Phoenix Retail Outperforms Nation
Retail in Phoenix is outperforming the national market. A new report shows the retail vacancy rate in Phoenix has dipped below 10%, and with the rising demand has come increased rental rates. Overall, rates have climbed 3.2% over last year, but in the most popular submarkets, which include Downtown Phoenix, Scottsdale and Northwest Phoenix, rents increased an average of 12%. Population growth is the primary driver behind the activity.
“As the saying goes, retail follows rooftops. In regards to population, Maricopa County has been the fastest growing county in the nation for the past three years running. Additionally, the Phoenix MSA, which includes both Maricopa and Pinal counties, is expected to break into the top 10 largest metros of the US with the coming 2020 Census,” Thomas M. Brophy, research director of Arizona at Colliers International, tells GlobeSt.com. “Additionally, Greater Phoenix has consistently been in the top five US metros for job growth over the last several years and has been one of the leading metros in the nation for wage growth, particularly small business wage growth, all of which are very attractive to retail businesses.”
Mixed-use development has helped to drive the retail activity as well as the increases in rents. Most of these projects have restaurant and entertainment tenants. “A couple of the more recognizable projects of this restaurant-based retail real estate revival was started in 2013 with Sam Fox’s The Yard project off 7th Street to the repositioning of Uptown Plaza at Camelback & Central which brought in iconic brands such as Shake Shake and Lou Malnatti’s to the mixed-use revival of Park Central Mall in Midtown with the addition of Creighton University Medical School,” says Brophy.
Traditional retail in Phoenix is also adapting to the changes in the market, helping to drive the strength of the retail market. “Whereas people decry the death of the big-box power centers which were developed, in part, to offset the high CAM (common area maintenance) costs associated with indoor malls, both of which are now, themselves, facing their own adapt or become extinct moments,” says Brophy. “As such you are beginning to see both old/new investors, with different ideas, coming into the retail space to see how to change with the times; whether that’s including co-working space if you’re Scottsdale Fashion Square to Fiesta Mall’s current attempt at redevelopment/transformation into a residential/job epicenter to the big box store-to-gym facility are all concepts which are playing out across the Valley.”
Originally Posted on GlobeSt.com