Phoenix Retail Vacancy & Lease Rates Slip, Construction Up – Q3
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