In Q3 2014, Colliers is reporting the Greater Phoenix retail market continued its gradual improvement trend, with absorption positive, vacancy improving and investment activity gaining momentum. This sets the stage for the all-important fourth quarter, where deliveries and absorption are typically the most active.
On the development side, several small- to medium-size projects with tenants already committed are in the pipeline to be delivered before the end of the year. Looking further ahead, demand is expected to pick up as the economic expansion, hiring and population growth gain additional momentum. All three of these measures have shown signs of accelerating in recent months, supporting a positive outlook for 2015 and beyond.
CURRENT CONDITIONS
Following a second quarter lull, sales activity surged in the third quarter, nearly tripling the volume recorded in the preceding three months. Year to date, total sales activity is up 7 percent from the same period in 2013, and if this trend holds, 2014 will mark the fifth consecutive year of increased sales velocity in Greater Phoenix.
The rise in activity has been accompanied by a spike in sales prices. The median price in shopping centers sold thus far in 2014 is $111 per square foot, 37 percent higher than the median recorded in 2013. Some of the increase is a function of the properties that are trading; after distressed properties accounted for nearly half of the properties that changed hands in 2012 and 2013, these assets have made up approximately 20 percent of transactions thus far in 2014. Cap rates have compressed, averaging in the mid-7 percent to low-8 percent range year to date.
Net absorption reached more than 685,000-square-feet over the past three months, the highest quarterly total in more than a year. Over the past 12 months, retailers have moved into a net of approximately 1.6 million-square-feet, down from nearly 3.2 million-square-feet over the same period, one year earlier. Net absorption routinely spikes during the fourth quarter as retailers ramp up activity in anticipation of the holiday shopping season, suggesting a surge is likely in the coming months.
To read the full report more and see graphs click here: Phoenix Retail Market Report 3Q14
