Velocity Retail Group’s Research Solutions Team finalized its recap for the retail market through 1Q 2013, and the news is good.
We are excited to report that the market is clearly showing improvement. The good news is that for the past six quarters the retail market has had positive absorption.
The vacancy rate in Phoenix is one of the biggest areas showing progress. For more than 3 years, since the end of 2008, the vacancy rate steadily increased to 13.54% which was the peak.
Now for six consecutive quarters the vacancy rate has declined in Phoenix. The vacancy at the end of the 1st quarter of 2013 is 11.48%, which is over two percentage points less than it was at its peak. This is a significant improvement.
In addition to the improved vacancy, the leasing activity is also up. The Phoenix area has recorded positive absorption of nearly 2 MSF in the past two quarters alone. Our research team breaks the market into six sub-regions which cover the entire Metro Phoenix area.
By understanding the particulars of a specific area we are able to drill down to determine the trends and actual health of these regions. Of these six sub-regions, two have worked their way back to a healthy single-digit vacancy with two others being closer to a stabilized healthy vacancy.
The North sub-region has the lowest vacancy, ending the first quarter at 8.8%. The Southwest area is not far behind at 8.9%. The Northwest area is next with 10% vacancy, followed by the Northeast at 10.2%.
These four areas are leading the market in having the lowest vacancy. The two areas with the highest vacancy are the Southeast region which is at 13% and the Central region has the highest vacancy in the Phoenix area of 13.3%.
For leasing activity the numbers tell a different story during this past quarter.
The Southwest and the Southeast sub-regions both recorded absorption of more than 200,000 SF. The Southwest had the highest absorption of just more than 231,000 SF, with the Southeast recording more than 216,000 SF. This continued positive leasing activity will help bring the vacancy rates down in each of the regions.
The total base of retail in the Phoenix market is 175 MSF in more than 4,000 buildings.
Dave Cheatham of Velocity Retail Group 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.