TUCSON, ARIZONA – Retail big box leasing activity throughout the Tucson area showed an upswing from the prior year that was hampered by the ongoing COVID-19 pandemic. At year-end, 39 spaces greater than 10,000-square-feet were available, resulting in approximately 1.67 million-square-feet of vacant big box space throughout the market.
The 2021 levels compare to 36 spaces of that size and approximately 1.46 million square feet of large vacant retail space recorded at the end of 2020. Although 2021 still had effects of COVID-19, governmental closures and restrictions eased and retailers saw sales rebound while many experienced sales rise above pre-pandemic numbers. Nationally, year-end sales showed a 13% increase from 2020.
“Even with supply chain issues, essential retailers and service businesses like grocers and pharmacies continued to see solid gains as many consumers returned to in-store shopping, giving industries such as apparel, sporting goods, crafts and home furnishings a large increase in sales in 2021,” said CBRE’s Nancy McClure, First Vice President in Tucson. “Entertainment businesses also saw increased sales in 2021, as most were forced to close due to governmental restrictions. Still, operations aren’t at 100% due to consumer hesitancy with COVID-19 and a significant portion of venues are still repaying landlords for deferred rent that was given during governmental shutdowns.”
In retail, the effects of the pandemic have pushed companies to advance their technology to allow customers to order online, have items delivered, or use curbside pickup. The reverse supply chain in returning the merchandise has also become a significant challenge, with many companies turning to brick-and-mortar stores for merchandise return solutions.
The velocity of new leases signed with big box retailers was more than double it was in 2020. Metropolitan Tucson signed several 10,000-square-foot leases, totaling 347,400-square-feet.
“Tucson has historically been viewed as a tertiary market by many major retailers and with the added pandemic stress, shopping center ownerships are asking the ‘what now?’ question,” said McClure. “Large-format department stores that vacate leave floorplates that often are difficult to lease. In 2021, a 183,200-square-foot two-story Sears was vacated at Tucson Mall. Before that, Park Place Mall saw a three-story 153,511-square-foot former Macy’s, a two-story 154,280-square-foot former Sears and a 2-story 220,290-square-foot JCPenney at El Con Center vacant.”
Nationally, many shopping center owners are looking to demolish all or parts of their centers to redevelop to mixed-use with multi-family, medical, distribution centers and offices. Redevelopment can often be challenged by zoning constraints.
“Property owners and experienced real estate professionals are coming together to understand industry and market trends to structure deal terms that will help owners prevail in a challenging market,” said McClure. “The good news is that the COVID-19 pandemic moved retail at warp speed to meet the consumers where they are, which includes a mix of online, delivery and in-store options. Those owners that continue to adapt to the evolving retail landscape, even beyond COVID-19, will most likely have great success.
See full BIG BOX REPORT here.