Driving through some areas of Phoenix it’s hard not to miss all of the vacancies in once booming strip centers and growing areas of town. It’s no surprise that everyone is feeling the pressures of the economy but there seem to be an ever-increasing number of retail locations closing their doors and whole centers “going dark”. How much more can we expect? When will we start to see some turn around?
We are regular viewers of the CoStar (www.costar.com) webinar series that gives quarterly updates of the state of various real estate markets in particular for this entry; Retail. Below are a few pertinent pieces of information that we thought would help everyone understand where our market is and projections for the future:
- In 2009 Phoenix metro area has seen 2.5 million square feet of negative absorption in the retail market
- Phoenix still has 1 million square feet of new retail construction underway (this only makes up 0.5% of Phoenix’s total commercial construction)
- Phoenix has the highest retail vacancy rate in the country at 11.4% (this is due mainly to the massive growth Phoenix saw in the last few years)
Leasing Market
- Retail vacancies are projected to peak in 2010
- Retail rents should begin to increase in 2011
- Positive NOI is expected by 2012
Sales Market
- Cap rates actually bottomed out in 2006 at 6.1% and are slowly increasing (current average is 7.8%)
- General retail property sales are down 36% but still remain above long term averages
- Phoenix has seen $420 million in retail sales this year
As you can imagine, this is only a portion of the information we were given (we even have information on recent numbers for office and industrial) so stop by or call us sometime if you would like to discuss any of this further (we love an excuse to sit on the veranda for a good chat!).
