The Phoenix industrial market continued to stabilize during the second quarter of 2026, as moderating construction activity and steady tenant demand helped ease many of the supply pressures that have weighed on the market over the past two years. While vacancy remains elevated by historical standards, the rapid increase seen throughout 2023 and 2024 has begun to level off as new deliveries slow and market fundamentals gradually improve. Leasing activity remained healthy throughout the quarter, supported by continued demand from logistics, retail distribution, advanced manufacturing, and data center users. Although tenants continue to make decisions more cautiously than in recent years, annual net absorption has outpaced new deliveries for the first time since 2022, signaling that existing inventory is beginning to be absorbed faster than new space is entering the market. New supply remains heavily concentrated in large-format logistics facilities, where vacancy continues to be highest due to the significant amount of speculative construction completed over the past several years. Buildings exceeding 100,000 square feet continue to face the greatest competitive pressure, while smaller industrial properties remain comparatively resilient, benefiting from limited new construction and consistent tenant demand. Rent growth continued to soften amid elevated competition, with landlords offering concessions to attract tenants, particularly within newer bulk distribution projects. However, asking rents have remained relatively stable overall, while infill locations and smaller-format industrial buildings continue to demonstrate stronger pricing power than many large-box assets. Looking ahead, the outlook for the Phoenix industrial market continues to improve. As the pace of new development slows and the construction pipeline contracts, supply and demand are expected to move into better balance. While vacancy is likely to remain elevated through much of 2026, improving absorption and long-term economic drivers position the market for continued stabilization and a gradual recovery in occupancy and rent growth heading into 2027.