The good news for the Metro Phoenix retail market as 2013 ended was that net absorption topped 3 million square feet, up from 2.7 MSF in 2012.
Some of that momentum has carried over as vacancy in the Valley in 1Q 2014 declined 70 basis points over the same period last year to 10.3 percent. There has been more than 53,000 square feet of net absorption year to date with the North Phoenix market leading the way.
What lies ahead for the rest of the year?
Next week’s ICSC RECon 2014 will discuss trends, issues and even provide a look into the crystal ball as more than 32,000 retail real estate professionals converge on Las Vegas. RECon is the global convention for the shopping center industry. Trends and issues to be discussed:
>> The New Math: Online shopping has changed the modern shopper’s habits in adding another avenue to products. The Internet has allowed already time-constrained consumers to shop at all hours of the day with product sometimes arriving at their front door the next day. Many retailers have found ways to market themselves apart from other retailers by offering free shipping, online only offers and more.
Although many retailers continue to see an increase in productivity because of the ease and added shopping hours online shopping presents, we’ve also seen online shopping adversely affect retailers and the bricks-and-mortar developments. The adverse side has been the downsizing, consolidation and retailers closing the once-needed space or being unable to compete with online retailer pricing, thus affecting the way developers move forward with future development size.
>> Revitalizing a Challenged Center: A common trend in Metro Phoenix has been the revitalization of shopping centers and older buildings within our core markets. A number of local developers have found it fortuitous to purchase older buildings. It has become a hobby of sorts to purchase and peel the buildings back to their original state in order to expose the brick and wood tresses the buildings have to offer. By then adding some modern fixtures and anchoring the building with a local restaurant operator, the landlord has increased the rents and property values in the surrounding neighborhoods.
Additionally, landlords have taken advantage of purchasing mid- to high-vacancy shopping centers during the down market in order to reposition them with a new tenant mix and create cash flow. Others have been successful in giving their existing shopping centers a simple facelift and adding a restaurant or two to their tenant mix, thus increasing the rents, demand and property values in the surrounding areas. The tenant emphasis is on local restaurant operators with a mix of some regional and national flair.
>> Outlet retailing … Past, Present and Future: Metro Phoenix has seen the opening of two new outlet malls within the past two years – one in Glendale and one in Chandler. Additional outlets are planned. We can relate this trend locally and in the U.S. to shoppers being cash conscious while still wanting access to the brand names.
In turn, retailers see their sales increase as they’re not only able to access the full price shopper, but the outlet shopper as well while having less rent overhead in their locations. Outlet merchandise prices seem lower than what they are, thus driving shoppers to spend more than they normally would at a full-price store; a win for the retailer.
The outlet trend in Metro Phoenix has begun to affect national retailer’s expansion plans in Arizona. Retailers are beginning to see their outlet locations as competition to their full-priced store options. Consequently retailers are not only paying attention to the distance between their full-price stores, but their outlet locations as well.
>> The New Frontiers … A Look Back, and Forward: We will continue to see operators using social media to increase their sales. Operators see social media as a great resource to let their customers (followers) know of upcoming sales, special offers such as free shipping as well as marketing their merchandise by showing their customers who’s buying their products. We have a handful of local businesses that have seen their sales drastically increase over the past couple of years by using social media to market their products.
