Phoenix retail market report
Q3 2024
5.3%
High demand persists amidst low vacancy rates (%)
The Phoenix retail market continues to experience tight conditions, with demand for space significantly outpacing available inventory for tenants. This imbalance has resulted in heightened competition, increased rents, and limited availability, exacerbated by a lack of new small-space construction. As of Q3 2024, the vacancy rate stands at 5.3%, indicating a stabilization in this segment, although it represents a 40-basis point increase from Q4 2023. Notably, the vacancy rate has remained unchanged for the past two quarters, consistently recorded at 5.3%.
897,963 sf
Lower leasing activity due to limited supply (sf leased)
In Q3 2024, leasing activity fell short of the average quarterly total of 1.09 million square feet recorded over the past eight years (Q3 2016 - Q3 2024), although it wasn't the lowest quarter on record. Prior to 2020, leasing activity was higher, but since then, the market has become extremely tight and competitive, with minimal new deliveries entering the market. While there is currently 2.5 million square feet in the pipeline, this consists primarily of pre-leased big box spaces, such as Sam's Club and Fry's, rather than single-tenant or smaller multi-tenant spaces. Consequently, significant changes in vacancy rates and new supply in the overall retail market are unlikely.
$25.28
Aggressive rent growth slows but rents remain high ($)
Rents in the Phoenix retail market have reached historical highs, averaging $25.28 per square foot. This increase is primarily driven by premier shopping centers and select submarkets, though rents have risen across all shopping center categories in the Valley. In the last quarter, asking rents valley-wide rose by an average of $0.34 from the prior quarter.
As of Q3 2024, rents are up 7.5% from Q3 2023, 15.6% from Q3 2022, and 29.7% from Q3 2020. This upward trend reflects a strong demand for retail space in Phoenix, indicating a competitive market.
As of Q3 2024, rents are up 7.5% from Q3 2023, 15.6% from Q3 2022, and 29.7% from Q3 2020. This upward trend reflects a strong demand for retail space in Phoenix, indicating a competitive market.
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