Phoenix closes out 2025 in a position that many Sunbelt markets would envy—powered by record job creation, a surge of high-profile corporate investment, nation-leading construction activity, and durable demand across multifamily and build-to-rent (BTR) housing. At the same time, the region is working through one of the most prolonged supply cycles in its history, and the interest-rate environment has refused to cooperate with the expectations many carried into the year. The result is a market defined not by volatility, but by resilience: strong fundamentals meeting structural headwinds, all pointing to a 2026 that looks strikingly similar to 2025—steady, competitive, and full of long-range promise.
Expectations vs. Reality in 2025
Coming into 2025, industry players expected a turning point: interest rates were widely projected to fall by mid-year, easing the capital markets gridlock and re-energizing rent growth as the wave of new supply crested. While some of those story lines materialized, one big one didn’t—rates stayed stubbornly high throughout the year. That delayed transaction momentum and kept many development sites frozen.
Even so, absorption in Phoenix defied the macro drag. Multifamily demand ran about 30% above the 10-year average, according to Cushman & Wakefield’s 2026 CRE Outlook. That strength—driven by elevated mortgage rates, scarce for-sale inventory, and affordability challenges—allowed the market to digest a historic construction wave amounting to 12% of existing inventory delivered in just three years. Rents flattened, concessions rose, and vacancy pushed higher, but the market continued to move product at a pace that underscored the structural appeal of the region.
By late 2025, the fundamentals were stabilizing. Starts fell sharply, landlords calibrated pricing strategies, and forward-looking models now project rent growth accelerating toward 5% by 2027, with stabilized vacancy holding below long-term averages. The outlook for 2026? Another year of equilibrium finding—more stable than spectacular, but firmly supported by demand.
Jobs: Cooling Headlines, Strong Underlying Momentum
The national jobs picture late in the year sent mixed signals. ADP reported a 32,000-job decline in November and meaningful losses in small-business hiring. With the federal shutdown delaying official data, the labor market narrative became unusually murky—cooling, but not collapsing.
In Arizona, however, the data is anything but ambiguous. The state shattered records in Fiscal Year 2025, with 24,285 new jobs committed, averaging nearly $96,000 per year in wages and supported by $31 billion in capital investment. Major announcements—from Mayo Clinic’s $1.9 billion Phoenix expansion to Axon’s headquarters scale-up, Dutch Bros’ relocation to Tempe, and an impressive slate of semiconductor and clean-tech manufacturing projects—solidified Arizona as one of the nation’s most active environments for high-value job creation.
The Arizona Commerce Authority surpassed every one of its annual goals, achieving 121% of job projections, 162% of wage expectations, and nearly 800% of investment targets. These are indicators not of a cooling local economy, but of one accelerating ahead of the national picture.
Construction: Phoenix Leads the Nation in Opportunity
Construction is another cornerstone of Phoenix’s momentum story. Despite macro caution, the region remains one of America’s best markets for skilled construction labor. Wages rose 4–5% in 2025, outpacing many metros, and Phoenix ranked as the No. 1 city in the nation for construction worker opportunities based on employment growth, wage competitiveness, and new housing authorizations.
Innovation and Tech: A Decade of Intentional Growth Pays Off
Phoenix’s economic transformation didn’t happen by accident. A decade after the release of Velocity: A Blueprint for Transforming Greater Phoenix into an Innovation Economy, the region has emerged as a credible hub for advanced industries, AI development, and deep-tech manufacturing.
According to researchers at Brookings Metro, Phoenix is now one of America’s 28 “Star Hubs” for innovation, thanks to a decade of coordinated investment in talent, research institutions, entrepreneurship, and high-tech corporate attraction. But there is more runway ahead: AI adoption still lags peer markets, and leaders argue that the next phase of growth will require greater emphasis on doctoral-level STEM talent and federal research alignment.
TSMC and the Semiconductor Supercycle
Nothing captures Phoenix’s shift into a global innovation center more than TSMC’s $165 billion investment, the largest foreign investment in U.S. history. The company is rapidly scaling from 3,000 employees to 6,000 across three fabs, supported by a deepening pipeline through ASU, Maricopa Community Colleges, and national internships. The knock-on effect—high-salary engineering jobs, supplier expansion, and technology clustering—positions Phoenix as one of the world’s most important semiconductor hubs.
Housing Demand: Migration Keeps Pressure Under the Surface
Migration remains the quiet force underpinning housing demand. According to MovingPlace’s 2025 Hottest ZIP Codes Report, nine of Arizona’s 10 hottest ZIP codes are in Metro Phoenix or its outer orbit, led by:
- 85387 (Surprise)
- 85054 and 85085 (North Phoenix)
- 85004 and 85003 (Downtown Phoenix)
- 85142 (Queen Creek), one of the nation’s top ZIP codes for total move volume
These inflows reinforce a simple truth: even with supply running high, Phoenix continues to attract residents at a scale most U.S. metros can’t match.
2026 Outlook: Balanced, Resilient, and Demand-Driven
Looking ahead, 2026 is shaping up to be a continuation of 2025’s themes. Multifamily and BTR remain supported by strong absorption, a moderating construction pipeline, and a renter pool that continues to grow as homeownership remains out of reach for many households.
The supply glut will persist into 2026, and interest rates may not meaningfully decline until late in the year. But Phoenix enters this period with durable tailwinds: nation-leading job creation, innovation-driven expansion, a strong construction ecosystem, and a migration story that continues to outperform.
In a year where expectations and reality often diverged, one thing held true: Phoenix’s long-term fundamentals remain among the strongest in the country—and that momentum is set to carry well into 2026.