The Phoenix industrial real estate market continued to expand in the third quarter of 2026, fueled by strong tenant demand, significant leasing activity and continued investment in logistics and advanced manufacturing.
According to research from Kidder Mathews, industrial leasing activity totaled 7.6 million square feet during the quarter, while direct net absorption reached 2.9 million square feet. Despite continued construction activity, total vacancy declined 180 basis points year over year to 11.5%, while total availability fell 40 basis points to 14%.
Glendale emerged as the Valley’s strongest industrial submarket, recording 1.5 million square feet of absorption — roughly half of the Phoenix market’s total. Chandler North/Gilbert and the Southwest area north of Buckeye Road followed, with each generating approximately one-third of Glendale’s absorption.
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New supply remained a major factor in market conditions. Approximately 3.4 million square feet of industrial space was delivered during the third quarter, more than triple the amount delivered during the previous quarter. Despite that quarterly surge, deliveries were down 51% year over year.
Smaller-bay industrial properties continued to benefit from having less direct competition from the wave of new big-box developments entering the market.
Rents also moved higher. Average direct asking rents for industrial spaces of 10,000 square feet and larger increased 5% year over year to $1.18 per square foot, triple net.
Broader economic growth continues to support the sector. Arizona added 17,400 jobs since August 2025, according to the Arizona Office of Economic Opportunity. The state’s unemployment rate rose 50 basis points year over year to 4.9% in August.
Looking ahead to the final quarter of 2026, Kidder Mathews expects industrial vacancy to remain relatively stable as tenant demand helps absorb available space.
Glendale is expected to remain a significant driver of activity, supported in part by its proximity to suppliers and logistics operations connected to TSMC’s expanding semiconductor manufacturing presence in North Phoenix.
Continued growth in technology, manufacturing and logistics is expected to support industrial demand across Metro Phoenix as the market works through its recent wave of new supply.
