Phoenix retail development makes a slow comeback
The retail land market in the Phoenix area is waking up from its nearly seven year dormancy. While sales and development for retail pads and in-fill parcels has been at an all-time high, the development of new shopping centers has remained at a stand-still – and with good reason. The housing boom and subsequent bust of 2008 catapulted a void in the pipeline of new shopping centers the likes of which have not been experienced in my 30+ years in the business.
During 2006, 2007 and 2008 the Phoenix market recorded unprecedented new retail construction. During those years 24 million square feet of new shopping centers came on line. Many were built along the expanding freeway systems and supported the new housing developments that were spreading into the outer reaches of the Valley.
When the economy came to a screeching halt, many shopping centers that were slated to begin construction and some that had started construction were stopped. When the anchor tenant put their plans on hold, the entire project was on hold.
As we fast-forward seven years to 2015, many of these stalled projects are once again being marketed for sale. In a recent search on CoStar™ over 50 shopping center parcels are being marketed for sale throughout the valley. Investors and developers are once again cautiously looking to Phoenix as the market pushes into its next cycle.
Phoenix is a market that is slowly on the rise, as evidenced by the recovering housing market, decreased unemployment, improved in-migration (Phoenix ranks 6th in the nation in population growth), and continued job growth. Phoenix is also one of the top three destinations for people to move when they are considering relocating. Multi-family building is the highest it has been in a decade, with projects in the pipeline for the next 24 months keeping that number high.
The sale of land parcels for retail and residential projects are a good indicator that the market is continuing to move in the right direction. We anticipate this next round of growth will be calculated and thoughtful. Speculative buying and building will be scarce in this next growth cycle. Buying and building of retail sites will continue to be driven by retailer demand.