Phoenix’s industrial vacancy rate continues to climb as a wave of new developments outpaces demand, a trend that could extend into 2026. Over the past 12 months, developers delivered an unprecedented 34.7 million SF of industrial space, far exceeding the pre-pandemic annual average of 8 million SF. This rapid expansion is driving a normalization of market conditions. Demand remains resilient despite cooling from the frenzied levels of 2021-2022. Leasing activity modestly accelerated in 2024 and is 33% above the 2017-2019 annual average, driven by logistics, construction, and manufacturing tenants. The West Valley remains a key hub, underscored by Amazon’s trio of 1+ million SF leases last year. These factors contributed to 16.3 million SF of net absorption in the past year, ranking Phoenix third in the nation. However, demand hasn’t kept pace with supply, pushing vacancy from 4.2% in mid-2022 to 12.5% today, with further increases likely. Larger properties over 100,000 SF are experiencing the sharpest rise in vacancy, now at a 15-year high above 16%, with another 8 million SF of unleased space underway. Smaller properties under 50,000 SF are faring better, with vacancy in the high 4% range, though rising. The surge in supply is slowing rent growth. Average asking rents rose just 2.9% in the past year, down from 14.5% in late 2022, with rent growth expected to hit a decade-low in the coming quarters. Infill and small bay properties may maintain stronger pricing power compared to large facilities on the metro’s outskirts. With 18 million SF under construction—60% speculative—vacancy will likely continue rising through 2024. However, a slowdown in new starts suggests a future supply pullback, positioning Phoenix for tightening vacancies and a potential rent growth rebound by 2026.