The Phoenix retail market has rebounded since the pandemic and is benefiting from continued consumer demand, steady population growth, and significant development in the technology industry, centered around the chip manufacturing sector.  All of this positive economic performance is at the same time the retail market recorded the lowest vacancy rates in the past four decades, according to an analysis from Velocity Retail Group.

LEARN MORE: 2024 PTK Spotlight: Velocity Retail Group

Metropolitan Phoenix is experiencing high retailer demand, with the return of big box users and the construction of new power centers in Surprise, Buckeye and east Mesa.  Retailers who have not expanded since 2009 are once again growing their footprint.  During 2023 Costco opened in Buckeye’s Verrado corridor, with Target and other national supporting retailers committing to new other developments at the intersection.  In Surprise Prasada’s area, a 700,000 square foot power center opened strong with national retailers and restaurants now fueling growth on the other corners of the intersection, which also include a planned Target store.

A High Demand For Big Box Inventory

New construction is not the only area showing strong performance.  With the higher costs of building, retailers are looking to expand with existing boxes they can retrofit for their stores.  The inventory of vacant big boxes has experienced higher demand. At year-end 2022 there were 123 vacant big boxes in the market, at the end of 2023 there were 90. The lowest number of vacancies of this product type in over 25 years of our research tracking.  In some cases, well-located boxes from retailers such as Bed Bath & Beyond and Tuesday Morning were leased immediately.  

The leasing activity (absorption) was 2.8 million square feet. This coupled with vacancies that are at a record low, retailers who are servicing their clients from multiple platforms that include brick-and-mortar, integrating ecommerce, and other approaches to make stores more experiential all point to another strong year for retail. 

Phoenix’s top performing retail categories include retail, pads and smaller street-front multi-tenant buildings where stores in the 2,000-sqare-foot to 2,500-square-foot range can open. We are seeing continued strong activity in the restaurant category – especially for those with drive-through capacity.

Phoenix retail market outlook

The year ahead promises to be one of continued growth across the Phoenix market for the retail sector. Stability will be tempered through an election year, as retailers balance growth plans against economic conditions. As more clarity and certainty about where interest rates will land, retailers will gain more confidence about expansion and roll-out plans. Phoenix is expected to be one of the key markets where retailers want and need to be in 2024.

OVERALL VACANCY: 4.8%

NET ABSORPTION: 2,856,169 SF vs. 4,198,354 SF Year End 2022

UNDER CONSTRUCTION: 1,167,640 SF vs. 1,300,000 SF Year End 2022

BIG BOX VACANCY: 90 BOXES; 2,333,426 SF of Vacant Big Boxes (26.7% of overall vacancy)