By BEX Staff for AZBEX
The Industrial construction pipeline in metro Phoenix contracted sharply in Q4 2025, according to the latest report from Kidder Mathews, as only 15.8MSF was delivered, a 54% year-over-year decline.
Vacancy was also up slightly last quarter, reaching 13.5% and representing a 20 basis point year-over-year increase. The report notes developers are currently prioritizing absorbing existing inventory. Total availability declined 70 bps to 14.9%
Direct asking rates for spaces larger than 10KSF rose over the quarter, reaching $1.19/SF NNN, an increase of 6% from $1.13/SF NNN in 2024.
Total construction totaled 16MSF, while direct net absorption reached 2.4MSF.
The report cites 2025 as a “transformative year” highlighted by wins in aerospace and advanced technology, resulting in new employment growth. “Arizona’s technology and innovation, advanced manufacturing, and aerospace sectors continue to thrive. In 2025, the Arizona Commerce Authority and its economic partners secured 90 competitive projects, committing to 27,749 jobs and more than $34B in capital investment.”
As the market enters the new year, Kidder Mathews expects new product to continue leasing at a comfortable pace, while second-generation space will sit longer than in 2023-2024.
Rents are expected to stabilize, but heightened concessions will probably remain in place in some areas.