Economic uncertainty combined with online shopping is having an impact on the metropolitan Phoenix retail market study prepared by CBRE Global Research and Consulting. As evidenced by the amount of available retail space, due in large part, to the change in saving and spending habits and the growing presence of internet sales according to the Q3 2013 market study. At some point consumers will return to a much different market. For now, it is a question of when and how strongly they re-enter the market.

The CBRE metropolitan Phoenix retail market study reflects both shopping centers and buildings greater than 300,000-square-feet. The overall vacancy rate at the end of third quarter was 10.5%, a decline of 50 basis points from 11.3% Valley-wide, one year ago.

The Q3 vacancy rate in metro Phoenix for strip and in-line centers was 18.7%, neighborhood centers reported 12.2% vacancy, followed by community centers with 10.8% vacant space and power centers with 5.9% vacancy. There is currently 415,000-square-feet of retail space under construction in metro Phoenix, compared to 923,475-square-feet one year ago.

The availability of big box space remains a concern for property owners throughout the Phoenix area as the number of available spaces continues to impact vacancy. At the end of Q3 there were 133 spaces greater than 20,000-square-feet, totaling 4.9-million-square-feet of available space. One year ago, there were 135 spaces totaling 5.3-million-square-feet. Premium spaces and locations are receiving considerable interest from retailers.

In Q3, metro Phoenix did not deliver any new retail product. The last time this happened was Q2 2012. As a comparison, the delivery of new retail space in metro Phoenix from 2000 through 2010 average was 5.5-million-square-feet per year with a high point in completions occurring in 2007 when 1.6-million-square-feet of new product was brought to market.

In Q3, metro Phoenix retail market recorded positive absorption of 385,625-square-feet and has absorbed 1.1 million-square-feet with 3.7-million-square-feet of gross activity for the year. The retail market has now recorded positive absorption in eight of the last nine quarters. One year ago, the market absorbed 1.2-million-square-feet with 3.5-million-square-feet of gross activity. In Q3, 10 of the 12 submarkets reported positive absorption led by Northwest Phoenix with 125,715-square-feet and Paradise Valley with 88,152-square-feet. Submarkets with the negative absorption were Sun City with 29,750-square-feet and East Phoenix with 12,155-square-feet.

The average net asking lease rate among existing retail centers in metro Phoenix at the end of Q3 was $15.47 per square foot down from $15.83 at the end of 2012. This compares to $16.10 per square foot one year ago and $15.95 per square foot two years ago. The submarket with the highest average asking rate was Paradise Valley which posted a rate of $24.84 per square foot in Q3.

To read CBRE’s full 3Q Retail report and other 3Q Reports from CBRE in Phoenix and Tucson click here: https://www.cbre.com/en/research/Pages/default.aspx

Construction spending in the US and Arizona unexpectedly fell in March, reflecting the biggest slump for government projects in 11 years according to AZBEX, Arizona’s Builder’s Exchange. Spending on commercial structures was little changed however, dropping 0.3%. The following are open invitations to bid for trades in new construction for the area:

TIs RETAIL SPACE- 5420 E BROADWAY BLVD, STE 210, TUCSON General Contractor, Division II Construction, requests proposals for the 3,460 sq. ft. landlord tenant improvements for Relax the Back at 5420 E Broadway Blvd. in Tucson, 85711. Bids are due by 5/7/2013 at 2:00 PM in the office of general contractor.

New RETAIL SPACE – 3854 W RIVER RD, TUCSON Requests from non-residential subcontractors are needed for new construction of a 3,252 sq. ft. masonry shell building at 3854 W River Road, Marana, AZ 85741 for Massage Envy. Division II Construction is the General Contractor for the project. Bids are due by 5/9/2013 at 2:00 PM in the office of general contractor.

New COUNTY BUILDING – 1250 W SILVERLAKE RD, TUCSON Requests for proposals from all subs are needed for a new 3,000 sq. ft. building at 1250 W Silverlake Rd. in Tucson, 85701 to be occupied as the Pima County Sheriff Departments Training Facility. United Builders is the general contractor for the project. Bids are due to GC by 5/15/2012 at 1:00 PM for a 6/17/2013 project start date to be completed in 120 days, by 10/17/2013. Valuation: $550,000.

New – MEDICAL BUILDING – 3601 S 6TH AVENUE, TUCSON United Builders held a pre-bid walk through for subcontractors for the new 16,000 sq. ft., 2-story, hospital / nursing home being built for Women’s Health OEF/OIF (Building 81) at 3601 S 6th Ave., Tucson 85723. Bids are due to GC by 5/15/2013 at 10:00 AM, for project start date of 6/3/2013 to be completed in 406 days, by 7/31/2014. Valuation: $4.6 million.

For more information on these projects, contact Lynn Catalfamo at Division II Construction (520) 628-1663 ext. 410 or lynn@divisionii.com.

Joy Jensen at United Builders, LLC should be reached at (520) 622-2884 or joy.jensen@unitedbuildersllc.com

To report new construction activity and tenant improvements projects, please email to REDailyNews@outlook.com

Picor Commercial Real Estate an affiliate of Cushman & Wakefield released its ‘Marketbeat Retail Snapshot’ for Q1 2013 last week. The report indicates little change in retail vacancies, with little more than a percentage point in movement since Q3 2009, “for years, Tucson’s retail vacancy has inched up and down”.

To see Picor’s full Retail report go to: https://picor.com/downloads/tucson_ret_1q13.htm

From a national viewpoint, consumers pulled back spending slightly in March, according to the Census Bureau, with total US retail and food services down by 0.4% month-over-month and spending up by 2.8% compared with March 2012. The bureau adjusts spending estimates for seasonal variations, holidays and the like, but not for price changes.

Not many retailers saw sale advances in March, according to both Picor and the Bureau reports. Furniture and home furnishing sales were up 0.9% month-over-month, and 2.8% over March 2012. Picor reported increased mattress stores activity, and restaurants and bars nationally experienced a 0.4% growth. However, according to Greg Furrier of Picor, locally “restaurants’ appetites (were) largely restricted to the Campbell corridor and downtown submarkets”.

Nationally, non-store retailers, such as catalog and internet sales were up 0.3% for month-over-month and 13.5% over March 2012. The losers for the month were electronics stores that saw sales chipped away by 1.6%, down 3.2% compared to March 2012, and gas stations down by 2.2% month-over-month, with gas prices down in March from February highs, and down a mere 0.4% from March 2012. It should be noted that most categories of retailers did see a year-over-year increase in sales.

Realtor.com, operated by the National Association of Realtors, reports that in 134 of the 146 markets tracked, housing inventory decreased since last year. Here at home, the Tucson Association of Realtors reports inventory shrunk by 544 listings, or 4%, compared to March 2012. The decline is due to a combination of sales to homeowners, investors, and the slower pace of new development and foreclosures.

Consumer sentiment is down slightly for the month of April, according to the Reuters /University of Michigan Consumer Sentiment Index. It came in at 76.4 in April, down from 78.6 in March, but the end-April sentiment level could have been much worse considering that the mid-month reading was 72.3. Consumer sentiment has been bouncing around, but mostly on the low side of historic averages. Maybe some consumers are feeling a little bit better with lower gas prices.

As one seasoned Tucson CRE investor, who prefers to be unidentified, commented, “As long as the trend is not declining, it’s all good news.” This may be the best approach to take when reading Q1 2013 market reports.