The Phoenix industrial market entered 2026 on more stable footing, though near-term conditions remain somewhat fluid. The supply-driven rise in vacancy that defined the past two years is beginning to moderate as a slower pace of new deliveries comes into better alignment with steady, but more measured, tenant demand. While construction activity remains elevated, the peak of the development cycle appears to be behind the market, helping to establish a clearer path toward equilibrium. Leasing activity held relatively steady through the first quarter, supported by continued demand from logistics, retail distribution, and advanced manufacturing users. However, tenant decision-making remains deliberate, with longer deal timelines and a continued preference for high-quality, newly delivered space. As a result, absorption has improved modestly but still trails the wave of supply delivered over the past several quarters, keeping overall vacancy elevated near recent highs. New supply continues to be concentrated in large-format buildings, where vacancy remains disproportionately elevated. Properties exceeding 100,000 SF are still facing the bulk of competitive pressure, while small bay product has remained comparatively resilient. Vacancy for smaller spaces remains in the mid- to high-5% range, though availability is gradually increasing as some tenants right-size and sublease space enters the market. Rent growth has softened further amid heightened competition, with landlords increasingly willing to offer concessions to secure tenancy. While average asking rents are still posting modest year-over-year gains, effective rents have come under pressure, particularly in bulk distribution assets in outlying submarkets. In contrast, infill locations and smaller-format buildings continue to demonstrate firmer pricing dynamics. With a sizable pipeline still underway, vacancy is expected to remain elevated through much of 2026. That said, the ongoing slowdown in new starts and deliveries should allow fundamentals to gradually improve over the coming quarters. As supply pressures ease and demand stabilizes, the market is positioned for a more balanced environment, setting the stage for a gradual recovery in occupancy and rent growth heading into 2027.