Colliers International Releases 4Q 2015 Retail Market Report
Phoenix, AZ – Colliers International in Greater Phoenix released its fourth quarter 2015 Retail Market Report. Report highlights are outlined below. For more details, refer to the attached report or click here to view online.
The Greater Phoenix retail market closed 2015 on a bit of an upswing, with market conditions clearly stronger than one year earlier. Vacancy trended lower for the year and rents rose, but the traditional late-year spike in net absorption failed to materialize in 2015. As such, net absorption for the year failed to reach the levels recorded from 2012- 2014. This will likely be a short-term disruption, rather than a reversal of the prevailing long-term trend, and forecasts for the year ahead remain favorable.
One sign of the modest slowdown in retail expansion was highlighted in the pace of hiring for retail workers. From 2012-2014, merchants added an average of more than 5,000 retail jobs per year, representing growth of approximately 2.3 percent per year. In 2015, however, the pace of growth slowed, with preliminary estimates showing a gain of approximately 3,500 workers. This growth rate of approximately 1.5 percent lagged the pace of expansion in the overall labor market by more than one full percentage point in 2015.
Key Takeaways
Vacancy in the Greater Phoenix retail market ended 2015 at 9.8 percent, 30 basis points lower than one year ago. This marked the first time the vacancy rate has ended the year below 10 percent since 2008.
Average asking rents rose 3.4 percent in 2015, following several years of rent declines. Metrowide average asking rents ended the year at $13.80 per square foot, and additional increases are forecast for 2016. Some of the strongest rent growth occurred in the West Valley.
Following a third quarter spike, sales of shopping centers slowed by nearly 15 percent in the fourth quarter. For all of 2015, the median price was $111 per square foot, a tick lower than the 2014 median price. Cap rates rose 20 basis points in 2015, averaging 7.8 percent.
Outlook
The momentum created in the Greater Phoenix retail market in 2015 is forecast to carry over into further improvement in the year ahead. The local retail market cleared two important hurdles in 2015, with vacancy dipping below 10 percent and rents finally inching higher. Vacancies are on a path to decline again in 2016, which will support additional rent increases as operating conditions tighten.
Looking ahead, the local retail market should receive a boost from two traditional sources of growth: population expansion and a strengthening local housing market. The pace of local population growth has been accelerating in recent years and should top 2 percent in 2016.
Fueled in part by resumed population growth, the local housing market is also on the rebound. New single-family home permitting increased by more than 40 percent in 2015, and another strong gain is forecast for 2016. As these new homes are completed and sold, traffic at local retailers should pick up, supporting further expansion.
For full report Q4-2015-Colliers-Greater-Phoenix-Retail-Market-Report