Arizona’s small commercial sector—think 1,000–10,000 sq ft retail, office, flex, medical, and mixed-use buildings—is entering one of the strongest seller environments we’ve seen in years. While large institutional assets fight through higher vacancies and refinancing challenges, small commercial properties are quietly becoming one of the most competitive segments of the 2025 market.
If you own a small building in Phoenix, Mesa, Gilbert, Chandler, Tempe, Glendale, or the West Valley… your timing might be nearly perfect.
Below is what’s driving demand—and how smart owners are positioning themselves to sell for a premium.
Owner-Users Are Flooding the Market (And They Pay the Highest Prices)
The single biggest force pushing this segment upward?
Small business owners wanting to own instead of lease.
Across Arizona, owner-users include:
- Medical & dental practices
- Accounting, law, mortgage, insurance offices
- Contractors & trades
- Therapists & counselors
- Small retailers & boutique service businesses
- E-commerce companies that need small flex/warehouse
Why are they buying?
- Leases are up 20–40% since 2020
- Interest rates are stabilizing
- SBA 504 & 7(a) loans remain incredibly competitive
- Owning creates tax advantages and wealth building
And most importantly:
Owner-users routinely pay above investor pricing because their payment replaces rent.
This is driving multiple-offer situations on well-located small buildings even while the larger CRE market struggles.
Inventory Is Historically Low
Across Maricopa County, small commercial listings have dropped significantly over the last two years. Many owners don’t realize the market is this tight because they assume all CRE is slow.
But the data tells a different story in the sub-10,000 sq ft space:
- Very little new construction
- High demand from both owner-users and investors
- Aging landlords retiring or consolidating portfolios
- Buildings under $2M get the most intense buyer competition
When inventory is low, your timeline shortens and your leverage increases.
Lease Rates Are Up — and Cap Rates Haven’t Fully Adjusted
This is an ideal combination for sellers:
- Market rents have risen sharply
- Tenants are willing to pay more because inventory is tight
- But cap rates have not risen as much as expected, especially for smaller buildings
Translation:
Small commercial assets are producing stronger valuations than many owners realize.
If your rents are below market, a buyer may model future rents—not just current ones—which can push the purchase price higher.
Investors Love Small Commercial Right Now
Because larger office and retail assets are struggling, investors are moving “downmarket” into manageable spaces.
Why?
- Easier to lease
- Easier to finance
- Better tenant stability
- Lower risk if a tenant leaves
- More liquid on resale
- Strong migration and business formation in Arizona
Investors especially target:
- Single-tenant NNN buildings
- Small multi-tenant retail with 2–5 suites
- Medical/healthcare spaces
- 1–3 bay industrial
These investors are creating competition alongside owner-users—which benefits sellers.
Arizona’s Population & Business Growth Are Still Outpacing the Nation
Even with the market cooling from pandemic highs, Arizona remains one of the country’s most attractive business environments.
Key drivers include:
- Strong job creation
- Top-tier in-migration
- Business-friendly policies
- Affordable compared to coastal markets
- Highly skilled workforce expansion
- Exploding entrepreneurial activity (SBA data confirms this)
More people + more businesses = more demand for small commercial spaces.
What This Means If You’re Thinking About Selling
If you own a small commercial building in Arizona, the 2025 environment gives you:
✔ Pricing power
✔ A larger buyer pool
✔ Faster sales timelines
✔ Stronger offers (many with SBA loans or cash)
✔ A chance to exit before interest rate volatility returns
Most owners greatly underestimate their property value because they assume CRE is struggling across the board.
Small commercial is the exception.
Should You Sell Now or Hold? (Quick Assessment)
You should consider selling in 2025 if:
- Your building is under 10,000 sq ft
- You have upcoming capital improvements
- Your tenants are month-to-month or below market
- You want to exit before tenant turnover
- You’re retiring or consolidating your portfolio
- You want to trade up using a 1031 exchange
You may consider holding if:
- You just completed improvements
- Your tenants are strong and paying market rents
- You plan to increase rents soon
- You have no desire to reposition capital
Either way, it’s smart to get a current market valuation—small commercial pricing has changed more in the last 12–18 months than most people realize.
DTD Realty — Do The Deal.
Driven. Trusted. Dependable.
📞 602.702.3601
🌐 https://www.dtdrealty.com
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