is TSMC affecting the Deer Valley, Phoenix, AZ industrial market?
TSMC’s continued build-out near Deer Valley has created a ripple effect among its suppliers and subcontractors. Many companies that previously leased space are now buying land and buildings outright to secure long-term operational control near the fab, which is compounding an already tight supply picture in the submarket.
What is the average industrial asking lease rate in Deer Valley, Phoenix, AZ?
The direct asking lease rate in Deer Valley was $1.32/SF NNN in Q2 2026, essentially flat quarter-over-quarter and down 7.82% from $1.43/SF a year earlier.
Is it a good time to sell a small industrial building in Deer Valley, Phoenix, AZ?
Yes. Quality industrial buildings in the 10,000–30,000 SF range are in especially short supply, with newer product pricing pushing toward $400/SF. Owners in this size range are currently operating in a seller’s market with few comparable listings.
How much new industrial space is under construction in Deer Valley, Phoenix, AZ?
Several projects are under construction or proposed, including a 807,437 SF project at 2402 W Beardsley Rd (1Q27 delivery), a 394,885 SF proposed project at 20022 N 31st Ave (2Q27), and smaller projects at 23777 N 3rd Ave and 1616 W Alameda Rd both expected in 3Q26.
ContactGARY BARAGONA |
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