As we approach the second half of 2024, Phoenix’s retail market is experiencing historically tight conditions, driven by strong demographic trends, sustained income growth, and significant job gains. These factors, along with a modest construction pipeline and few store closures, have resulted in exceptionally low space availability and significant rent increases. Over the past year, Phoenix has recorded robust tenant demand with 2.0 million square feet of net absorption, making it one of the top 10 U.S. markets for retail demand. The leasing landscape is dominated by quick-service restaurants, beverage shops, and experiential concepts occupying smaller format suites, while gyms and off-price retailers fill larger spaces, reflecting evolving consumer preferences.
The retail sector’s steady growth is reinforced by limited new construction; only 1.4 million square feet of new retail space was delivered in the last year. With just 15% of the 2.7 million square feet currently under construction available for lease, supply-side pressures remain minimal. Despite these unyielding conditions, the market has seen aggressive rent growth, with the average asking rent increasing 7.9% in the past year and 31.7% over the past five years.
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