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