2nd Qtr. 2025 Phoenix Industrial Report

Industrial building development in metro Phoenix has slowed, but some warehouse/distribution construction continues.  Lease rates have dropped during 2025, and more free rent is offered. Free rent preserves the higher lease rate for later and reduces the 'effective' lease rate. Leasing by quality tenants and the size of leases was stronger in Q2. 

-The largest 9 leases for Q2 totaled 3,128,466 million sq. ft. compared to a cumulative 2.4 million sq. ft. for 10 leases in 1Q 2025.

-5,222 million sq. ft. of existing, sublease, or newly constructed space came on the market in Q2.

-Most of the top 9 leases completed in the first quarter started at about 200,000+ (184,368 smallest). Financially strong tenants, like a distribution center for a national retailer, are committed for 5+ years. Ball Mfg. makes metal containers, Xnrgy manufacturers for data centers, etc. These companies have long-term commitments and provide good-paying jobs.   

Lease rates are still softening in the small bay spaces. A friend leased a 10,000 sf space about a year ago; the tenant is now trying to sublease the space, asking about 7-10% less than last year's lease rate.

In July, I worked with a tenant whose building had been sold. He could not come to terms with the new Landlord. We were able to find a 26,000 sf building with deferred maintenance. The tenant will repair the building and pay a reduced lease rate for the first five years of the lease.  

Largest Leases 2nd Qtr. 2025 in Phoenix (sq. ft.)

Retailer       521,302                       United Sports Brands  245,519 

Ball Mfg.      514,000                       Swire                           241,172  

Verst Group 331,683                       Voltaris                       190,516

Xnergy         324,800                       Air2O                          184,368

JA Solar       272,497                            

Sale prices for industrial buildings continue to soften. The 1.1 million sf below sold for $111.00 psf, less than a similar-sized building 2 years ago. 

The second sale was for two buildings in Tempe, with I-10 freeway frontage. This development did sell for close to $300 psf.

Largest Industrial Sales

1,156,860 sq. ft.  $111 psf        Fully leased 

357,103 sq. ft.     $289 psf      2 building Fully leased buildings

Over the past weeks, I have worked on a summary of 100,000 sq. ft. +  warehouse/distribution space in Metro Phoenix.

Here are some early details:

-45 million sf of vacant industrial space in Metro Phoenix.

-The majority of the vacant space has been constructed since 2020.

-Over 100 buildings are vacant, and most of those have never been occupied.

- Over 25 industrial buildings are under construction.  

Will have more information on this building summary in the coming weeks. 

Wall Street Journal

CoStar