The Phoenix industrial market has a shortage of megawarehouses

Article originally posted on CoStar on August 17, 2026

In March 2026, Amazon Web Services signed a 1.2 million-square-foot lease to fully occupy Southern Industrial Center, a recently built megawarehouse in Buckeye, Arizona. (CoStar)

Though a surge in construction over the past five years has caused Phoenix industrial vacancy to climb into the double digits, there is one segment of the market at record lows: megawarehouses.

The Greater Phoenix area is one of the most active logistics markets in the country. The Valley’s strategic location, robust infrastructure, growing population base and low operating costs make it an ideal target for the build-out of supply chains.

Corporate retailers, third-party logistics firms and other distribution-oriented users have snapped up large blocks of industrial space at a blistering pace in recent years, making Phoenix one of the top demand markets in the country.

Tenant demand is especially fierce for the Valley’s largest logistics properties, and while big-box industrial was navigating oversupply conditions just a few years ago, space availability for megawarehouses — defined as those larger than a half-million square feet — is now historically scarce.

The direct vacancy rate for Phoenix logistics properties of all sizes is 11.4%, an improvement of about 190 basis points from the peak in late 2024.

Among those 500,000 square feet or larger, however, direct vacancy has compressed to just 3.4%, down from above 14% just 24 months ago.

So far this year, there have been six industrial leases of 500,000 square feet or more as of Aug. 14, including space commitments from DHL, Fluidstack and Amazon Web Services. In 2025, there were eight such transactions.

Additionally, there has been a notable uptick in owner-user transactions, including the Valley’s two largest single-building industrial sales of 2025. Walmart and Dollar Tree each paid more than $145 million to acquire recently built West Valley warehouses that both span about 1.3 million square feet.

Moving forward, though about 6 million square feet of logistics space is currently under construction in this size tranche, users are moving aggressively for the largest buildings before they even open.

For example, DHL preleased 1.2 million square feet to fully occupy Building D of Northern Parkway Logistics Center in May 2026. The property is still under construction with completion slated for late 2026 or early 2027.

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