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Phoenix retail market posts lowest vacancy in seven years

Phoenix Retail Hero

Increases in population and consumer spending drive strengthening market

PHOENIX - The Greater Phoenix retail real estate market posted a robust fourth quarter, with strong investment sales, increasing rental rates and the lowest vacancy rates in seven years, according to a report released by Colliers in Arizona.

The metropolitan area posted labor figures exceeding those of February 2020 (pre-pandemic.). Increased population, strong job figures and improving consumer spending all are contributing to an increasingly improving retail real estate market.

Fourth quarter 2021 ended with retail vacancy at 6.8 percent, marking a 40 basis point decrease from third quarter. This is the lowest level of vacancy posted in Greater Phoenix in the past seven years. Northwest Phoenix finished the year with the lowest vacancy of all submarkets at 4.7 percent. Scottsdale submarket finished the year with 5.3 percent vacancy, a decrease of 100 basis points year-over-year. The largest decline in vacancy year-over-year took place in the Downtown submarket, which finished at 6.1 percent.

Net absorption of retail space during fourth quarter reached 530,082 square feet, bringing the 2021 total to 1.2 million square feet. The 2021 net absorption figures surpassed 2019, pre-pandemic levels. During the month of December, the number of quick service restaurants that opened outpaced closings by 38 percent. The number of new leases exceeding 10,000 square feet in fourth quarter exceeded third quarter levels by 30 percent. The East Valley submarket posted the highest net absorption during fourth quarter, largely attributed to the delivery of the new 127,400-square-foot Fry’s Marketplace at Ellsworth and Riggs roads. The largest lease signed during fourth quarter was American Furniture Warehouse committing to 149,609 square feet at site formerly occupied by Costco at Christown Spectrum. 

Approximately 217,000 square feet of new retail space was completed and added to inventory during fourth quarter This brought the 2021 total of new deliveries to 809,467 square feet. Two different Fry’s Marketplace stores were delivered during 2021. Currently, 524,220 square feet of new product are under construction. This falls below the five-year average of 842,363 square feet. Construction levels will drastically increase in 2022 with the announcement of three large, proposed shopping centers expected to be started this year. Construction is heavily focused in the East Valley and West Valley, where 81 percent of the total announced projects will be located.

Asking rental rates reached $15.28 per square foot, marking an increase of 3.73 percent compared to year-end 2020. West Valley posted the largest increase in rental rates year-over-year, rising 10.7 percent to $15.84 per square foot. Low vacancy and population growth in this submarket are the driving forces for rate increases, The East Valley posted the strongest increase over-the-quarter with a 3.7 percent rise in rates to $14.56 per square foot.

Investment sales reached nearly $2 billion in 2021, with 31 percent of that total being transacted during fourth quarter. Fourth quarter transaction volume surpassed third quarter by 15.8 percent. The 2021 transaction volume marked an increase of 120 percent over 2020 and this past year was the best performing since 2015. The strong demand for retail investments drove the median price per square foot up 16.1 percent during 2021 compared to 2020. The largest sale of the quarter was the $65 million sale of Arcadia Crossing, a 476,743-square-foot center. 

The outlook for Greater Phoenix retail market remains strong. Population growth in the Valley is attracting retailers from across the nation, including new restaurant concepts and store innovators. A continued strong economy and consumer spending will ensure the market thrives.

About Colliers
Colliers (NASDAQ, TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 65 countries, our more than 15,000 enterprising professionals work collaboratively to provide expert advice to real estate occupiers, owners and investors. For more than 25 years, our experienced leadership with significant insider ownership has delivered compound annual investment returns of almost 20% for shareholders. With annualized revenues to $3.6 billion ($4.0 billion including affiliates) and $46 billion of assets under management, we maximize the potential of property and accelerate the success of our clients and our people. Learn more at, Twitter @Colliers or LinkedIn.
Colliers in Arizona has served clients locally and globally for more than 40 years.

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Phillip Hernandez

Director, Research | Arizona


As research manager for Colliers in Arizona, Phillip Hernandez is responsible for proactively developing and implementing research objectives and directing all research activity for the Arizona offices.

He provides leading-edge, thought-provoking research and analysis of market data for use in producing quarterly statistical market reports for each property discipline, as well as other ad hoc reports, research projects and presentations. Phillip analyzes and interprets real estate trends and maintains a database of economic indicators to provide forecasts.

Regardless of the property type or sector, Phillip believes each has a story to tell and that data provides the opportunity to redefine the narrative. With a background in location analytics, he is highly experienced in interpreting complex data sets. Using the latest technology, Phillip developed a system to blend analytics with a visually attractive approach to bring data to life.

Focusing on business development, he leverages market intelligence and insights for thought leadership content strategy in support of client engagement. His goal is to strategically align research and business development efforts and present research in an easily digestible format that promotes Colliers’ market share and revenue growth.

Colleagues describe Phillip as a brilliant storyteller and a passionate, creative and experienced professional.

Prior to joining Colliers, he served as a business analyst at CBRE, where he specialized in creating tailored research reports, as well as unique and interactive applications and dashboards that elevated the market position of assets. Phillip delivered weekly research updates, with relevant lease and sale comps, custom competitive sets and current market activity.

He provided complex market and trend analyses, monitored an extensive database of proprietary market data, and delivered custom quarterly and annual reports that were strategically positioned towards targeted clients. He also led weekly department research meetings to develop initiatives surrounding market trends, produce innovative industry solutions and analyze client-centric objectives.

Previously, Phillip was a GIS analyst for the central region of CBRE. Working exclusively with top-performing markets, he created unique models that illustrated custom real estate datasets through location analytics. Phillip produced high-quality geographic and demographic maps, and investigated multiple approaches to storytelling through map and market analytics.

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