CBRE: Phoenix retail reports robust demand amid rise in new supply

Phoenix, Arizona – CBRE Research has released its Q4 2016 Phoenix Retail MarketView and Big Box reports, and overall the Valley’s retail market performed well to close out the year. Top-level highlights included:

Overall market fundamentals & general leasing activity:

  • Q4 was highlighted by roughly 600,000 sq. ft. of positive net absorption, which was the greatest amount of any quarter in 2016
  • Overall, 2016 saw nearly 5 million sq. ft. of gross leasing activity, surpassing 2015 totals by just over a million square feet.
  • Market wide vacancy dipped four basis points (bps) quarter-over-quarter, ending Q4 at 8.9 percent.
  • The Valley’s average asking lease rate ended Q4 at $17.16 PSF (NNN), which is a 4 percent year-over-year increase.
    • Trend alert: Rent growth was particularly supported by rising demand from restaurant users in 2016 as these users typically pay a premium for well-located, quality space.
    • Construction completions reached a six-year high in 2016, reaching 1.3 million sq. ft. of new product brought online.
    • Completed construction in Q4 alone exceeded 350,000 sq. ft.

Trend alert: Grocers lead the new construction wave with four Fry’s Marketplaces and two Spouts Farmers Markets build-to-suits were brought online, driven by high levels of household formation and housing growth. Demand for grocers is expected to extend into 2017, with two Fry’s and one Sprouts in the development pipeline. According to First Vice President Greg Abbott, 2017 should continue to be a healthy year for retail. He points to steady job and wage growth continuing to support consumer spending as well as a strengthened housing market as indicators that will benefit the Valley’s retail sector.

“Phoenix still has a lot of runway for retail growth, given we were one of the last markets to head into recovery post-recession,” said Abbott. “The Valley’s housing market is projected to be one of the best in country and because retail tends to follow rooftops, I expect a lot of momentum as retailers expand and enter the Arizona market.”

Big box retail highlights:

Metro Phoenix’s big box market performed well in 2016 despite several big box retailer bankruptcies early in the year. Big box space continued to be in high demand as tenants expanded their footprints across the Valley.

  • At year’s end, 120 big box spaces totaling just over 4.3 million sq. ft. were available across the Valley. Breaking that down, CBRE Research reports:
  • 28 Class A spaces totaling 953,067 sq. ft.
  • 53 class B spaces totaling just over 2.1 million sq. ft.
  • 27 class C spaces totaling 819,686 sq. ft.
  • 12 class D spaces totaling 497,712 sq. ft.

CBRE experts expect much of the older big box space to be redeveloped to meet modern use requirements. This includes adaption for uses other than retail, as well as seeing some broken down and split into smaller footprint boxes.

  • Supply/demand balance remained healthy as four big-box spaces totaling over 300,000 sq. ft. were delivered – all 100 percent pre-leased.
  • Former Sports Authority space continues to be in high demand. Three of the class A spaces were absorbed in Q4 bringing the 2016 total of absorbed SA boxes to four.
  • Target signed an approx. 50,000-sq.-ft. lease for a “flexible-format” store – the first of its kind in the Valley.First Vice President Todd Folger says he expects demand from big box retailers will continue at the same – if not higher – levels as we head farther into 2017.“2016 saw 17 big box spaces absorbed for 905,046 sq. ft. in Q4 alone and 41 spaces for nearly 2.1 million sq. ft. for all of 2016. With only 28 class A boxes currently available, the market is getting increasingly competitive,” said Folger. “Development has started to keep pace with demand, so I expect pre-leasing activity on new class A space to remain high as well. The remainder of available big box space is starting to reach the end of its functional life, so look for continued redevelopment of those boxes for uses outside of retail.”

    To see the full retail report click here: 4Q2016_Phoenix_Marketview_Retail

    To see the full Big Box report click here: Big_Box_Retail_Report_4Q2016




DSW Designer Shoe Warehouse Signs 20,000-Square-Foot Lease at Tempe Marketplace

Courtesy Photo
Tempe Marketplace (Courtesy Photo)

CBRE has negotiated a 20,000-square-foot lease at Tempe Marketplace in Tempe, Arizona on behalf of DSW Designer Shoe Warehouse.

Todd Folger with CBRE’s Phoenix office negotiated on behalf of DSW. David Malin, director of acquisitions and development for Vestar, Inc. represented Tempe Marketplace.

“This transaction continues to show the overall improvement in the Phoenix economy and is a notable indicator of the renewed confidence in the metro Phoenix retail market,” said CBRE’s Folger. “As always, I am very pleased to assist a tremendous retailer like DSW in their continued expansion in Arizona.”

Developed by Vestar in 2007, Tempe Marketplace is a premier, interactive shopping, dining and entertainment destination located at southwest corner of the loop 101 and 202 freeways in Tempe. The project features 1.3 million square feet of retail space and, in addition to the new lease with DSW, is home to prominent national retailers including Target, Cost Plus World Market, Old Navy, JC Penny, GAP and Best Buy. It is also home to the first Arizona location for Dave & Busters.

DSW is a leading branded footwear and accessories retailer. The retail giant operates 393 stores across the U.S., including the District of Columbia and Puerto Rico. In addition to the new location at Tempe Marketplace, DSW’s other Valley locations include stores at Gateway Pavilions in Avondale, Arrowhead Crossing in Peoria, Scottsdale Fiesta in Scottsdale, Desert Ridge Marketplace in Phoenix, Chandler Village Center in Chandler and San Tan Village in Gilbert. DSW’s Tempe Marketplace location will open in the spring of 2014.

Folger can be reached at (602) 735-1749 andend_of_the_skype_highlighting Malin should be contacted at (602) 866-0900.

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PHOENIX LEASE REPORT – SEPT. 30 – OCT 4, 2013

Agua Fria Town Center (photo courtesy Velocity Retail Group)
Agua Fria Town Center (courtesy photo Velocity Retail Group)

GROUND LEASE AT Gilbert & Germann in Chandler, AZ
Michael Clark and Dave Cheatham of Velocity Retail Group in Phoenix represented the landlord, Accelerated Development Services and Wadsworth Development in a 20 year ground lease of 1.73 acres located at the southwest corner of Gilbert and Germann in Chandler, Arizona. The Tenant, First Choice ER, was represented by Todd Folger of CBRE in Phoenix. The tenant plans to build an approximate 6,500 square foot facility, and be open for business by second quarter of 2014.

OFFICE – 1580 N FIESTA BLVD, GILBERT, AZ
A lease for 34,368 sq. ft. in Fiesta Tech Center in Gilbert was recently consummated. The owner of the property is D Ray Hult Family, LP. Steve Grossoehme and Dan Casey of Rein & Grossoehme represented the owner and Payson MacWilliam and Don MacWillian of Colliers represented an undisclosed tenant.

RETAIL – CHANDLER PAVILLIONS II, CHANDLER, AZ
Velocity Retail’s Dave Cheatham and Nick Ault represented the tenant, My Pigsty in the lease of a 34,000 sq. ft. space at Chandler Pavillions II on the southeast corner of Harrison and 54th Street in Chandler. The landlord, MDI 154, LLC was represented by Mike Polachek of SRS Real Estate Partners. The space was previously occupied by Ultimate Electronics.

RETAIL – 441 S WATSON ROAD, BUCKEYE, AZ
Goodwill of Central Arizona finalized a 25,000 sq. ft. build-to-suit lease with DTD Devco 12, LLC, an entity controlled by Desert Troon Companies, at Watson Marketplace, 441 South Watson Road in Buckeye, AZ. Andy Kroot of Velocity Retail Group in Phoenix represented the tenant.

OFFICE – 3135 S PRINCE RD, CHANDLER, AZ
Tom Bean and Laurel Lewis of NAI Horizon in Phoenix represented the landlord, Hangar Winters Ventures LLC, in a 15 month office lease transaction for a 4,950 sq. ft. space at 3135 South Price Road in Chandler, AZ. Josh Wyss and Bruce Calfee with Cassidy Turley represented the tenant, Insys Therapeutics, Inc.

RETAIL – PEORIA PLAZA SHOPPING, PEORIA, AZ
Westbrook Animal Hospital leased a 3,004 sq. ft. space at Peoria Plaza Shopping Center, located at the southwest corner of Union Hills and 91st Avenue in Peoria and was represented by John Appelbe of Cassidy Turley. Judi Butterworth and Nick Ault of Velocity Retail Group in Phoenix represented the landlord, Shambhala Development, LLC

OFFICE – 8101 N 19TH AVE. SUITE A, PHOENIX, AZ
NextCare Arizona, LLC leased a 4,086 sq. ft. space at 8101 N. 19th Avenue, Suite A, in Phoenix. The landlord, Kling/Stong Trust was represented by Andy Kroot of Velocity Retail in Phoenix, and the tenant was represented by Ed Beeh and Robbie Petty of SRS Real Estate Partners in Phoenix. The space was formerly an O’Reilly Auto Parts Store.

OFFICE – 8687 E VIA DE VENTURA, SCOTTSDALE
Justin Horwitz of Sperry Van Ness in Phoenix represented the landlord at Ventura Gateway to lease 2,987 sq. ft. to Alert GPS Holdings, Inc. The tenant was represented by Tanner Milne of Menlog CBRE.

OFFICE – 1100 S DOBSON RD, CHANDLER, AZ
Mike Myrick and Alexandra Loye of NAI Horizon in Phoenix represented the tenant, Arizona Orthopedics, PLLC, in a 65 month medical lease transaction for a 2,930 sq. ft. space at 1100 South Dobson Road in Chandler, AZ. Phil Wurth with Colliers International of Phoenix represented the landlord, SDBP III, LP.

RETAIL – 13200 W FOXFIRE DR, SURPRISE, AZ
Mark Wilckeof NAI Horizon in Phoenix represented the tenant, Sisco’s Fabrication and Custom Body Work, LLC, in a 63 month industrial lease transaction for a 2,851 sq. ft. space at 13200 West Foxfire Drive in Surprise, AZ. John Pompay with Cassidy Turley represented the landlord, Foxfire Two, LLC.

RETAIL – GILBERT FIESTA II, GILBERT AZ
Leslie Pools lease 2,800 sq. ft. at Gilbert Fiesta II in Gilbert. Greg Vanlerberghe and Erin Schrauth of Sperry Van Ness in Phoenix represented the landlord. Darlene Saunders of Sperry Van Ness in Phoenix represented the tenant.

OFFICE – 14614 N KIERLAND BLVD, SCOTTSDALE, AZ
Laurel Lewis of NAI Horizona in Phoenix represented the tenant, Cornerstone Home Lending, Inc., in a 40 month office lease transaction for a 2,771 sq. ft. space at 14614 North Kierland Boulevard in Scottsdale, AZ. Luke Walker with CBRE in Phoenix represented the landlord, Abart Properties VIII Holding Company, LLC.

RETAIL – 2480 W HAPPY VALLEY RD, PHOENIX
Rod Works leased a 2,488 sq. ft. space at The Shops at Norterra, located at 2480 W. Happy Valley Road, Phoenix. Velocity Retail Group’s Jim Edwards and Larry Miller represented the tenant. The landlord, RED Development/USAA, was represented by Heather Randall of RED Development in Phoenix. This will be Rod Works second valley location, and is set to open in November of this year.

OFFICE – 8765 W KELTON LN, PEORIA, AZ
Barbara Lloyd and Lane Neville of NAI Horizon of Phoenix represented the landlord, Pathfinder TRF Four, LLC, in a 38 month office lease transaction for a 2,135 sq. ft. space at 8765 West Kelton Lane in Peoria, AZ. Rob Ryan with West USA Commercial represented the tenant, Barress and Barress, LLC.

RETAIL – CAMP VERDE OUTPOST MALL, CAMP VERDE, AZ
Greg Vanlerberghe and Erin Schrauth of Sperry Van Ness in Phoenix represented both the landlord and tenant at Camp Verde Outpost Mall to lease 2,088 sq. ft. to Camp Verde Eye Care.

OFFICE – 4515 S McCLINTOCK DR, TEMPE, AZ
Tom Bean and Barbara Lloyd of NAI Horzon in Phoenixz represented the landlord, Tempe CC, LLC, in a 52 month office lease transaction for a 1,586 sq. ft. space at 4515 South McClintock Drive in Tempe, AZ. Laurel Lewis with NAI Horizon represented the tenant, Two Suns Health Services, LLC.

RETAIL – GILBERT FIESTA II, GILBERT AZ
The Tilted Mirror clothing boutique leased 1,400 sq. ft. at Gilbert Fiesta II. The property is located on Williams Filed Road in Gilbert. Greg Vanlerberghe and Erin Saunders of Sperry Van Ness in Pheonix represented the tenant.

Union Hills & 91st Ave, Phoenix (courtesy photo Velocity Retail Group)
Union Hills & 91st Ave, Phoenix (courtesy photo)

RETAIL – PEORIA PLAZA SHOPPING, PEORIA, AZ
Judi Butterworth and Nick Ault of Velocity Retail Group in Phoenix represented the landlord, Shambhala Development, LLC in a lease of 1, 200 sq. ft. to Awen’s Day Spa at Peoria Plaza Shopping Center, located at the southwest corner of Union Hills and 91st Avenue in Peoria

RETAIL – AGUA FRIA TOWNE CENTER, PHOENIX
Take or Bake Pizza has chosen Agua Fria Towne Center at the northeast corner of Camelback Road and Loop 101 for its first Phoenix location. The tenant leased 1,100 sq. ft. from Oak Tree Three Investments, LLC in a new 5-year deal. Nick DeDona with Strategic Retail Group of Phoenix represented the tenant. Judi Butterworth and Nick Ault of Velocity Retail Group in Phoenix represented the landlord.

RETAIL – 20797 N JOHN WAYNE PARKWAY, MARICOPA, AZ
Chris Gerow, Shelby Tworek, and Gabe Ortega of NAI Horizon represented the landlord, USB NA as Trustee for JPM 2007-LDP12-Maricopa Marketplace, in a 3 year retail lease renewal for a 1,080 sq. ft. space at 20797 North John Wayne Parkway in Maricopa, AZ.

RETAIL – 6740 E UNIVERSITY DR, MESA, AZ
Michael Franks and Michael Gaida of Sperry Van Ness in Phoenix represented Winks Smoke Shop in a 1,020 sq. ft. lease at Tapanema Plaza at 6740 E University Drive in Mesa. Franks and Gaida also represented the landlord.