Phoenix’s industrial developers are thinking outside the big box

Article originally posted on CoStar on September 9, 2025

The Phoenix industrial market is at the tail end of a historic construction boom that has dramatically reshaped the Valley’s landscape.

Since the start of 2023, about 80 million square feet of gross industrial space was completed in Phoenix, outpacing the market’s cumulative construction total from 2008 to 2019, as well as the entire existing inventory of Palm Beach, Florida.

The 19% increase in industrial stock during that time ranked Phoenix as the fourth-fastest-growing market in the nation among the 74 markets with at least 100 million square feet of inventory. For comparison, the United States as a whole notched inventory growth of about 5.7%.

Nearly 90% of completions during that time were for buildings larger than 100,000 square feet, sometimes referred to as “big-box” properties. Additionally, while new manufacturing, data center and flex industrial space was built, the bulk of supply additions was distribution and warehouse buildings.

Over the past few years, however, construction for large logistics-oriented properties has slowed considerably. In mid-2023, during the height of the construction boom, about 44 million square feet of warehouse and distribution space larger than 100,000 square feet was underway, more than 30 million square feet of which was being built on a speculative basis, or without a tenant in place.

A pullback in construction starts allowed the development pipeline in this segment to slow to around 11 million square feet as of the second quarter of 2025. Less than 9 million square feet of large, speculative logistics space is now underway, down more than 70% from the peak a few years ago.

The rapidly easing pace of new completions provides some supply-side relief for the Phoenix industrial market. The steady rise in vacancy that has occurred since the start of 2023 is finally showing signs of leveling off, and a further recovery in property performance could take hold next year.