Economy: Output Accelerates Amid Sustained Job Growth
In Q2 2026, the Phoenix Metro reported an employment level of 2.5 million, after adding 20,500 jobs over the last year. While the unemployment rate ticked up from 3.8% to 4.0% during that timeframe, it remained below the national average of 4.2% and ranked third-lowest among major U.S. metros with total employment of at least 2 million jobs. Continued wage growth encouraged new entrants into the labor force, with the median household income increasing by 3.8% year-over-year (YOY) to $97,400. Population growth also more-than doubled the national average, however, the 0.8% YOY increase marked a deceleration from previous quarters. Annual GDP growth, meanwhile, accelerated up from 2.0% in Q2 2025 to 3.5% in Q2 2026, underscoring the Metro’s positive economic momentum.
Demand: Vacancy Remains Unchanged Quarter-Over-Quarter
In Q2 2026, the total overall vacancy in the metro Phoenix retail market remained unchanged quarter-over-quarter (QOQ) at 5.0%. The East Phoenix and the Central Business District submarkets recorded the lowest overall vacancies with 1.9% and 3.3%, respectively. The Mesa and North I-17 submarkets recorded the highest vacancies of 9.9% and 7.2%, respectively.
At mid-year 2026 the metro Phoenix retail market recorded positive net absorption with 581,078 square feet (sf). Absorption declined 53.3% QOQ to 184,914 sf as seven of the eleven submarkets reported positive absorption in the quarter. The North Central Phoenix and Southeast Valley submarkets posted the largest gains of positive absorption with 93,233 sf and 80,162 sf, respectively. The Mesa submarket led the market in negative absorption in Q2 with 53,221 sf followed by Scottsdale with 35,317 sf.
Pricing: Average Asking Rent Continues To Climb
The direct average asking rate for the metro Phoenix retail market was $20.11 per square foot (psf) on an annual triple net basis in Q2. This marks a 6.3% YOY increase from the $18.84 psf average asking rate that was recorded one year ago. In Q2, the Central Business District (CBD) submarket had the highest asking rate of the eleven submarkets, at $42.36 psf followed by the East Phoenix submarket with $32.16 psf. The Southwest Phoenix submarket had the lowest asking rate of the eleven submarkets, at $13.32 psf.
