So 2014 finally brings an optimistic view of retail commercial real estate in Arizona. There is a heightened sense of activity and an overall attitude among owners, tenants, brokers and developers that the worst is far, far behind us.
One of the key indicators that the market has significantly improved is the vacancy rate. The Phoenix MSA is 10.5 percent, which is down significantly from 12.5 percent in 2010. The core trade areas have become increasingly more difficult to lease in and are reaching top of the market rents. Great real estate valley wide, including the hot pockets in the market are seeing the same trend. The residential market and job growth are gaining momentum and are much stronger today, which bodes well for our retail segment.
In the Phoenix market we are seeing a surge in retailer growth, including new or existing restaurants such as Café Rio, Culver’s, Raising Cane’s and Sam Fox Restaurant Concepts. Retailers like Pet Club, Goodwill, Dollar Tree and WinCo Foods are also expanding valley wide.
While this retailer growth is great for leasing existing shopping center product, we aren’t even close to seeing any significant development for a few more years. The only development today is comprised of user driven development generally in in-fill areas. The development model of chasing residential growth is long gone as developers, tenants and lenders have adapted their new way of doing business based on current population numbers and not growth. Also a thing of the past is the 1,000,000 square foot power center such as Desert Ridge or Tempe Marketplaces. While we will see bigger projects built, my guess is they will be less than half that size and have either a grocery or entertainment component.
Many developers aren’t looking at ground up opportunities and instead look to acquire underperforming projects and reposition them. That has become increasingly difficult as there is significant competition and a lack of available product. There is an enormous amount of investor capital in the market, which is driving down cap rates and sometimes pricing developers out of the market.
So what does 2014 and beyond look like for us? Unless something disastrous happens to the World or National economy, I see a continued upward trend for retail commercial real estate in Arizona. We will see a stronger economy with higher earnings, lower unemployment, and greater consumer spending. Vacancy rates will continue to decline and rental rates will rise and eventually we will see additional new development as new retailers emerge and existing retailers expand. All in all, the future looks as bright as the Arizona sun.
So 2014 finally brings an optimistic view of retail commercial real estate in Arizona. There is a heightened sense of activity and an overall attitude among owners, tenants, brokers and developers that the worst is far, far behind us.
One of the key indicators that the market has significantly improved is the vacancy rate. The Phoenix MSA is 10.5 percent, which is down significantly from 12.5 percent in 2010. The core trade areas have become increasingly more difficult to lease in and are reaching top of the market rents. Great real estate valley wide, including the hot pockets in the market are seeing the same trend. The residential market and job growth are gaining momentum and are much stronger today, which bodes well for our retail segment.
In the Phoenix market we are seeing a surge in retailer growth, including new or existing restaurants such as Café Rio, Culver’s, Raising Cane’s and Sam Fox Restaurant Concepts. Retailers like Pet Club, Goodwill, Dollar Tree and WinCo Foods are also expanding valley wide.
While this retailer growth is great for leasing existing shopping center product, we aren’t even close to seeing any significant development for a few more years. The only development today is comprised of user driven development generally in in-fill areas. The development model of chasing residential growth is long gone as developers, tenants and lenders have adapted their new way of doing business based on current population numbers and not growth. Also a thing of the past is the 1,000,000 square foot power center such as Desert Ridge or Tempe Marketplaces. While we will see bigger projects built, my guess is they will be less than half that size and have either a grocery or entertainment component.
Many developers aren’t looking at ground up opportunities and instead look to acquire underperforming projects and reposition them. That has become increasingly difficult as there is significant competition and a lack of available product. There is an enormous amount of investor capital in the market, which is driving down cap rates and sometimes pricing developers out of the market.
So what does 2014 and beyond look like for us? Unless something disastrous happens to the World or National economy, I see a continued upward trend for retail commercial real estate in Arizona. We will see a stronger economy with higher earnings, lower unemployment, and greater consumer spending. Vacancy rates will continue to decline and rental rates will rise and eventually we will see additional new development as new retailers emerge and existing retailers expand. All in all, the future looks as bright as the Arizona sun.