Phoenix cracks the nation’s top five ranking for retail rent growth

Article originally posted on CoStar on December 5, 2025

The average asking rent at Phoenix retail properties rose 4.9% annually in the third quarter of 2025, the fifth-largest gain in the United States among major retail markets.

Last quarter’s performance narrowly edged out Kansas City’s 4.8% gain and more than doubled the 2.3% increase achieved overall in the United States. It also earned Phoenix the designation as the only market from a Mountain or West Coast state to rank in the top 10.

The Valley boasts powerful long-term demographic tailwinds, supporting healthy demand for retail space. The Phoenix metropolitan statistical area added 84,900 residents in 2024, the sixth-largest population increase in the country. The steadily rising population provides retailers with a deep and growing pool of potential consumers, prompting expansion.

Favorable supply and demand dynamics are also playing a major role. In the 12-month period ending in the third quarter of 2025, the Phoenix retail market recorded 1.5 million square feet of net absorption, or the change in occupied stock. About 1.2 million square feet of net new retail space was completed during that time, causing market-wide vacancy to tick down to 4.7%, near the lowest level on record. For comparison, Phoenix carried a vacancy rate in the mid-6% range in 2019.

Historically low space availability provides landlords with ample pricing power to raise rents. Additionally, many corporate tenants have strong balance sheets, healthy margins and greater efficiency on a sales-per-square-foot basis, often allowing retailers to absorb higher rents while maintaining comfortable occupancy costs.

Moving forward, the pace of rent growth in Phoenix is expected to normalize in 2026, alongside the rest of the country. Although a moderation of rent growth closer to pre-pandemic levels, in the mid-3% range, could be in store, the Valley’s robust demographic profile and manageable construction pipeline will likely keep Phoenix as one of the nation’s better-performing markets.