Ahwatukee retail vacancy rate half that of Valley
by Cathryn Creno – Apr. 25, 2009 08:00 AM
The Arizona Republic
Ahwatukee business owner Yen Lam knows that to be a success, a small-business owner must sometimes zig when everyone else zags.
She sold a profitable Vietnamese restaurant in Chandler in October 2007, getting her money out right before the credit crunch sent the dining industry into a tailspin.
Two weeks ago, in what many call the worst retail climate in decades, Lam bought a nail salon.
Lam says she doesn’t expect to do much more than pay salaries and rent during the first few years she owns Chic Nails, 4025 E. Chandler Blvd.
“Everyone says, ‘You are opening a business now?’ But I have a good feeling about it,” she said. “I got a very good deal for my money and I think when things get better this will be a very successful place.”
One reason Lam thinks the salon will be a success is its location in a busy Ahwatukee shopping center, in between a Safeway and a Trader Joe’s on the southeastern corner of 40th Street and Chandler Boulevard.
“The economy overall is suffering, but this is one of my best, most successful centers in the entire Phoenix metro area,” said Daniel Lupien, senior director of real estate at Kimco Realty Corp. in Mesa.
While other centers around the Valley are going begging for tenants, Lupien said he just signed a Panda Express to take a space previously occupied by a party store. And he is working on other offers for spaces recently vacated by a gym and by a dress shop.
Like most parts of the Valley, Ahwatukee is not without some gaping holes in shopping centers.
Probably the most noticeable is on the northwestern corner of 46th Street and Ray Road, where a 76,000-square foot Mervyn’s closed in late 2008. Other holes have been left by an El Paso Barbeque and a family-owned restaurant, La Vigne. Both went out of business a few doors down from the AMC Ahwatukee 24 Theaters at 50th Street and Ray.
Also, an office ghost town can be found along Desert Foothills Parkways between Chandler and Pecos roads.
Only a single tenant has moved into one office condo complex in the area. Broker Tim Dulany, with Landmark TNC, said a dental group has also signed on and is making payments, but decided not to start seeing patients until the economy improves.
“Right now everyone is on caution,” he said.
Dulany said the area, which is slightly more than five miles from Interstate 10, has struggled since Wal-Mart Inc. dropped plans for a Neighborhood Market next to the complex that he represents. Now the area lacks a retail hub that could bring in more tenants, he said.
Overall, however, Ahwatukee’s retail vacancy rate is about half that of the Valley as a whole, according to statistics from CB Richard Ellis in Phoenix. Typically in Ahwatukee, when one store closes, a new tenant like Yen Lam is ready to move in. Lam said her landlord would not even consider lowering the rent.
“I asked, but they would not negotiate,” she said.
Ahwatukee’s office vacancy rate is about even with the rest of the Valley, according to CB Richard Ellis numbers.
Retail real estate analyst Bob Kammrath said it is no surprise that Ahwatukee commercial real estate is outperforming that in other parts of the Valley.
The success of a commercial real estate market depends on the success of an area’s residential market, he said.
Commercial centers in areas with stable housing markets tend to have more regular shoppers. And offices have customers to cater to.
“The areas that are performing the best are areas that have been developed the longest and have established neighborhoods. Areas like Ahwatukee and Tempe,” Kammrath said. “The areas that are performing worst are on the fringes: Peoria, Buckeye and Queen Creek. Growth has come to a halt there.”
Brokers for the former Mervyn’s space and restaurant locations near the theaters declined comment about prospective tenants. But others spoke enthusiastically about interest potential tenants have shown in Ahwatukee.
“It’s a great suburban market,” said Todd Folger, of SRS Real Estate Partners, who is hoping to soon close on a deal that would bring a family-style restaurant to a space left empty by a Chili’s Grill and Bar at Chandler and 48th St.”It has families with great discretionary incomes.”
Kevin Michaud, general manger of a Jersey Mike’s Subs franchise that opened across the street from the former Chili’s on Tuesday echoed the sentiment. He said that the New Jersey-based chain has another store six miles away in Chandler but also views Ahwatukee as an important market for the store’s East Coast style sandwiches.
Long-time Valley broker and developer Marty DeRito, chief executive officer of De Rito Partners Development in Phoenix, cautioned that Ahwatukee is vulnerable to future dips in the economy.
DeRito’s company represents both vacant land for sale and empty retail space for lease in Ahwatukee.
“Even established retailers are having trouble finding financing,” he said. “I am hopeful that the (federal) stimulus package will turn things around. But right now all retailers are struggling and I think they will be struggling for another three years.”