Phoenix Warehouse Market Report 2025: Your Guide to Valley of the Sun Industrial Space
Last Updated: December 2025
If you’re looking for warehouse space in Phoenix, you’re entering one of America’s fastest-growing industrial markets – and one that’s experiencing a dramatic transformation. The Valley of the Sun has evolved from a secondary Southwest market into a major logistics and manufacturing hub, fueled by California exodus, semiconductor investment, and strategic positioning for Mexico trade.
Let me walk you through what’s really happening in this market, from the West Valley’s explosive growth to the Southeast Valley’s established corridors. Whether you’re a small business owner looking for warehouse space in the nation’s fifth-largest city or a broker helping clients navigate metro Phoenix’s sprawling industrial landscape, here’s what you need to know.
Why Phoenix Has Become a National Industrial Player
MARKET SNAPSHOT: PHOENIX WAREHOUSE FACTS
| Metric | Value |
|---|---|
| Average Lease Rate | $10.75/sq ft NNN (2025) |
| Total Industrial Inventory | 385 million sq ft |
| Current Vacancy | 9.8% (Q3 2025) |
| Historical Vacancy Average | 7.2% (10-year average) |
| Net Absorption (Trailing 12 Months) | 8.2 million sq ft |
| Metro Population | 5.0 million |
| Population Growth (2020-2024) | 11.2% |
The numbers tell part of the story, but here’s what they mean for you: Phoenix has undergone the most dramatic industrial expansion of any U.S. metro in the past five years. The market has added nearly 80 million square feet of new warehouse space since 2020, transforming from an undersupplied market into one with genuine tenant options.
But here’s the opportunity: All that new supply has pushed vacancy to 9.8% – above historical norms. For the first time in years, tenants have leverage. Landlords are offering concessions, and modern Class A space is available at competitive rates. If you’ve been priced out of Phoenix previously, this is your window.
The Submarkets That Matter Most
Southwest Valley (Goodyear, Buckeye, Tolleson)
This is Phoenix’s industrial growth engine. The I-10 West corridor has attracted billions in development, including Amazon, Microsoft, and major logistics operators.
Key characteristics:
- Highest concentration of new Class A development
- Average rates: $9.50-12.00/sq ft NNN
- State Route 303 and I-10 access
- Amazon, Home Depot, UPS major presence
- Luke Air Force Base proximity (consideration for certain uses)
- Master-planned logistics parks with modern specs
Southeast Valley (Chandler, Gilbert, Mesa)
The established industrial base of metro Phoenix, anchored by semiconductor manufacturing and aerospace.
Key characteristics:
- Average rates: $10.00-13.00/sq ft NNN
- Intel, Taiwan Semiconductor (TSMC), aerospace suppliers
- US-60 and Loop 202 access
- Mix of manufacturing and distribution users
- Tighter vacancy than West Valley – 7.2%
- Strong semiconductor supply chain ecosystem
Sky Harbor Airport Area (Tempe, South Phoenix)
The traditional core of Phoenix industrial, with excellent airport adjacency but limited new development opportunity.
Key characteristics:
- Average rates: $11.00-14.00/sq ft NNN
- Direct Sky Harbor International Airport access
- Constrained land for new development
- I-10 access to both east and west corridors
- Infill redevelopment opportunities
- Ideal for time-sensitive air cargo operations
North Phoenix / Deer Valley
The northern industrial corridor, offering relative value with access to Loop 101 and I-17.
Key characteristics:
- Average rates: $9.00-11.50/sq ft NNN
- Mix of older and newer product
- Strong small-business presence
- Loop 101 access improving connectivity
- More affordable option within city limits
- Growing last-mile delivery presence
Glendale / West I-17 Corridor
Emerging industrial submarket connecting Sky Harbor access with West Valley growth.
Key characteristics:
- Average rates: $9.50-11.50/sq ft NNN
- Cardinals/Coyotes sports district adjacent
- I-17 and Loop 101 interchange access
- State Farm Stadium area development
- Good value for regional distribution
What Small Businesses Need to Know
Phoenix’s industrial boom has created real opportunities for small businesses. The combination of population growth, California migration, and new supply means options exist across price points and sizes.
Your advantages in this market:
- Population explosion – 5 million metro residents, growing 2%+ annually
- California alternative – 40-50% cost savings vs. Los Angeles/Inland Empire
- Business-friendly climate – Arizona consistently ranks top-10 for business
- Modern inventory – New Class A space available to smaller users
- Tenant leverage – 9.8% vacancy creates negotiating opportunity
- Mexico trade access – 185 miles to Nogales border crossing
- Year-round operations – No winter weather disruptions (summer heat aside)
- No state inventory tax – Significant savings for distribution operations
Watch out for:
- Summer heat – June-September temperatures exceed 100°F regularly; HVAC critical
- Rising vacancy – Sublease competition increasing; know your comps
- Water concerns – Long-term water availability a strategic consideration
- Sprawl distances – Metro Phoenix is massive; plan logistics carefully
- Labor market tightening – Rapid growth creating wage pressure
- Newer market – Fewer established logistics service providers than mature markets
- Power infrastructure – Verify electrical capacity for high-demand operations
The California Exodus Effect
How California Migration Transformed Phoenix
Phoenix’s industrial transformation accelerated dramatically as California companies sought alternatives to the nation’s most expensive and regulated market:
| Factor | Phoenix | Inland Empire | Los Angeles |
|---|---|---|---|
| Average Rent | $10.75/sq ft | $14.25/sq ft | $18.50/sq ft |
| Vacancy | 9.8% | 7.7% | 5.5% |
| State Income Tax | None | 13.3% (CA) | 13.3% (CA) |
| Regulatory Environment | Business-friendly | Complex | Complex |
| Distance to LA | 370 miles | 50 miles | — |
| Mexico Border Access | Excellent | Good | Good |
For companies that can operate from Phoenix rather than Southern California, the math is compelling. The catch: You’re adding 350+ miles to California-bound freight. For Southwest regional distribution or Mexico trade, Phoenix often wins.
The Semiconductor Catalyst
Taiwan Semiconductor’s $40+ billion Phoenix investment has fundamentally altered the market:
- TSMC Fab 1: 1,200+ acre campus in North Phoenix
- Intel expansion: $20 billion investment in Chandler
- Supply chain attraction: Dozens of semiconductor suppliers relocating or expanding
- Workforce investment: Arizona State University semiconductor programs expanding
For small businesses, this means: supplier opportunities, workforce competition, and a more sophisticated industrial ecosystem than Phoenix offered even five years ago.
Real Numbers from Real Deals
Recent Notable Transactions:
Taiwan Semiconductor (TSMC) – 1,200+ acre campus, North Phoenix
- Largest foreign direct investment in Arizona history
Amazon – Multiple facilities totaling 5+ million sq ft across West Valley
- Fulfillment centers, sortation facilities, delivery stations
Microsoft – Data center campus, Goodyear
- $1 billion+ investment in West Valley infrastructure
Rate Ranges by Submarket:
| Submarket | Rate Range ($/sq ft NNN) |
|---|---|
| Sky Harbor Area | $11.00-14.00 |
| Southeast Valley (Chandler, Gilbert) | $10.00-13.00 |
| Southwest Valley (Goodyear, Buckeye) | $9.50-12.00 |
| Glendale/West I-17 | $9.50-11.50 |
| North Phoenix/Deer Valley | $9.00-11.50 |
| Sublease Opportunities | 10-20% below direct rates |
Operating Cost Considerations:
- Property taxes: Approximately 0.6% of assessed value (favorable)
- Triple net expenses: $2.50-3.50/sq ft annually
- Utilities: Summer cooling costs significant ($0.50-1.00/sq ft premium June-September)
- No state inventory tax – significant savings for high-inventory operations
Looking Ahead: What’s Coming in 2025-2026
The Good:
- Net absorption strong – 8.2 million sq ft absorbed trailing 12 months
- Population growth continues – Phoenix adding 80,000+ residents annually
- Semiconductor boom – TSMC, Intel creating manufacturing ecosystem
- Tenant leverage – Best negotiating conditions in a decade
- Mexico trade – Nearshoring trend benefiting Arizona border access
- California migration – Business relocation pipeline remains active
- Sunbelt fundamentals – Long-term demographic trends favorable
The Challenges:
- Vacancy elevated – 9.8% with additional supply under construction
- Sublease surge – 12+ million sq ft of sublease space competing
- Water availability – Long-term water rights increasingly scrutinized
- Summer operations – Extreme heat creates operational challenges
- Infrastructure strain – Roads, power, water systems catching up to growth
- Speculative development – Some projects may struggle to lease
- Interest rate impact – Affecting development and investment decisions
Making Your Move: Practical Next Steps
If you’re a small business owner:
- Take advantage of current conditions – 9.8% vacancy creates rare tenant leverage
- Explore the West Valley – Newest product at competitive rates
- Negotiate aggressively – Free rent and TI allowances now standard
- Consider sublease options – 12+ million sq ft available below market rates
- Factor cooling costs – Summer HVAC can add $0.50-1.00/sq ft
- Verify building specs – Ensure HVAC, power meet your requirements
- Lock in favorable terms – Current window won’t last forever
If you’re a broker:
- Lead with tenant leverage narrative – Market has shifted dramatically
- Quantify California alternative – Cost comparison is compelling
- Segment by submarket need – Distribution vs. manufacturing have different priorities
- Present sublease options – Significant inventory available
- Emphasize timing – Current conditions represent cycle opportunity
- Understand semiconductor ecosystem – TSMC/Intel driving new demand patterns
The Bottom Line
Phoenix has transformed from a secondary Southwest market into a major national industrial player, and the timing couldn’t be better for tenants. After years of development chasing explosive growth, the market has reached a rare equilibrium where modern Class A space is available, landlords are negotiating, and the fundamentals remain strong.
At 9.8% vacancy, this is the most tenant-friendly Phoenix market in over a decade. The semiconductor investment, California migration, and Mexico trade positioning haven’t changed – what’s changed is that supply has caught up to demand, creating genuine options for businesses of all sizes.
For companies seeking Southwest distribution, Mexico trade access, or an escape from California costs, Phoenix delivers compelling value. The population is growing, the infrastructure is expanding, and the business climate remains welcoming. What you need to decide is whether to act now while conditions favor tenants, or wait and risk the inevitable tightening as absorption catches up with supply.
The Valley of the Sun has arrived as a national industrial market. The question is whether you’ll capitalize on current conditions before the next growth cycle begins.
