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Colliers reports Phoenix retail vacancy drops as leasing activity accelerates in Q1 2021

In-migration fuels demand for retail space as city grows

Phoenix May 26, 2021 – The first quarter of 2021 brought positive net absorption to the Greater Phoenix retail market, according to a report released today by Colliers in Arizona. Absorption pushed vacancy down and rental rates continue showing signs of growth.

The city lost significant jobs during the spring of 2020, as the pandemic unfolded, but many have been recovered. The retail trade supersector lost 29,000 jobs in April of last year and, as of March 2021, approximately 99.6 percent of the lost jobs had been recovered. The leisure and hospitality sector, which lost 96,400 jobs, has only recovered 64.7 percent of its positions.

During the first three months of 2021, the city posted 246,897 square feet of net absorption. This marks the highest level of net absorption since second quarter 2019. The Northwest submarket cluster had the single largest move-in with Lifetime Fitness taking occupancy of 180,000 square feet. Leasing activity increased 18 percent year-over-year. The volume of new retail deals has increased 85 percent since the slowdown in second quarter 2020.

First quarter was completed with 7.7 percent of retail space vacant, which is 20 basis points lower than fourth quarter 2020. This is still an increase of 40 basis points over vacancy posted March 2020. South Mountain posted the largest increase in vacancy both over-the-quarter and year-over-year, primarily attributed to the closure of Fry’s Electronics. That closure added 148,992 square feet to that submarket’s inventory. West Valley submarket posted the lowest vacancy at 4.9 percent, which is 70 basis points down year-over-year.

Rental rates continue to rise, elevating 1.1 percent year-over-year. As the metro area grows and demand for retail space increases in the outskirts, rising land prices and elevated construction costs are pushing rental rates even higher. Rental rates finished first quarter at an average $14.75 per square foot, marking a .34 percent increase over-the-quarter.

Construction moved forward during the first quarter, bringing 231,020 square feet of new retail space to the market. These new projects came online with only 5 percent vacancy. Demand for drive-thru spaces and the creation of new restaurant concepts have been pushing the market for new construction. In addition, city sprawl in both the East and West Valley regions is creating more demand for retail space.

The Northwest Phoenix submarket cluster added the most square footage, including delivery of the Lifetime Fitness at 67th Avenue and Happy Valley Road, as well as the grocery store chain Aldi at Lake Pleasant Parkway and Happy Valley Road. These two properties total 202,000 square feet and comprise 87 percent of the city’s first quarter deliveries.

Only 431,333 square feet are under construction currently, compared to the three-year average of 760,000 square feet. The largest project under construction is Fry’s Marketplace at Village Grove at Verrado on the northwest corner of Jackrabbit Trail and Indian School Road. The 124,070-square-foot project is expected to be completed next quarter.

Investment sales of retail properties remained healthy in the first quarter of the year with 41 transactions totaling $382 million. The median price paid per square foot increased 14 percent year-over-year to $191. The largest transaction was Macerich’s sale of Paradise Valley mall to RED Development in late March. The recently completed Lifetime Fitness on 67th Avenue was sold as a sale-leaseback to Spirit Realty in March for $188 per square foot. Quick-service restaurants and coffee shops with a drive thru component are still in high demand and continue to capture the highest prices per square foot.

About Colliers International
Colliers (NASDAQ, TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 67 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 of $3.0 billion ($3.3 billion including affiliates) and $40 billion of assets under management, we maximize the potential of property and accelerate the success of our clients and our people. Learn more about how we accelerate success at, Twitter @Colliers and LinkedIn.

Colliers in Arizona has served clients locally and globally for more than 40 years.

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Phillip Hernandez

Research Manager


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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