A recent Kidder Mathews survey reports that Phoenix continues to be a hotspot for industrial development. It has maintained a strong construction pipeline, averaging 8 million square feet in annual deliveries since 2022. This trend will continue well into 2025, with 21.8 million square feet of new projects currently underway. Year-to-date deliveries reach 37.6 million square feet, 19% higher than the total deliveries in 2023, which will continue to intensify the demand-supply imbalance as vacancy rates continue to rise. 

Vacancy increased by 440 basis points (bps) year-over-year (YOY) to 13.1%, while availability rates increased by 140 bps to 15.1%. However, compared to 3Q24, vacancy rates only grew by 140 bps and availability by 20 bps. 

Despite the continued rise in vacancy rates through 2024, driven by new developments, direct net absorption continues to remain positive as logistics and manufacturing tenants expand their footprints. Direct net absorption in 2024 totaled 17.8 million square feet, coupled with 5.7 million square feet in leasing activity. 

Rent growth in the Phoenix industrial market is slowing, with direct asking rents remaining steady quarter-over-quarter (QOQ) to $1.12 /SF NNN.