Retail Vacancy in Phoenix
The thriving retail sector in Phoenix has remained strong throughout economic uncertainty. Investor interest is peaked because of the region’s healthy local economy and robust job and population growth. 2022’s retail vacancy rate was 5.3 percent, 250 basis points below 2020’s 8.3 percent vacancy rate, according to CoStar Group. Over the past 18 months, Phoenix’s property performance was the strongest in 15 years, with 4.3 million square feet absorbed in 2022. Read on to see what the retail vacancy in Phoenix means for the city.
Strongest Submarkets in Phoenix MSA
Thanks to its high in-migration rates, remote working environments, preferred climate, and popularity for retirement, Phoenix shows strong consumer spending. Its strongest submarkets include Surprise, Goodyear, Queen Creek, and Gilbert due to their affordability and land availability for new projects. Phoenix currently has 3.2 million square feet underway, representing 1.3 percent of its overall inventory.
Of Phoenix’s 140 properties in the construction pipeline, 88.5% are preleased-CoStar Group
Retail Continues to Boom in Phoenix
The retail sector in Phoenix can attribute its success to a moderate development pipeline heavily reliant on demolishing and redeveloping outdated space, balancing out supply and demand. The steady pipeline supports healthy rent growth, and in 2022 Phoenix saw rents rise 6.7 percent, compared to the national average of 3.6 percent.
Out-of-state buyers are attracted to the booming retail sector in Phoenix, especially California-based buyers, who are driving transaction activity. This has been a driving factor contributing to the 40-year low vacancy rates throughout the city. In 2022, Phoenix saw retail investment sales volume reach $3.5 billion, a record year for the Valley.