ARIZONA – INDUSTRIAL – PHOENIX – MESA – TUCSON by Marie Cappello, Broker, Argossy International
Arizona’s 2025 Market: Shifting from Wildfire to Controlled Burn
The boom of the last few years is over. Arizona’s commercial real estate is no longer a gold rush; it’s a game of strategic stabilization. The market is maturing, and a new playbook is required.
- Population Power: Steady growth continues. The state’s population nears 7.6 million.
- The Big Picture: The industrial sector is a powerhouse, but oversupply looms. The office market struggles. Multifamily is in a state of flux.
- Phoenix/Mesa: The Epicenter
- Industrial: An investor’s paradise. Phoenix named the #1 industrial market in Q1 2025. Key fact: 120 million sq ft added in the last five years. However, new construction is slowing down to address oversupply. Submarkets like Glendale have a high vacancy, while small-bay infill spaces remain a rare, valuable find.
- Multifamily: Navigating a supply glut. An unprecedented 70,000 units delivered in 2024. 2025 sees a more manageable 24,000 units. A temporary oversupply. Concessions are common. Rents will likely not rise significantly until 2026.
- Office: The “whipping boy” of the market. High vacancy rates, at 25.3% in Phoenix. The future is hybrid. Landlords are getting creative, converting office space to labs or even multifamily.
- Retail: Resilient. Vacancy rate at 6.7%. Single-tenant retail performs exceptionally well.
- Tucson: A Different Flavor
- Industrial: Tight. Vacancy rates are low but rising slightly. Rents are dropping back to pre-2020 levels. A user-driven market.
- Multifamily: A temporary oversupply of apartments. Transaction volume is expected to increase, but repair costs are up. Senior housing is a bright spot.
- Office: An enduring struggle. Vacancy rates around 10.4%. Work-from-home trends are a major headwind. Conversion to medical or multifamily is being explored.
- Retail: Stable. Grocery-anchored centers are a safe bet. Rents are expected to grow 2-3%.
Call Marie Capp, Broker at (760) 507-1222
