With the close of 2Q 2013, Velocity Retail’s research has confirmed what we have been speculating: the retail market in Phoenix is on the rebound with several key benchmarks collaborating this:
>> Vacancy is down;
>> Leasing activity is up;
>> Regional areas are showing significant improvement.
Currently, as of 2Q 2013, our research shows that the retail vacancy has dropped to 11.3%. This is nearly a full percentage point improvement from just 6 months ago, (at the end of 2012 the vacancy was 12.2%), and more than 2 percentage points below the highest level, which was two years ago in 3Q 2011 when the vacancy reached 13.7%
Some of the regional areas have improved a little faster than the others. In the Southwest region where the vacancy was 12.4% at the highest point in 4Q 2009, it is now 8.2% — this is an improvement of 4.2% in 31/2 years. Currently, this is the region with the lowest vacancy.
The Southeast region, which is significantly affected by a glut of 129 vacant big box spaces, continues to show improvement. Vacancy in 3Q 2011 was the highest for this area at 14.8%. Currently the vacancy rate has improved 2 percentage points to 12.8%. This area recorded leasing activity of more than 525,000 SF in the past 6 months.
What do all these numbers really mean? It means that nearly 1M net square feet of retail space was leased in just 6 months. It means that all six of our regions have improved; some more than others. It also means that retailer confidence is returning both from national and local tenants, and landlords are finalizing deals which improve the vacancy within their shopping centers and the bottom line.
We are projecting that by the end of 2013 or the beginning of 2014 vacancy in Phoenix should be in the single digits for the first time since the end of 2008 when the vacancy was 9.8%.
Dave Cheatham is president of Velocity Retail Group. He is an authority on retail real estate in the disciplines of brokerage, project leasing, development, consulting and advisory services. He is a senior advisor to merchants, entrepreneurs, investors and senior retail executives throughout the industry.