The Phoenix retail real estate market in the third quarter of 2023 is the most competitive it has ever been, with the lowest recorded vacancy rate at 5.1%. Grocery stores and fitness centers have been leading the surge in demand for retail space, filling larger spaces in malls and mixed-use developments at higher rates than before the pandemic. Retail leasing remains strong despite economic challenges. Rental rates have increased, with the average rent per square foot rising from $21.21 in Q2 to $23.91 in Q3. While there is strong demand in the Valley, limited available space has created intense competition for leases. Large retail projects under construction may lead to a softening of rental rates in the future.