Phoenix industrial demand shifts to mid-bay as large-box supply remains scarce
JLL releases Q3 2026 Phoenix Industrial Market Overview
The Phoenix office of JLL has released its Q3 2026 Phoenix Industrial Market Overview, noting vacancies holding steady, net absorption moderating, asking rents rising and the construction pipeline expanding as the Valley’s industrial sector heads into year-end.
Phoenix's industrial market saw absorption moderate in Q3 2026, with total net absorption reaching 3.2 million square feet, roughly half the pace of the recorded 6.3 million square feet absorbed in the previous quarter.
According to the report, this moderation is a structural shift rather than a demand signal, as Phoenix has become virtually exhausted of large-block industrial availability. Without this large-box supply to absorb, headline figures have pulled back. Instead, Q3 absorption reflects a broadening of demand into mid-bay and small-bay product — where the greatest concentration of available supply remains and where higher per-square-foot rents have driven the average asking rate to a new cycle high of $1.01 per square foot, up from $0.94 per square foot the previous quarter.
Despite the slowdown, the year-to-date absorption climbed to 16.0 million square feet, already near 2025's total 17.0 million square feet, with one quarter remaining. Total vacancy edged up to 9.5%, though it remains significantly below the 13.2% recorded a year ago. The modest uptick reflects a wave of new deliveries entering the market as year-to-date completions reached 6.9 million square feet.
"Metro Phoenix has been rapidly working through its inventory of available large-box space, and while scaled occupiers continue to view the market favorably, they are facing fewer existing options, requiring them to plan further ahead in their leasing and investment decisions," said JLL Executive Managing Director John Lydon. "New construction will help meet some of our future demand, and we may see more build-to-suit activity from companies looking for customized space. But Phoenix's growth story has also expanded beyond the largest occupiers, and that is reflected in stronger activity across mid-bay and smaller-format space. The diversification is creating a healthier, more balanced metro Phoenix industrial sector and is a very positive indicator for sustained momentum among all users and product types."
The West Valley led leasing activity in Q3, recording over 5 million square feet of leasing volume and accounting for the majority of market activity. The largest transaction in the cluster was a confidential 3PL 1.15 million-square-foot lease in the Northwest submarket.
The Southeast Valley contributed over 3 million square feet of leasing volume, led by Logistics Insight's 250,000-square-foot renewal, while Brinkman Construction's 204,337-square-foot new lease in the Gilbert submarket was the largest new lease in the cluster.
Looking ahead, the JLL report expects net metro Phoenix industrial absorption to trend upward through the remainder of 2026 and into 2027, supported by pre-committed large block developments coming online and a pipeline that has grown to 20.0 million square feet under construction.
Vacancy is expected to remain stable or edge upward amid rising deliveries, depending on momentum of the mid-bay rebound while large-box space remains tight. Overall, Phoenix industrial sentiment remains constructive, with the market's manufacturing growth, nearshoring tailwinds and large-scale infrastructure investment supporting the long-term demand outlook.
In Phoenix, JLL is a market leader employing more than 600 of the region’s most recognized industry experts offering office, industrial, retail, healthcare and data center brokerage, tenant representation, facility and investment management, capital markets, multifamily investments and development services, and related services within the real estate leasing, investment and management process. For more news, videos and research resources, please visit JLL’s newsroom.
– ends –
About JLL
JLL (NYSE:JLL) is a leading global commercial real estate services and investment management company with annual revenue of $26.1 billion, operations in over 80 countries and a global workforce of more than 112,000 as of June 30, 2026. For over 200 years, clients have trusted JLL, a Fortune 500® company, to help them confidently buy, build, occupy, manage and invest across a variety of industries and property types, including office, industrial, hotel, multifamily, retail and data center properties. Driven by our purpose to shape the future of real estate for a better world, we help our clients, people and communities SEE A BRIGHTER WAY. Powered by rich global datasets and leading technology capabilities, we provide coordinated, end-to-end delivery of real estate services for a broad range of global clients who represent a wide variety of industries. Through LaSalle Investment Management, we invest for clients on a global basis in both private assets and publicly traded real estate securities. For further information, visit jll.com.
Comments