PHOENIX, ARIZONA (July 16, 2026) — Metro Phoenix industrial market continued to strengthen during the second quarter of 2026, as robust tenant demand pushed vacancy lower, supported strong absorption and encouraged developers to rebuild the construction pipeline.
The market recorded 4.7 million square feet of net absorption during the quarter, while overall vacancy declined to 9.6%, according to CBRE’s Phoenix Industrial Figures report for Q2 2026. Approximately 1.5 million square feet of new industrial space was delivered, and the volume under construction increased to 18.4 million square feet. The average monthly triple-net asking lease rate rose to $1.09 per square foot.
Quarterly absorption was down 7.7% from the first quarter but remained 7.5% higher than during the same period last year. Vacancy fell 70 basis points from 10.3% in the first quarter and was 260 basis points below the 12.2% rate recorded one year earlier.
Direct vacancy decreased from 9.7% to 8.9%, while sublease vacancy remained unchanged at 0.7%. Approximately 3 million square feet of sublease space was available across the Phoenix industrial submarkets tracked by CBRE.
“Over the last three years, cumulative net absorption reached 47.7 million square feet, the highest it has ever been as Phoenix continues to grow into a Tier 1 market,” CBRE stated in the report.
During that same three-year period, developers delivered approximately 77.5 million square feet of new industrial space. Although the construction pipeline reached a high of 48.8 million square feet in 2023, development activity subsequently contracted as the market worked to absorb the wave of new supply.
That adjustment appears to be reversing.
The 18.4 million square feet under construction at the end of the second quarter represented a 31.2% increase from the previous quarter and a 59% increase from one year earlier. The pipeline had fallen to approximately 10.2 million square feet by the fourth quarter of 2025 before beginning to rebuild in 2026.
Construction activity was concentrated in the Southwest Valley, where approximately 7.6 million square feet was underway, according to CBRE’s submarket statistics. The Southeast Valley followed with approximately 5.6 million square feet under construction, while the Northwest Valley had nearly 2.6 million square feet underway.
Major projects contributing to the pipeline include three large logistics developments in the Southwest Valley, the LG Energy battery manufacturing facility in the Southeast Valley and the first phase of the Amkor testing facility in the Northwest Valley.
The Southwest Valley also remained the market’s strongest demand center, accounting for approximately 3.1 million square feet of second-quarter net absorption. The Southeast Valley recorded 1.1 million square feet, followed by the Northwest Valley with 440,000 square feet and the Northeast Valley with 143,000 square feet.
The Airport Area was the only submarket to post negative absorption, returning approximately 102,000 square feet during the quarter.
CBRE noted that tenants are demonstrating a growing preference for newer, higher-quality projects on the outskirts of the metro area, where rental incentives and more competitive lease rates are helping attract users from more centrally located properties.
Leasing activity totaled 10.6 million square feet during the quarter, down 9.4% from the first quarter but 44.6% higher than a year earlier. Combined first- and second-quarter leasing reached a record 22.3 million square feet for the first half of the year.
Several large transactions helped drive that performance. DHL signed a nearly 1.19-million-square-foot lease near Reems Road and Northern Parkway and an additional 403,000-square-foot lease on Glendale Avenue.
Fluidstack completed two Southwest Valley leases totaling approximately 1.15 million square feet. Other major transactions included a 387,000-square-foot DiversiTech lease, a 284,000-square-foot Lam Research lease and a 270,000-square-foot Komatsu America lease in the Southeast Valley.
Industrial rents also moved higher as vacancy tightened. The average asking rate of $1.09 per square foot represented a 2.8% quarterly increase and a 0.9% year-over-year increase.
The Northeast Valley commanded the market’s highest average asking rent at $1.76 per square foot, followed by the Airport Area at $1.19 and the Southeast Valley at $1.16. The Southwest Valley remained the most affordable major submarket at an average of 91 cents per square foot.
Vacancy varied considerably across the Valley. The Northeast Valley recorded the lowest rate at 6.7%, followed by the Airport Area at 7.5%, the Northwest Valley at 7.8% and the Southwest Valley at 8.9%. The Southeast Valley posted the highest vacancy at 13.8%.
Despite uneven conditions among individual submarkets and building sizes, the combination of falling vacancy, record first-half leasing and renewed construction activity indicates the Phoenix industrial market is steadily absorbing the substantial development completed during the past several years.