This week, the ICRE Investment Team attended an in-depth market briefing hosted by the Central Arizona CCIM Chapter. The session featured CoStar’s Director of Market Analytics, Connor Devereaux, who delivered a data-rich, highly relevant analysis of the demographic, economic, and sector-specific trends shaping the future of Phoenix commercial real estate.
The event also included valuable insights from LMS industry leaders, including:
- Peter Gray, Associate Vice President, HonorHealth
- Russ Korcuska, Senior Vice President, Facilities & Supply Chain, Phoenix Children’s Hospital
- Aaron Zeligman, Senior Project Executive, Facility Services, Banner Health
- Aron Kirch, Regional Executive, Kitchell (moderator)
Each brought a real-world, healthcare-focused perspective, reinforcing how CRE trends tie directly to facility development, construction costs, planning cycles, and the evolving needs of major Arizona health systems.
Below is a clear breakdown of the most important takeaways – what’s happening, why it matters, and how investors, landlords, and tenants can use this information to make smarter decisions.
Phoenix’s Population Growth Continues to Be a Major Competitive Advantage
Phoenix’s demographic momentum remains one of its strongest long-term fundamentals. Maricopa County ranked #3 in the nation for population growth, up from #4 last year, and Phoenix is now the 6th fastest-growing metro in the U.S. GPEC projects 900,000+ new residents over the next decade.
Where the growth is concentrating:
- West Valley: Explosive expansion in Goodyear, Surprise, Buckeye, Glendale
- Pinal County: Affordability + land availability = major pressure valve
- East Valley: Still growing, but at a steadier, more mature pace
For investors, this sustained boom supports long-term demand across retail, medical, office, industrial, and housing sectors.
Job Growth Is Slower – But Stable and Healthy
Phoenix’s job growth has cooled over the last 18 months, but this isn’t a red flag. Companies are largely holding employment steady, rather than over-hiring or laying off, keeping unemployment below the national average.
CoStar economic partner projections include:
- No recession in 2026
- Stronger momentum returning late 2026 into 2027
- Growth fueled by semiconductor manufacturing, EV supply chain expansion, and clean-energy production
In short, the economy isn’t sprinting—it’s pacing itself for sustainable long-term strength.
Multifamily: Oversupply, Not Weak Demand, Is the Challenge
The multifamily sector continues to absorb a historic wave of new supply. Over 20,000 units are still under construction, pushing vacancies above 12%, the highest since the Great Recession.
What renters are seeing:
- Concessions of 8–10 weeks free are common
- Some properties pushing up to 12 weeks free
- Negative rent growth for the third consecutive year
Demand is healthy, but construction far outpaced absorption. CoStar expects meaningful rebalancing beginning in 2027.
Retail: A Standout Performer in Phoenix CRE
Retail continues to shine, driven by a decade of underbuilding and strong consumer spending.
Key dynamics:
- Small shop space under 5,000 SF remains extremely tight
- Value-focused brands (Aldi, Five Below, Dollar General) are expanding
- Luxury retail is growing
- Mid-tier retail continues to face challenges
- Store openings once again outpace store closures in 2025
Phoenix remains one of the strongest retail markets in the U.S.—a rare combination of demand, absorption, and limited supply.
Office: Signs of Stabilization After Five Tough Years
This may be the turning point. While still elevated, vacancies are no longer rising, and sublease availability has begun to flatten.
Top-performing office submarkets:
- East Valley
- Scottsdale
- North Phoenix
A full recovery will take time, but this is the clearest sign yet of stabilization.
Industrial: Strong Fundamentals Despite Near-Term Pressure
Industrial remains one of Phoenix’s powerhouse sectors, fueled by logistics, advanced manufacturing, and reshoring trends.
However, the story is split:
- Southwest Valley (big box): Under pressure from significant new supply
- Mid-bay infill & flex: Extremely tight with strong tenant demand
- Advanced manufacturing: Long-term tailwinds remain exceptional
Submarket and product type selection are key for investors navigating this cycle.
Final Thoughts
Both the CoStar presentation and the LMS speaker insights reaffirm what we experience daily in the market: Phoenix remains one of the most resilient and opportunity-rich commercial real estate environments in the country.
Strong demographics, stable employment, and expanding healthcare demand continue to support long-term growth, even as multifamily and industrial work through near-term supply imbalances.
- Retail is thriving.
- Office is stabilizing.
- Healthcare demand is accelerating.
- And advanced manufacturing continues to anchor the region’s economic engine.
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