Arizona’s industrial market continued to grow in the third quarter of 2026 as strong tenant demand met a significant amount of new construction across the Valley.

Continued investment in logistics, advanced manufacturing and other industrial sectors supported leasing activity and absorption, while major users continued to expand their presence in the market.

New supply was especially notable during the quarter, with 3.4 million square feet delivered in the third quarter. Construction deliveries more than tripled from last quarter, reflecting the significant amount of new supply entering the market. Despite the increase in new supply, smaller-bay properties continued to benefit from less competition from new big-box space.

The total vacancy rate declined 180 basis points year-over-year to 11.5%, while total availability decreased 40 basis points to 14.0%.

Leasing activity totaled 7.6 million square feet, with 2.9 million square feet of direct net absorption. Glendale recorded 1.5 million square feet of absorption, accounting for roughly half of Phoenix’s total absorption. Chandler North/Gilbert and Southwest North of Buckeye Road followed, with each contributing roughly one-third of Glendale’s absorption.

Direct average asking rents for spaces 10,000 square feet and larger increased 5% year-over-year to $1.18/square feet NNN.

Economic overview

Arizona added 17,400 jobs since August 2025, according to the Arizona Office of Economic Opportunity. The state’s unemployment rate increased 50 basis points year-over-year to 4.9% in August. Continued employment growth across Arizona’s technology, manufacturing, logistics and other business sectors is supporting economic activity and contributing to demand for industrial space throughout the Valley.

Near-term outlook

Entering the last quarter of 2026, vacancy is expected to remain stable as continued tenant demand supports market activity. Glendale is likely to remain an important demand driver, supported by its proximity to TSMC-related supplier and logistics activity.

Editor's note: The above was republished from a Kidder Mathews news release.