In Q2 2024, Phoenix’s retail market remains strong, driven by demographic growth, rising incomes, and job gains. Tenant demand is robust, with significant activity from quick-service restaurants, beverage shops, discount retailers, and experiential tenants. The market saw 1.3 million SF of net absorption over the past year, placing it among the top 10 markets. Limited new construction, with only 1.8 million SF delivered and 2.7 million SF under construction, has kept availability rates low at 4.6%, supporting strong rent growth.
Retail space availability remains constrained, with fewer store closures and strong consumer demand contributing to a 7.2% increase in average asking rents over the past year. Rent growth is expected to moderate to 5.9% by the end of 2024, but the outlook remains positive due to limited new construction and favorable demographic trends. Despite a slowdown in investment activity, with $1.7 billion in retail assets traded in the past year—a 50% decline from peak levels—smaller deals continue, largely driven by private investors targeting single-tenant properties and small strip centers. Elevated interest rates and economic uncertainty are expected to impact deal flow, though distressed sales should remain limited.
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