The Phoenix retail market is thriving ending 2023 and into early 2024, boasting multi-decade bests in vacancy rates, space availability, and rent growth. Tenant demand for retail space remains robust, driven by net migration, population growth, and rising incomes, resulting in approximately 3.6 million square feet of net absorption over the past 12 months. The metro-wide vacancy rate has reached a record low of 4.5%. Phoenix retains its status as one of the strongest rent growth markets in the country, with a 9.4% increase in average asking rents over the past year, outpacing the national level.
Development activity is concentrated in the metro’s periphery, especially in high-growth suburban areas like North Goodyear/Litchfield, Goodyear, Glendale, and the rapidly growing town of Queen Creek in the Southeast Valley. Despite a slowdown in large deals, the market remains active in the $1 million to $5 million price point, attracting private individual investors, primarily targeting single-tenant triple-net lease properties and small strip centers. Elevated interest rates and economic uncertainty are expected to widen the pricing expectations gap between buyers and sellers, potentially impacting deal flow.
Continue reading below how the lack of overbuilding contributes to a stable retail market outlook for 2024 and where the market is expected to outperform in the near term!