Phoenix remains a well-positioned market for industrial tenants: Here’s why Article originally posted on AZ Big Media on October 16, 2025 Despite Phoenix industrial construction activity continuing to slow down in 2025, 11.9 million square feet remain in the pipeline, helping Phoenix remain a well-positioned market for industrial tenants, according to an analysis from Kidder Mathews. Market Highlights CONSTRUCTION activity totaled 11.9 million square feet. DIRECT NET ABSORPTION reached 2.4 million square feet. TOTAL LEASING ACTIVITY YTD is 11.3 million square feet. MARKET DRIVERS Phoenix remains a well-positioned market for industrial tenants with 460 million square feet in total inventory, making it a booming hub for manufacturing and emerging technologies. The total inventory in Phoenix for manufacturing and warehouse space is 284 million square feet. Construction activity is continuing to slow down in 2025, with 11.9 million square feet currently underway, a significant decrease from 28 million square feet 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 2.9 million square feet, approximately 8M SF below YOY. Glendale leads all Phoenix submarkets in YTD deliveries with 4.3 million square feet, followed by Deer Valley with 1.3 million square feet. 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 4.8 million square feet in 2Q25 coupled with 6 million square feet in total leasing activity. Manufacturing and warehouse vacancies continue to rise with 39.7 million square feet of vacant space across the valley. An additional 10M SF of warehouse and manufacturing space are under construction. ECONOMIC 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. NEAR 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 Property Submarket Square Feet Sale Price Price Per Square Foot Buyer Seller Sarival Logistics Center – Bldg A Glendale 1,156,860 $128,200,000 $110.82 EQT Exeter Real Estate Income Trust Blackstone Inc. Sight Logistics Park Tempe Southwest 357,103 $103,050,000 $288.57 CBRE Investment Management ViaWest Group Tailwinds at Gateway Chandler N/Gilbert 172,451 $51,500,000 $298.64 McCarthy Cook & Co Cedar Point Enterprises Seventy5 Business Park Tolleson 222,396 $46,750,000 $210.21 MIG Real Estate Baron Properties Blue Cactus Logistics Surprise 257,920 $44,500,000 $172.53 Hillwood Development Corp BlueScope Properties Group Significant Lease Transactions Property Submarket Square Feet Transaction Date Landlord Tenant Litchfield Palms – Bldg C Goodyear 521,302 Jun-25 Johnson Development Associates Project Braves Commerce @ 303 Glendale 331,683 May-25 Steelwave Vestgroup Logistics Centris Industrial at Mesa – Bldg B Chandler N/Gilbert 324,800 May-25 Centris Industrial Undisclosed Coldwater Depot Logistics Center Goodyear 302,609 Jun-25 Avondale City Engineering Freeport Logistics 95th Avenue Logistics – Bldg 2 Tolleson 272,497 Apr-25 KKR & Co LP JA Solar The information in this report was composed by the Kidder Mathews Research Group.