Market Report
Phoenix Retail Market Report
3Q 2026
National Net Absorption Leader
Still Sees Some Strain in Shop Space
Consumer pressures test smaller tenants. Major retailers continue to lease new supply and selectively backfill larger spaces in Phoenix, while demand for smaller formats has slowed. Vacancy at properties over 20,000 square feet fell roughly 30 basis points year-over-year to about 5 percent in June, whereas the rate at smaller buildings rose around 60 basis points to near 4 percent. This weakness likely reflects pressure on thin-margin tenants, such as fast-food and restaurant operators, that are particularly sensitive to shifts in discretionary spending. As a result, shop-space demand is expected to hinge on the strength of consumer spending, shaped partly by gasoline prices and hiring activity.
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