I have had the opportunity to discuss the Phoenix commercial real estate market activity consistently since 2022 for Arizona School of Real Estate and Business. This article always ties into the market update that I typically host, which, by the way, is coming up on August 22, 2025, Commercial Growth, make sure you sign up!
Trends start to emerge each time I look at the data from year to year and this year is no different! Let’s start off by the recap of looking at Year-Over-Year changes in each product type from just the first half of 2024 and YTD 2025:
Office Sector: Hybrid to In-Office Mandates
The office market continues to evolve. New, Class A properties, for example, The Grove, have set record occupancy and rental rates in our market. Meanwhile, older, Class B & C still continue to struggle with vacancy and increased operating costs. Transaction velocity increased by 8% for a total of 104 transactions YTD; however, total sales volume is down by 43%. The takeaway here is that there are more smaller transactions which explains why the average price per square foot has increased by almost 3% to $198/SF from $193/SF same time last year.
Industrial Sector: From Boom to Balanced Growth
Crystals are now worth a TRILLION dollars? A recent announcement by Softbank, in the Phoenix Business Journal and Bloomberg news, plans to develop a $1 trillion dollar industrial complex for AI and robotics. Current nickname is “Project Crystal Land.” We have seen the impact of the $165B ongoing investment by TSMC. Now, imagine that times 10! Overall, transaction velocity increased by over 19% for a total of 165 transactions YTD; total sales volume increased by over 63%. Larger transactions at lower price per square foot and higher cap rates enticed investors to take advantage of the slower 2024 numbers
Retail: Yes, More Experiential Please
The consumer continues to spend, and the CPI has stabilized, at least for now. New projects deliveries have been modest the past few years which is why vacancy rates continue to stay at historic low levels and rents continue to rise. The memory of the GFC when retail was built before the rooftops and the decade long correction required are still top of mind for developers which continue to use restraint. Tenant expansions continue even with the number of Tenant bankruptcy announcements. Tenants that were priced out have opportunities to locate to trade areas they have not been able to enter previously. Transaction velocity is almost even at 121 sales YTD. The average price per square foot increased at just under 6% to $211. Total Sales Volume is still down significantly because the average transaction size is just under half from this time last year. Cap rates compressed by 10% from this time last year with the average cap rate sitting at 6.5% YTD in 2025.
Multifamily: No more apartments! We need more housing!
As mentioned above, the amount of large commercial and industrial projects under construction, in the pipeline and recently announced is going to require additional housing. Phoenix continues to be a top 5 population growth market in the country. Renting by choice vs purchasing a home is no longer viewed negatively. It provides the ultimate flexibility for workers that are relocating here from other markets until they find the area they want to plant roots. Affordability is going to continue to be a challenge. Transaction velocity is a little down from last year but the big story is the sales volume is significantly down. Last year at this time, almost $3.4 billion traded hands while YTD it has been $1.6 billion, a decrease over 117%. Cap rates remain steady around 5% with the average price per unit increasing about 9% to about $266,000 per unit.
Change and Challenge
Despite all the macroeconomic uncertainties of tariffs, wars, national debt, water, etc., the Phoenix’s commercial real estate market in 2025 continues to be adaptive and resilient. Each commercial sector took a breath the latter half of 2024. So far in 2025, there has been a constant re-evaluation of new data that continues to come in, and yet, the market continues to press forward. Challenges create the opportunity; go take advantage of the opportunity!
RELATED LINK:
ASREB August 2025 Journal
Sources: Costar Data, Vizzda Data, Personal Research, and other news articles and publications.
CRE in Phoenix: Thriving Amid Change and Challenge
I have had the opportunity to discuss the Phoenix commercial real estate market activity consistently since 2022 for Arizona School of Real Estate and Business. This article always ties into the market update that I typically host, which, by the way, is coming up on August 22, 2025, Commercial Growth, make sure you sign up!
Trends start to emerge each time I look at the data from year to year and this year is no different! Let’s start off by the recap of looking at Year-Over-Year changes in each product type from just the first half of 2024 and YTD 2025:
Office Sector: Hybrid to In-Office Mandates
The office market continues to evolve. New, Class A properties, for example, The Grove, have set record occupancy and rental rates in our market. Meanwhile, older, Class B & C still continue to struggle with vacancy and increased operating costs. Transaction velocity increased by 8% for a total of 104 transactions YTD; however, total sales volume is down by 43%. The takeaway here is that there are more smaller transactions which explains why the average price per square foot has increased by almost 3% to $198/SF from $193/SF same time last year.
Industrial Sector: From Boom to Balanced Growth
Crystals are now worth a TRILLION dollars? A recent announcement by Softbank, in the Phoenix Business Journal and Bloomberg news, plans to develop a $1 trillion dollar industrial complex for AI and robotics. Current nickname is “Project Crystal Land.” We have seen the impact of the $165B ongoing investment by TSMC. Now, imagine that times 10! Overall, transaction velocity increased by over 19% for a total of 165 transactions YTD; total sales volume increased by over 63%. Larger transactions at lower price per square foot and higher cap rates enticed investors to take advantage of the slower 2024 numbers
Retail: Yes, More Experiential Please
The consumer continues to spend, and the CPI has stabilized, at least for now. New projects deliveries have been modest the past few years which is why vacancy rates continue to stay at historic low levels and rents continue to rise. The memory of the GFC when retail was built before the rooftops and the decade long correction required are still top of mind for developers which continue to use restraint. Tenant expansions continue even with the number of Tenant bankruptcy announcements. Tenants that were priced out have opportunities to locate to trade areas they have not been able to enter previously. Transaction velocity is almost even at 121 sales YTD. The average price per square foot increased at just under 6% to $211. Total Sales Volume is still down significantly because the average transaction size is just under half from this time last year. Cap rates compressed by 10% from this time last year with the average cap rate sitting at 6.5% YTD in 2025.
Multifamily: No more apartments! We need more housing!
As mentioned above, the amount of large commercial and industrial projects under construction, in the pipeline and recently announced is going to require additional housing. Phoenix continues to be a top 5 population growth market in the country. Renting by choice vs purchasing a home is no longer viewed negatively. It provides the ultimate flexibility for workers that are relocating here from other markets until they find the area they want to plant roots. Affordability is going to continue to be a challenge. Transaction velocity is a little down from last year but the big story is the sales volume is significantly down. Last year at this time, almost $3.4 billion traded hands while YTD it has been $1.6 billion, a decrease over 117%. Cap rates remain steady around 5% with the average price per unit increasing about 9% to about $266,000 per unit.
Change and Challenge
Despite all the macroeconomic uncertainties of tariffs, wars, national debt, water, etc., the Phoenix’s commercial real estate market in 2025 continues to be adaptive and resilient. Each commercial sector took a breath the latter half of 2024. So far in 2025, there has been a constant re-evaluation of new data that continues to come in, and yet, the market continues to press forward. Challenges create the opportunity; go take advantage of the opportunity!
RELATED LINK:
ASREB August 2025 Journal
Sources: Costar Data, Vizzda Data, Personal Research, and other news articles and publications.