Dallas and Phoenix lead the nation in industrial demand

Article originally posted on CoStar on June 4, 2026

The Southwest has continued to drive industrial growth over the past 12 months. Dallas-Fort Worth and Phoenix have both emerged as national leaders in demand, reporting 29 million and 20.7 million square feet of net absorption.

Net absorption measures the change in occupied inventory and is the key demand metric for the commercial real estate industry.

New supply has been the primary catalyst for both markets, with a combined 54 million square feet constructed since the start of 2025 and another 52 million square feet currently underway. The unprecedented wave of construction provides users with a deep pool of modern, institutional-grade expansion options and frees up capacity for demand formation to occur.

In Dallas, demand has been driven not by data center users but by auxiliary players in the space. A primary example of this is the largest move-in so far in 2026: Stellar Energy’s 1.15 million-square-foot site in Alliance Westport 24. The company produces modular cooling systems for hyperscale artificial intelligence users.

This is further backed up by many of the other million-square-foot-or-greater move-ins. Among the seven new arrivals within this size range, more than half have been tied to these users. The biggest player is Google, which has acquired over 2 million square feet of warehouse space in the past year to store data center equipment for its planned expansions throughout the region.

Data center activity has also ramped up in Phoenix, where an arid climate, lack of natural disasters, available land and stable power grid are supportive of data center development.

At least 12 new data centers have been built in the Greater Phoenix area since the start of 2025, spanning nearly 4 million square feet. Google, Meta, QTS and Aligned Data Centers were among the recent additions, and millions of more square feet of new data center space are in the planning and development pipeline.

While data center-related news captures headlines, logistics and distribution users still dominate industrial tenant demand in both markets, and are responsible for many of the largest space commitments in Phoenix and Dallas-Fort Worth over the past year.

Logistics firms like Hayes, which acquired space at Gateway Crossing Logistics Park and several other sites throughout North Texas, and DSV, which leased a 1.05 million-square-foot facility at Northlake 35 Logistics Park in north Fort Worth, have also driven some of the largest leases in recent months.

Other distribution nodes for firms like Dick’s Sporting Goods have also driven demand, with the company opening a major 804,000-square-foot facility in south-central Fort Worth. The region has even benefited from large manufacturers setting up shop in the region. This includes DrinkPak’s 1.4 million-square-foot, built-to-suit bottle manufacturing facility, which was last year’s largest move-in.

In Phoenix, the West Valley, which includes Glendale, Goodyear, Buckeye and Surprise, remains the most-active traditional industrial region in the metropolitan area, receiving the most investment, development and tenant interest.

The area’s robust population growth provides a deep pool of labor and customers for industrial users, while infrastructure and location advantages, like the I-10 and Loop 303 freeways, provide strong connectivity.

In the West Valley, DHL signed on for a total of 1.7 million square feet across three newly built logistics properties so far this year, the Valley’s largest space commitment. Additionally, Amazon leased 1.1 million square feet at Caprock West 202 Logistics in December 2025 and another 1.2 million square feet at Southern Industrial Center in March 2026.