Phoenix Industrial & Warehouse Market Report | Q3 2026

Phoenix’s industrial market tightened again in Q3 2026. Overall vacancy fell to 10.3%, 40 basis points lower than in Q2 and 300 basis points lower than a year ago, as muted new supply met steady demand. Only 9.0 million SF delivered over the past 12 months, 68% below the 2022–2025 annual average, while net absorption reached 20.5 million SF over the same span.

The mix of demand shifted. The Southeast Valley led net absorption with 1.8 million SF, and the Airport Area posted its strongest quarter since at least 2000, while the Southwest Valley led leasing with 4.8 million SF. The pipeline also jumped to 20.5 million SF, most of it speculative. For businesses looking for warehouse space in Phoenix, submarket and building size will shape their options more than the metro average.

Market Snapshot: Q3 2026

Figures are from Cushman & Wakefield’s Q3 2026 Phoenix Industrial MarketBeat. Q2 2026 comparisons use the values as restated in its Q3 2026 U.S. national tables, which also give the annual rent equivalents. Rents are NNN asking rates quoted per month, the Cushman & Wakefield convention for Phoenix; multiply by twelve to compare them with markets quoted per year.

Rent Trends: Up for a Third Straight Quarter

Overall asking rents reached $1.13/SF/month NNN ($13.51/SF/year), up 1.7% from the prior quarter’s restated $13.29/SF/year and 3.5% from $13.05 a year earlier (WareCRE calculations from C&W’s national tables). Direct asking rents rose to $1.16/SF/month NNN. C&W’s Phoenix report says both have now risen for three consecutive quarters for the first time since 2022, which it says may signal a return to steady growth as vacancy declines. Its national annual series shows a dip in Q1 2026, so on that basis rents have risen for two straight quarters.

Rents vary widely across the metro. The Southwest Valley asks $0.91/SF/month overall, against $1.48 in the Northeast Valley, $1.19 in both the Southeast and Northwest Valleys and $1.18 in the Airport Area, where rents rose 3.2% in Q3, the most of any major market. By product, manufacturing space rose 2.3% to $1.15 and warehouse/distribution 1.2% to $1.03, while high-technology and office service space slipped 0.2%, to $1.31 and $1.37.

Construction: Pipeline Climbs to a Two-Year High

Phoenix has 20.5 million SF under construction, an 11.0 million SF increase from the end of 2025 and the highest level since mid-2024. Speculative construction totals 13.4 million SF and build-to-suit 7.1 million SF, both more than double their year-end 2025 levels. The Southwest Valley’s pipeline grew more than four-fold, from 2.2 million SF in Q4 2025 to 10.5 million SF. Deliveries total 6.3 million SF year to date, well below the 13.6 million SF of net absorption over the same period.

C&W reads the jump in groundbreakings as a sign that developers are regaining confidence in tenant demand and rent growth. The new supply will reach the market over the next several quarters, so vacancy keeps compressing only if absorption holds near its recent pace. The largest projects underway are Burlington’s 2.2 million SF build-to-suit in the Southwest Valley and LG Energy Solution’s 1.5 million SF project in the Southeast Valley, followed by Prologis’ 1,432,922 SF Airpark Logistics Center Phase II in the Southwest Valley.

Submarket Breakdown: Southeast Valley Led Q3 Absorption

Southwest Valley

The Southwest Valley is the largest submarket at 206.2 million SF and the center of big-box bulk distribution. It absorbed 1.6 million SF in Q3 and 9.8 million SF year to date, and it led leasing with 4.8 million SF in the quarter and 14.4 million SF year to date, its highest three-quarter total on record. Vacancy is 9.3%, and overall asking rents of $0.91/SF/month NNN are the lowest in the metro. The quarter’s five largest leases were all here, led by DHL’s 1,145,955 SF at VT303. C&W counts more than 4.3 million SF of signed leases due to commence here in Q4.

Southeast Valley

The Southeast Valley led the metro in net absorption for the first time since mid-2017, at 1.8 million SF in Q3, its 25th straight positive quarter. Its vacancy is still the highest in the metro at 15.2%, and overall asking rents average $1.19/SF/month NNN. The submarket signed 1.8 million SF of new leases in Q3, its second-strongest quarter in four years, and LG Energy Solution’s 1.5 million SF owner-user project is among the metro’s largest under construction.

Airport Area

The Airport Area is Phoenix’s infill, last-touch market, with 70.0 million SF at 9.4% vacancy. It absorbed 428,652 SF in Q3, its strongest quarter since at least 2000, after losses in the first half that leave year-to-date absorption at −12,893 SF. Overall asking rents rose 3.2% to $1.18/SF/month NNN, the largest gain of any major market, and the submarket signed 951,741 SF of leases in the quarter.

Northwest Valley

The Northwest Valley is the metro’s second-tightest submarket at 7.4% vacancy, behind the much smaller Northeast Valley at 6.8%, with asking rents of $1.19/SF/month NNN. It absorbed 205,162 SF in Q3, and 3.0 million SF is under construction. Atkore sold The Yard @ 2525 (275,000 SF) to Reich Brothers for $30.3M, or $110/SF.

Co-Warehousing & Flexible Warehouse Space in Phoenix

The Southeast Valley signed 1.8 million SF of new leases in Q3, its second-strongest quarter in four years, and led the metro in net absorption. The Southwest Valley’s leasing, by contrast, is driven by large-scale transactions, with 13 deals over 100,000 SF in Q3 alone.

For smaller occupiers, the Southeast Valley has the highest vacancy rate in the metro, 15.2%, which gives them unusual negotiating room for a growing metro. C&W expects new semiconductor and data center operations to keep attracting ancillary suppliers, and those firms generate vendor, staging and overflow requirements that suit co-warehousing and small-bay space better than a bulk distribution box.

Browse available co-warehousing and small-bay listings on WareCRE’s Phoenix marketplace.

Key Trends to Watch

1. Absorption Broadened Beyond the Southwest Valley

Net absorption totaled 4.0 million SF in Q3, down from a restated 6.4 million SF in Q2 but spread more widely. The Southeast Valley led for the first time since mid-2017 with 1.8 million SF, and the Airport Area posted its strongest quarter since at least 2000 at 428,652 SF. Year-to-date absorption of 13.6 million SF already exceeds the full-year totals for 2023 (13.2 million SF) and 2025 (12.5 million SF). For national context, see How Tariffs Are Reshaping Warehouse Demand in 2026.

2. The Southwest Valley Still Leads Leasing

The Southwest Valley signed 4.8 million SF of new leases in Q3 and 14.4 million SF year to date, its highest three-quarter span on record, including all five of the quarter’s largest leases. C&W counts more than 4.3 million SF of signed leases scheduled to commence there in Q4, nearly 75% of the metro’s 5.8 million SF total, and expects the submarket to regain the lead in net absorption.

3. Large-Format Space Has Tightened Fastest

Vacancy in buildings of 300,000 SF and up fell to 5.1% from 14.6% a year earlier. Mid-box buildings of 100,000 to 250,000 SF are still 19.7% vacant, despite a 340 basis point decline over the year. A tenant shopping for a mid-box building has far more options than one needing a large distribution box. See Small-Bay vs. Big-Box: What the Vacancy Gap Means.

4. Speculative Construction Is Back

Speculative construction more than doubled from the end of 2025 to 13.4 million SF, and build-to-suit rose to 7.1 million SF. C&W reads the jump as developers regaining confidence in demand and rent growth, though it expects rising costs for construction inputs to keep speculative activity below its 2022–2024 peak. With 6.3 million SF delivered year to date, most of that pipeline has yet to land.

Outlook: What to Watch in Early 2027

Phoenix enters the last quarter of 2026 with falling vacancy, rising rents and a growing pipeline. Vacancy has fallen 300 basis points year over year, rents have risen for three straight quarters, and leasing reached 23.7 million SF year to date, the third-strongest first three quarters on record. C&W expects large leases signed in the past year, along with more than 500,000 SF of build-to-suit deliveries, to support absorption in Q4.

Watch the Southwest Valley move-ins. More than 4.3 million SF of signed leases are scheduled to commence there in Q4. If they do, the submarket should regain the lead in net absorption and push metro vacancy lower.

Expect rent growth to stay uneven. Overall asking rents rose to $1.13/SF/month, but pricing decisions happen within a submarket spread of $0.91 to $1.48. Owners in the Northeast Valley (6.8% vacancy) and the Northwest Valley (7.4%) have the least reason to concede.

Watch the speculative pipeline. 13.4 million SF of speculative space is under construction, 10.5 million SF of the total pipeline sits in the Southwest Valley, and mid-box vacancy is still 19.7%. Absorption will need to stay near its 2026 pace for that supply to land without pushing vacancy back up.

Data sources: Cushman & Wakefield Phoenix Industrial MarketBeat Q3 2026 (metro rents quoted monthly NNN) and U.S. Industrial MarketBeat Q3 2026 (restated Q2 2026 comparisons and annual rent equivalents); WareCRE marketplace data. Each report reflects the most recent vacancy, rental, and construction data available at the time of publication. We refresh our reports as new market data is released, and we’re continually expanding coverage to additional metros.