The Phoenix retail market recorded approximately 1.1 million square feet of net absorption during the first half of 2026, the highest total among major U.S. markets, according to Marcus & Millichap’s third-quarter Phoenix Metro Retail Market Report.
The strong absorption reflects continued demand from major retailers, which are leasing newly delivered space and selectively backfilling larger vacancies. Phoenix is expected to add 2.8 million square feet of retail space in 2026, increasing the metro’s inventory by 1.4%. Nearly 90% of that incoming space is already committed, limiting the effect of new construction on vacancy.
Marcus & Millichap forecasts Phoenix’s retail vacancy rate will finish the year at 5.2%, up 30 basis points from 2025 but approximately 110 basis points below the metro’s 10-year average.
Demand has varied by property size. Vacancy at buildings larger than 20,000 square feet fell approximately 30 basis points year over year to about 5% in June. At smaller buildings, vacancy increased approximately 60 basis points to nearly 4%, reflecting greater pressure on restaurants, fast-food operators and other tenants sensitive to changes in discretionary spending.
Multi-tenant retail vacancy declined 60 basis points year over year to 7.1%, while single-tenant vacancy increased 30 basis points to 4.4%. First-half retail groundbreakings fell to a five-year low, which could support additional leasing once the current development pipeline is delivered.
Phoenix is expected to maintain one of the nation’s fastest retail supply-growth rates in 2026, trailing only Austin. Much of the new construction consists of smaller retail pads and large power centers in the metro’s outer suburbs.
In Buckeye, Verrado Marketplace and the nearby Buckeye Commons development total nearly 1 million square feet. The projects began opening in phases this spring and feature national retailers including Target and Home Depot.
Employment growth is also expected to support retail demand. Phoenix ranked fourth among major markets in net hiring gains through June, adding approximately 23,000 jobs. Healthcare and social assistance led the expansion with roughly 10,000 positions, followed by professional and business services with approximately 8,300 jobs. Marcus & Millichap forecasts the metro will add 36,000 jobs during 2026, representing annual employment growth of 1.5%.
Average asking rent is projected to reach $20.80 per square foot by year-end, an increase of 3.2% from 2025. That would place Phoenix retail rents approximately 30% above their 2019 level, compared with a 20% increase nationally. Newer retail properties have remained particularly tight, with vacancy among post-2000 inventory below 3%. Small pads occupied by national tenants have continued to command rents near $60 per square foot.
Retail investment activity rebounded during the second quarter following a slower start to the year, led largely by private investors pursuing triple-net properties. Marcus & Millichap identified affluent East Valley and North Phoenix trade areas, newer assets along high-growth West Valley corridors and high-visibility properties along Bell Road as potential areas of continued investor interest.
The report also pointed to recently completed Interstate 10 improvements between U.S. 60 and Ray Road as a potential benefit for retail assets in Chandler and the East Valley. Improved access through the corridor is expected to support restaurants, convenience retailers and other businesses serving the region’s expanding employment centers and higher-income households.
