Despite Phoenix industrial construction activity continuing to slow down in 2025, 11.9 million square feet remain in the pipeline, according to an analysis from Kidder Mathews.

Market Highlights

  • CONSTRUCTION activity totaled 11.9M SF.
  • DIRECT NET ABSORPTION reached 2.4M SF.
  • TOTAL LEASING ACTIVITY YTD is 11.3M SF.

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Market drivers

  • Phoenix remains a well-positioned market for industrial tenants with 460M SF in total inventory, making it a booming hub for manufacturing and emerging technologies. The total inventory in Phoenix for manufacturing and warehouse space is 284M SF.
  • Construction activity is continuing to slow down in 2025, with 11.9M SF currently underway in the Phoenix industrial pipeline, a significant decrease from 28M SF reported in 2Q24. This trend is expected to persist throughout the year, which may help address the demand-supply imbalance. 
  • Construction deliveries in 2Q25 totaled 2.9M SF, approximately 8M SF below YOY. Glendale leads all Phoenix submarkets in YTD deliveries with 4.3M SF, followed by Deer Valley with 1.3M SF.
  • Total availability rates increased by 150 bps YOY to 16% and remained steady QOQ. Total vacancy rates rose by 220 bps YOY and 20 bps QOQ to 13.4%.
  • Sales volume totaled 4.8M SF in 2Q25 coupled with 6M SF in total leasing activity.
  • Manufacturing and warehouse vacancies continue to rise with 39.7M SF of vacant space across the valley. An additional 10M SF of warehouse and manufacturing space are under construction.

Overview

  • According to the Arizona Office of Economic Opportunity, Phoenix metro’s unemployment rate in May increased by 70 bps YOY to 3.6%. This compares to the state’s seasonally adjusted unemployment rate of 4.1% and national rate of 4.2%. The labor market remains stable despite a decrease in hiring momentum, with Arizona nonfarm employment increasing by 18,300 jobs.
  • In June 2025, the Federal Open Market Committee (FOMC) unanimously decided to maintain the target range for the federal funds rate. Median projections indicate an estimate of two rate cuts later this year, however, ongoing inflation concerns may delay that action in the short term.

Outlook

  • Due to market uncertainty, a decrease in leasing activity may persist as warehouse tenants delay signing new leases until there is more clarity on the impact of enacted tariffs. In the long term, demand could rise in the logistics and manufacturing sectors.
  • The North Chandler/Gilbert submarket, which includes the Mesa-Gateway Airport, has a large vacant inventory due to deliveries surpassing net absorption figures since 2023. As construction volume continues to slow, the submarket is expected to stabilize in upwards of four years.

Significant Sale Transactions

PropertySubmarketSquare FeetSale PricePrice Per Square FootBuyerSeller
Sarival Logistics Center – Bldg AGlendale1,156,860$128,200,000$110.82EQT Exeter Real Estate Income TrustBlackstone Inc.
Sight Logistics ParkTempe Southwest357,103$103,050,000$288.57CBRE Investment ManagementViaWest Group
Tailwinds at GatewayChandler N/Gilbert172,451$51,500,000$298.64McCarthy Cook & CoCedar Point Enterprises
Seventy5 Business ParkTolleson222,396$46,750,000$210.21MIG Real EstateBaron Properties
Blue Cactus LogisticsSurprise257,920$44,500,000$172.53Hillwood Development CorpBlueScope Properties Group

Significant Lease Transactions

PropertySubmarketSquare FeetTransaction DateLandlordTenant
Litchfield Palms – Bldg CGoodyear521,302Jun-25Johnson Development AssociatesProject Braves
Commerce @ 303Glendale331,683May-25SteelwaveVestgroup Logistics
Centris Industrial at Mesa – Bldg BChandler N/Gilbert324,800May-25Centris IndustrialUndisclosed
Coldwater Depot Logistics CenterGoodyear302,609Jun-25Avondale City EngineeringFreeport Logistics
95th Avenue Logistics – Bldg 2Tolleson272,497Apr-25KKR & Co LPJA Solar