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Phoenix retail absorption in first half of 2021 doubles total posted for entire 2020 year and best since 2018

Vacancy of retail space declined in second quarter as market improves

PHOENIX, August 2, 2021 – The Greater Phoenix retail real estate market is rebounding with the first half posting positive net absorption that totaled more than twice the amount absorbed in all of 2020 and marking the best six-month period since 2018. Vacancy rates are decreasing in the retail sector and investment sales are improving as well, according to Colliers in Arizona.

Net absorption of retail space for the first half of 2021 totals 496,542 square feet. This includes 249,645 square feet of positive net absorption during the second quarter. Net absorption volume posted during the first six months of 2021 is the highest since 2018. Leasing was strongest in the East Valley, where 399,172 square feet of new direct deals were completed. 

In May, sporting goods company Sheels committed to occupy the former Nordstrom’s space at Chandler Fashion Square. This will be the company’s first Greater Phoenix location with opening planned in 2023. Sportsman Warehouse signed a lease for 32,019 square feet at Chandler Pavilions, relocating to the former Toys R Us space. Outside of the East Valley, ExtraSpace Storage signed the largest deal, involving 55,255 square feet at a former Safeway space in Surprise, Arizona. 

Vacancy in retail space fell 10 basis points during second quarter to 7.4 percent. This is an increase of 10 basis points year-over-year. Scottsdale posted the largest decline in vacancy during second second quarter. The area’s vacancy fell 110 basis points to 5.3 percent. West Valley posted the lowest vacancy for the second consecutive quarter at 5.0 percent. This is a 40-basis-point decline year-over-year. 

The highest retail vacancy is found in North Phoenix, where 10.4 percent of space is available, marking an increase of 130 basis points year-over-year. Colliers notes a significant change in the retail inventory, having removed Paradise Valley Mall. The project will be added back next quarter to the “under construction” category when the mall’s redevelopment is started.

Average rental rates finished the second quarter at $14.90 per square foot, marking an increase of 1.02 percent over-the-quarter and 1.98 percent year-over-year. Every Valley submarket but North Scottsdale posted a year-over-year increase in rental rates. North Scottsdale posted a 2.1 percent decline in rates from mid-year 2020 to the end of June 2021. West Valley and Northwest Phoenix submarkets posted the largest year-over-year rental rate increases, jumping 7.9 and 7.1 percent, respectively. Scottsdale submarket boasts the highest rental rates, increasing 0.52 percent over-the-quarter to $25.10 per square foot. 

Construction of new retail properties moved forward during second quarter with the completion of three projects totaling 188,470 square feet and another 382,505 square feet now underway. The three projects completed were 100 percent leased and include: two EOS Fitness facilities in Gilbert totaling 64,400 square feet and a Fry’s Marketplace comprised of 124,070 square feet at Village Grove at Verrado in Buckeye. 

Year-to-date, the market added 419,490 square feet of new retail space to inventory. At this point, the redevelopment of Papago Plaza in Scottsdale is the only inner core project under construction. All other new projects are located in the Southeast, West Valley and Northwest submarkets, The East Valley has the most activity with five properties underway totaling 126,562 square feet. 

Investment interest in Phoenix’s retail properties improved during the second quarter. Transactions totaling $350 million were completed during second quarter, bringing the total year-to-date to $636 million in sales volume. The median price paid per square foot landed at $222. Drug store sales were very active during second quarter with 10 transactions totaling $52 million. 

The largest retail sale during second quarter was the $162.5 million sale of Camelback Colonnade. The 1,098,685-square-foot center in the Camelback Corridor was sold by RED Development to Federal Realty Investment Trust. The same buyer purchased Hilton Village from RED Development for $37.5 million ($388/SF.)

Pent-up demand for retail activity was set loose as pandemic restrictions were lifted. This resulted in a 25 percent increase in retail spending compared to January 2020. Greater Phoenix remains in the top position for metro areas receiving immigration for the third consecutive year from July 2019-2020. This resulted in more demand by retailers to enter our market. Development in suburban areas accounts for more than 80 percent of retail construction as developers actively work to keep up with the city’s expansion.

Media Contact:
Robin Vitols
The Rodie Company
RobinVitols@me.com 
+1 602 810 4120

About Colliers
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 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 at corporate.colliers.com, Twitter @Colliers or LinkedIn.

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

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Phillip Hernandez

Research Manager

Phoenix

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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