Q1 2020 Retail Market
- The Greater Phoenix retail market ended the first quarter strong and healthy with 125,641 square feet of net absorption.
- Vacancy dropped 10 bps over the past 12 months but increased 10 bps over the quarter to the current 7.3 percent.
- The healthy vacancy held steady while the retail market delivered over 312,000 square feet this quarter, primarily in the Scottsdale and East Valley submarket cluster.
- Notable deliveries included the anticipated Lifetime Fitness at Biltmore Fashion Park and The Point at Eastmark, located on the NWC of Signal Butte and Warner roads in Mesa, which secured Safeway as the key anchor tenant.
- Rents climbed 2.2 percent higher over the past 12 months, with asking rents rising to $15.07 per square foot.
- North Phoenix, South Mountain, and Northwest Phoenix submarket clusters saw the highest year-over-year asking rate increases: 8.21% to $12.35, 4.91% to $15.69, and 4.64% to $15.70, respectively.
During the week ending March 28, 2020, a sizable 88,940 unemployment claims were filed in the state of Arizona, up 203 percent from the previous week. We anticipate this number will continue increasing as companies in all industries are forced to keep their doors closed as part of the effort to stop the spread of COVID-19.
In mid-March, roughly two thirds of the way through MLB Spring Training season, the remainder of the baseball games were cancelled. With 15 baseball teams playing across 10 facilities throughout the Valley, it is estimated the economic impact will be between $75 million to $100 million in lost revenue. Cancelling the schedule not only hit the baseball facilities, but also tourism, restaurants and bars that rely heavily on February and March as profit-generating months that carry them through the slow summer season.
Outlook: Ten years of consecutive job growth in Metro Phoenix was abruptly ended in the final two weeks of the first quarter. Certain industries might not feel the impact of jobs lost and some might even benefit.
Many retailers whose business model relies on attracting customers to their establishment will see the largest negative impact, while even the apparel industry witnessed sales cut in half during March. Large discount stores and grocery stores have seen their shelves emptied and online ordering has picked up tremendously. E-commerce is expected to increase between 15 to 20 percent over the year.
Landlords have been working closely with their tenants on a case-by case basis, but many retailers are in panic mode as they face a situation without a clear set timeline for re-opening.
In the midst of the COVID-19 outbreak, information and data is emerging at a quick and uneven rate. The information contained herein has been obtained from sources deemed reliable at the time the report was written. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.