Phoenix Industrial & Warehouse Market Report | Q1 2026

Phoenix’s industrial warehouse market absorbed the largest speculative construction wave in the Southwest’s history — over 91 million SF delivered in three years — and is now rebalancing. Q1 2026 absorption of 4.8–5.0 million SF decisively outpaced the 1.4 million SF of new supply, pushing vacancy down and confirming that the oversupply peak is behind us.

What makes Phoenix unique among recovering markets is the semiconductor and advanced manufacturing catalyst. TSMC, Amkor, Intel, and dozens of supply chain companies are building a semiconductor ecosystem in the Valley that creates industrial demand independent of the logistics cycle. For businesses looking for warehouse space in Phoenix, the headline vacancy numbers mask a deeply bifurcated market where small-bay space is tight and big-box is oversupplied.

Market Snapshot: Q1 2026

The wide range in reported vacancy (9.2% to 14.4%) reflects different geographic scopes and inclusion criteria. Colliers reports the narrower Phoenix MSA; Savills includes a broader definition. Both show the same trend: vacancy is declining as absorption outpaces new supply.

Rent Trends: Positive Despite Elevated Vacancy

Average asking rents increased 3–6% year-over-year to approximately $1.18–1.19/SF NNN per month ($14.16–14.28/SF annually), a counterintuitive result given elevated vacancy. The explanation: rent growth is concentrated in modern Class A product and small-bay infill space, while big-box logistics buildings in suburban corridors are competing on concessions.

Small-bay and infill properties command premium pricing, with Scottsdale Airpark at $19–21/SF annually and Deer Valley/North Phoenix at approximately $17.60/SF — both driven by proximity to the semiconductor ecosystem and limited new supply in those corridors. Larger suburban logistics buildings in West Phoenix and Mesa Gateway offer the most tenant-friendly terms.

Construction: Pipeline Contracting

Deliveries in 2025 totaled 15.8 million SF — down 54% year-over-year as developers shifted focus to absorbing existing inventory. The pipeline is contracting further as lending conditions tighten and pre-leasing requirements increase. West Phoenix is the exception, where some new warehouse development continues, but the overall trend is sharply lower new starts.

This supply deceleration is the primary catalyst for vacancy compression. With absorption running at 18–20 million SF annually and deliveries falling to the low teens, the math favors vacancy decline through 2026–2027.

Submarket Breakdown

Deer Valley / North Phoenix

Ground zero for the semiconductor ecosystem. TSMC’s $165 billion campus and related supply chain activity have made this the premium industrial corridor, commanding approximately $17.60/SF annually — 30% above the metro average. Modern buildings with strong power infrastructure are in highest demand. Small-bay vacancy is tight here.

Sky Harbor / Airport Area

The traditional logistics hub with excellent transportation access (I-10, I-17, Loop 202). Rents range from $13–16/SF NNN annually. Mix of e-commerce fulfillment, 3PL, and freight forwarding operations. Well-established workforce and infrastructure.

West Phoenix / Goodyear / Tolleson

Where the bulk of new big-box construction has landed — and where the highest vacancy exists. Large-format logistics buildings are competing aggressively for tenants. Rents are competitive ($11–14/SF annually) with concessions available. Good fit for cost-sensitive distribution operations that need modern building specs at lower rents.

Southeast Valley / Chandler / Gilbert / Mesa

Strong advanced manufacturing and logistics demand, boosted by Amkor’s $7B facility and DSV’s 950K SF regional headquarters groundbreaking in Mesa. North Chandler/Gilbert posted 1.1 million SF of absorption driven by semiconductor supply chain needs. Rents range from $13–16/SF NNN.

Scottsdale Airpark

The tightest submarket in the metro for small-bay and flex industrial. Typical buildings of 1,600–50,000 SF with the highest rents ($19–21/SF annually). Lowest vacancy in the market. Best for professional service businesses, light assembly, and owner-users who prioritize location.

Co-Warehousing & Flexible Warehouse Space in Phoenix

Phoenix’s co-warehousing market benefits from the extreme bifurcation between small-bay and big-box vacancy. With small-bay vacancy at 4–6% while the overall market shows double-digit vacancy, flexible space operators face limited competition from traditional landlords in the sub-5,000 SF segment.

Who’s leasing: Semiconductor supply chain vendors needing proximate storage and staging, e-commerce operators serving the fast-growing Phoenix metro (now the 5th largest US city), contractors and trades supporting the construction boom, and food producers serving the Valley’s expanding population.

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

Key Trends to Watch

1. Semiconductor Ecosystem Reshaping Industrial Demand

Arizona ranks #1 nationally for semiconductor investment, with $195.7 billion in international investment announced since 2020 and 60+ industry expansions. TSMC, Amkor, Intel, and their supply chains are creating industrial demand that is structural and long-term — not tied to the logistics or e-commerce cycle. This is reshaping which Phoenix submarkets command premiums and changing the tenant mix from pure logistics to advanced manufacturing and R&D.

2. Small-Bay vs. Big-Box: The Widest Gap in the US

The spread between small-bay vacancy (~5%) and large-format vacancy (16%+) is among the widest of any US market. Developers built almost exclusively large-format logistics buildings during the 2021–2023 boom — only 4–5% of new construction targeted small-bay. This structural imbalance will persist for years, as no new small-bay supply is being built at scale. See Small-Bay vs. Big-Box: What the Vacancy Gap Means.

3. Investment Capital Flooding In

Phoenix industrial investment hit $5.1 billion in 2025, nearly tripling the metro’s pre-pandemic annual average. Institutional and private capital are both scaling in, particularly for stabilized modern logistics assets and infill small-bay properties. Q1 2026 alone saw $1.1 billion in transactions at an average $245/SF. For national context, see How Tariffs Are Reshaping Warehouse Demand in 2026.

4. Delivery Slowdown Is the Catalyst

With deliveries down 54% YoY and absorption running at 18–20 million SF annually, the math favors vacancy decline through 2026–2027. West Phoenix is the only corridor still seeing meaningful new starts. Everywhere else, the pipeline is contracting and the rebalancing is accelerating.

Outlook: What to Watch in Q2–Q3 2026

Phoenix is emerging from the largest supply wave in its history and the rebalancing is underway. Q1 absorption outpaced new supply by roughly 3:1, vacancy is declining, and the semiconductor catalyst adds a demand driver that no other recovering market has.

Expect vacancy to continue declining through 2026 as deliveries slow and absorption holds. The pace of recovery will vary dramatically by submarket and building size — small-bay and semiconductor-adjacent corridors will tighten fastest.

Rents will bifurcate further. Small-bay and infill product will see continued growth (3–6%+). Big-box logistics in suburban corridors will see flat to modest increases as concessions slowly burn off.

The semiconductor story is just beginning. TSMC’s first fab is operational, with additional facilities in various stages of development. The downstream supply chain demand will unfold over years, not quarters. This is a structural shift for Phoenix industrial that positions the market differently from any other post-pandemic recovery story.

The risk: Big-box oversupply takes longer to absorb than expected, keeping overall vacancy elevated even as small-bay tightens. A slowdown in semiconductor investment or delays in TSMC expansion timelines would also reduce the demand catalyst.

Data sources: Colliers Phoenix Industrial Q1 2026, Savills Phoenix Q1 2026 Industrial Report, Matthews Phoenix Industrial Q1 2026, Kidder Mathews Phoenix Industrial Q1 2026, Avison Young Phoenix Industrial Market Report, Cushman & Wakefield U.S. Industrial MarketBeat Q1 2026, WareCRE marketplace data (May 2026).