Why Phoenix Became America’s Top Industrial Market in Q1 2025

Something big happened in the desert this year; Phoenix became the #1 industrial real estate market in the nation. For longtime locals and real estate professionals like myself, it’s not a surprise. It’s the result of years of smart growth, strategic investment, and ideal positioning.

Let’s break down what made this possible, and what it means for anyone investing, building, or leasing in Arizona.

Phoenix’s Momentum is No Accident

Over the past few years, Phoenix has seen explosive growth in industrial development. In Q1 2025 alone, millions of square feet of new space came online, and even more is underway.

But it’s not just about size. Phoenix is outperforming because it offers:

• A business-friendly climate
• Proximity to the West Coast without the California price tag
• A skilled workforce and growing population
• Room to expand in submarkets like Mesa, Goodyear, and Surprise

These factors have combined to push Phoenix past traditional leaders like Dallas and Atlanta.

Developers Are Still Building but Smarter

After a few years of rapid-fire construction, developers are now adjusting their pace to match demand. Build-to-suit projects are gaining traction, particularly for companies seeking customized space in strategic locations.

You’ll still see cranes and concrete, but with more focus on long-term leasing, green building certifications, and logistics access.

Vacancy Rates Are Up But That’s Not All Bad

Yes, vacancy rates have risen. But here’s the context: much of the new space was built on speculation, meaning without confirmed tenants in place. That’s a common strategy in high-growth markets, and leasing typically catches up over time.

In fact, interest from third-party logistics providers, manufacturers, and national brands is already strong. The space is there. Now it’s being filled.

Rents Are Stable, and Sale Prices Are Rising

Despite the influx of supply, rents have held steady, which is good news for landlords and developers. At the same time, sale prices are climbing, signaling continued investor confidence.

That combination —flat rents and rising values —is a rare sweet spot in any market cycle.

Why Businesses Are Choosing Phoenix

Several key factors are attracting businesses to the Valley:

• Strategic location: Close to Southern California ports, major highways, and rail.
• Pro-growth policies: Arizona continues to make it easier for businesses to expand.
• Large-scale projects: Like TSMC’s semiconductor facility, which has sparked related demand for warehouses and suppliers.
• Diverse submarkets: Development is spreading across the region, not just central Phoenix.

Whether it’s a logistics hub, manufacturing facility, or last-mile delivery center, companies are finding what they need here.

Submarkets to Watch

Some of the most active and promising areas include:

• Goodyear – Strong absorption and long-term growth potential
• Mesa Gateway – Proximity to air transport and tech-friendly zoning
• West Valley – Traditional industrial stronghold with expansion space

Each of these submarkets offers unique advantages depending on the size, use, and timing of the project.

A Few Challenges to Keep in Mind

Even in a booming market, there are things to watch:

• Oversupply risk – Developers must time new deliveries carefully to avoid a glut.
• Infrastructure demands – Roads, water, and power need to keep up with the pace.
• Economic pressures – Interest rates, inflation, and policy changes could influence investor appetite.

But Phoenix has weathered past cycles with resilience, and many builders are already planning ahead.

What This Means for You

If you’re an investor: There’s opportunity in well-located properties, especially in areas where vacancy is starting to stabilize.

If you’re a developer: Build-to-suit remains a winning strategy. Tenants want customization, and deals are happening where flexibility meets functionality.

If you’re a tenant: Now is the time to negotiate. Inventory is high, rents are flat, and landlords are open to creative leasing terms.

Final Thoughts

Phoenix didn’t stumble into this success. It’s the result of strong fundamentals, smart policies, and strategic vision. The city has earned its top ranking, and it’s poised to keep leading if stakeholders stay focused on sustainable growth.

For businesses entering the industrial space, or investors looking for the next big play, Phoenix offers a compelling story backed by real opportunity.

If you're investing, developing, or relocating your business in Arizona’s industrial sector, make sure you’re doing it with the right guidance.