The Phoenix commercial real estate market is experiencing a vigorous resurgence, driven by a confluence of population growth, corporate relocations, and a shifting national landscape that continues to favor Sun Belt cities. In a region once seen primarily as a retirement haven or secondary market, Phoenix is rapidly asserting itself as a primary destination for institutional capital and cutting-edge development.
Sun Belt Momentum Continues
Phoenix has emerged as a poster child of the Sun Belt surge—a trend defined by the migration of residents and companies from the Northeast and West Coast to more affordable, lower-tax states in the South and Southwest. Arizona’s favorable business climate, combined with its relative affordability and growing infrastructure, has transformed the state into a magnet for commercial investment.
According to a Q1 2025 report by CBRE, Phoenix ranked among the top five U.S. cities for net absorption of industrial space, tallying more than 9 million square feet. This reflects a broader shift in supply chain logistics and e-commerce, with the region’s proximity to California providing cost-effective access to West Coast ports without the regulatory and tax burdens.
Industrial and Logistics Lead the Charge
The industrial sector is the undeniable frontrunner of Phoenix’s commercial growth. In recent quarters, global brands such as Amazon, Walmart, and Intel have expanded their regional operations. Developers have responded in kind, with speculative and build-to-suit projects dotting the outskirts of Maricopa County.
“We’re seeing a record pace of demand that’s simply not letting up,” said Brian Rosella, Senior Vice President at Kidder Mathews. “Tenants are prioritizing speed-to-market and Phoenix offers both the space and the speed.”
Vacancy rates for industrial properties in Phoenix dropped below 4% in early 2025, and rents have increased by nearly 12% year-over-year, driven by both organic growth and a pipeline of speculative construction that is still struggling to keep pace with demand.
Office Sector Shows Signs of Reinvention
While the office sector nationwide continues to grapple with post-pandemic uncertainty, Phoenix is witnessing a selective renaissance. Demand is shifting from traditional downtown towers to suburban and mixed-use developments offering flexibility, wellness features, and parking convenience.
The Price Corridor in Chandler and the Camelback East area have become hotspots for Class A office leasing, particularly among tech and financial services firms. Companies like Allstate and PayPal have increased their office footprints, citing lower occupancy costs and a more competitive labor market.
Multifamily and Mixed-Use Complement Growth
Commercial momentum is fueling complementary development in the multifamily and mixed-use segments. Over 18,000 new apartment units are expected to deliver across the metro area by the end of 2025, according to data from Colliers.
Many of these projects are strategically integrated with retail, office, and public space components, reflecting a preference for lifestyle-centric urban design. Areas such as Tempe and Downtown Phoenix are increasingly characterized by vertical, walkable communities catering to young professionals and remote workers seeking amenities over square footage.
Institutional Capital Follows the Trend
Institutional investors are taking notice. In the last 12 months, Phoenix has seen a sharp rise in cross-border capital, REIT investment, and portfolio acquisitions. Blackstone, Prologis, and Starwood Capital have all closed eight- and nine-figure deals in the industrial and multifamily sectors, signaling confidence in long-term growth.
“Phoenix has crossed the threshold from opportunistic to core market,” noted Jessica Morin, Head of U.S. Office Research at CBRE. “Institutional money is now treating Phoenix the way it historically treated Dallas or Atlanta.”
Challenges Remain Amid Optimism
Despite its upward trajectory, Phoenix faces several challenges. Water scarcity, a long-standing concern in Arizona, has prompted some developers and municipalities to revisit zoning and permitting strategies. Meanwhile, rapid growth has strained transportation networks and raised affordability concerns for longtime residents.
Still, local policymakers are working to address these issues proactively. The city has invested heavily in light rail expansion and sustainable infrastructure initiatives, while exploring tax incentives for adaptive reuse and vertical density in urban cores.
Looking ahead, the Phoenix commercial real estate market appears poised for continued growth. Its strategic location, pro-business policies, and expanding labor pool make it an attractive bet for companies and investors alike.
As national trends favor decentralization and value-driven decision making, Phoenix is not just keeping pace—it’s setting the tone for what a next-generation growth market looks like.
Sources: CBRE, Colliers, Kidder Mathews, The Real Deal, HousingWire
