Greater Phoenix retail market remained healthy in Q2 2020 reports Colliers International

Market posted positive net absorption despite COVID-19 impact

Phoenix, July 20, 2020 – Colliers International reports the Greater Phoenix retail market finished the second quarter with positive net absorption, despite the impact of pandemic business interruptions. Vacancy remained healthy, but experts look towards the second half of the year to determine the long-term effects of COVID-19.

The retail sector posted positive net absorption of 14,134 square feet during the second quarter.  The leading submarket clusters were the West Valley with 88,540 square feet, North Phoenix with 76,551 square feet and South Mountain with 56,928 square feet. Scottsdale experienced the largest negative net absorption, primarily because of national brand gyms and home decor store closures.  

Retail vacancy remained low at 7.3 percent, matching the vacancy rate of first quarter 2020 and second quarter 2019. The Airport area maintained the lowest vacancy at 3.7 percent. The largest decrease in vacancy year-over-year took place in the South Mountain submarket, which now has 6.7 percent vacancy.

Four new retail centers were completed during second quarter and two of these are fully leased.  Laveen Park Place at 59th Avenue and Baseline Road is fully leased by Sprouts, TJMaxx and Michaels. The 35,399-square-foot new property at 1727 W. Ranch Road in Tempe has been fully leased by EOS Fitness. Punch Bowl Social, which was expected to take occupancy in downtown Phoenix, lost its funding from Cracker Barrel Old Fashion and never had a chance to open its doors.

Construction activity in the retail sector remained fairly steady. Building was disrupted on two projects due to supply chain issues, but projects currently underway are approximately 90.3 percent leased.  

Rental rates for retail space have risen 2 percent year-over-year, but declined 1.6 percent during second quarter. Average asking rental rates are now $14.82 per square foot. Northwest Phoenix, South Mountain and East Valley submarkets experienced the largest year-over-year asking rate increases. Scottsdale and North Scottsdale suffered the largest decrease in rental rates year-over-year. Discounts on rental rates are starting to become visible and the second wave of closures for gyms, bars and movie theaters is creating additional financial disruption.

Investment sales volume (over 10,000 SF and over $1 million) decreased 67 percent during second quarter. Approximately $73 million of sales were completed during April through June, compared to $223 million in transactions during first quarter 2020. The median price per square foot declined 7.2 percent over-the-quarter and 3.3 percent over-the-year. Investment sales during second quarter were led by three Walgreens transactions in Tempe, Chandler and Buckeye.

Transactions during the past three months included some noteworthy small properties that traded at high prices. Three properties, averaging 804 square feet in size, commanded an average price of $2,782 per square foot. These include the Dutch Bros. at 1005 S. Watson Road, Salad and Go at 3095 E. Queen Creek Road, and Salad and Go at 9875 W. Lower Buckeye Road. These drive-thru focused retail stores were not adversely impacted by the coronavirus shutdown.

Despite daily negative headlines, retailers are creatively exploring new business solutions that enable them to stay successful while adhering to pandemic restrictions. As witnessed during the reopening in May, there is pent-up consumer demand to socialize and re-connect with pre-COVID lifestyle elements. One of the casualties of the pandemic will be obsolete malls and vacant large big box spaces. These properties are prime for entrepreneurial redevelopment after the crisis passes.

About Colliers International
Colliers International (NASDAQ, TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning more than 40% of our equity, have delivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including affiliates), with more than $26 billion of assets under management.

Learn more about how we accelerate success at corporate.colliers.com, Twitter @Colliers and LinkedIn.

Colliers International in Arizona has served clients locally and globally for more than 35 years.


Related Experts

Phillip Hernandez

Research Manager

Phoenix

As research manager for Colliers International in Arizona, I am responsible for proactively developing and implementing research objectives and directing all research activity for the Arizona offices.

I provide 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. I analyze and interpret real estate trends and maintain a database of economic indicators to provide forecasts.

Regardless of the property type or sector, I believe each has a story to tell and that data provides the opportunity to redefine the narrative. With a background in location analytics, I am highly experienced in interpreting complex data sets. Using the latest technology, I developed a system to blend analytics with a visually attractive approach to bring data to life.

Focusing on business development, I leverage market intelligence and insights for thought leadership content strategy in support of client engagement. My 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 me as a brilliant storyteller and a passionate, creative and experienced professional.

Prior to joining Colliers, I served as a business analyst at CBRE, where I specialized in creating tailored research reports, as well as unique and interactive applications and dashboards that elevated the market position of assets.

I delivered weekly research updates with relevant lease and sale comps, custom competitive sets and current market activity. I 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. I also led weekly department research meetings to develop initiatives surrounding market trends, produce innovative industry solutions and analyze client-centric objectives.

Previously, I was a GIS analyst for the central region of CBRE. Working exclusively with top-performing markets, I created unique models that illustrated custom real estate datasets through location analytics. I produced high-quality geographic and demographic maps, and investigated multiple approaches to storytelling through map and market analytics.

View expert