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7/23/26
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This report was provided by real estate services firm Kidder Matthews
Market Highlights
• Total lease transaction totaled 7.9m sf
• Direct net absorption reached 5.4m sf.
• Deliveries decreased 66% YOY.
Market Drivers
• Arizona advanced its global technology leadership with the opening of the Taiwan Trade and Investment Service Center in Phoenix, strengthening collaboration, trade and foreign direct investment opportunities. These efforts continue to elevate Arizona’s national leadership in semiconductors and advanced technology while promoting the state as a premier destination for innovation and global investment. Construction is underway on the $7 bil Halo Vista development, a 2,300-acre innovation district adjacent to TSMC’s expanding Arizona campus. The project is poised to support Arizona’s rapidly growing semiconductor ecosystem, attract global companies and investment, and create thousands of jobs across advanced industries.
• The total vacancy rate declined to 11.4%, marking a 210 bps YOY decrease, while total availability fell 190 bps to 13.6%.
• Leasing activity reached 7.9 msf, supported by 5.4 msf of direct net absorption, with Glendale, Chandler North/Gilbert, and Goodyear posting the strongest gains amid continued industrial demand.
• Direct average asking rents for spaces 10k sf and larger increased 3% year over year to $1.18 PSF NNN in Q2.
• At the same time, new construction slowed significantly as the market continued to absorb existing inventory, with only 2.8 msf delivered YTD, a 66% YOY decline.
Economic Review.
According to the Arizona Office of Economic Opportunity, Phoenix metro’s unemployment rate increased 40 bps YOY to 4.1% in May. Arizona’s labor market continues to navigate slower job growth and a tightening labor force, while semiconductor expansion, advanced manufacturing investment, and infrastructure growth continue to drive demand for specialized talent.
Near Term Outlook
Vacancy rates are expected to continue declining through the remainder of 2026 as strong absorption supports market fundamentals; however, ongoing West Phoenix development will add new supply and maintain competitive conditions.
The information in this report was composed by the Kidder Mathews Research Group.
Data source: CoStar, AZ Office of Economic Opportunity, PBJ
This report was prepared by Kidder Mathews Vice President of Research Gary Baragona
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