Phoenix retail market report

Q1 2024

Three key market themes:


Direct vacancy (%)

In Q1 2024, Phoenix's retail vacancy rate slightly increased from the historic low of the previous quarter. While last quarter's direct vacancy stood at 4.9%, it rose by just 30 basis points to 5.2% in Q1 2024. Despite this uptick, the rate remains near record lows for the Valley. It is among the lowest nationally, with West Phoenix, Northwest Phoenix, the Airport Area, and Scottsdale submarkets leading the low vacancies. This increase can be attributed to the significant new construction activity in the area, with over 1 million square feet of new retail space delivered to the market in the past year and an additional 2.7 million square feet currently under construction.


Net absorption (sf)

In Q1 2024, Phoenix saw its first negative net absorption since the pandemic, ending the quarter with -397,567 square feet due to lease expirations and permanent closures of some larger retailers. Despite this, since Q4 2020, Phoenix has rebounded, creating a national leading market with demand surpassing availability. Despite the quarterly decline, the year's net absorption remained positive at 2 million square feet. With limited new construction managing demand, upcoming developments are expected to impact vacancies and absorption rates, but the market should remain tight.


Direct asking rents ($/sf)

In the Phoenix retail market, asking rents have shown a consistent upward trend over the past seven years, even amidst the challenges of the pandemic. Notably, rents have not only increased overall but have also risen consistently across various retail centers. Lifestyle centers have led the way with an average asking rent of $33.70 per square foot, followed by power centers at $27.33 per square foot.

Comparing year-over-year data, in Q1 2023, the average rent stood at $22.52, indicating an increase of $2.25 or 8.8%. Since the middle of the pandemic in Q1 2021, rents were at $19.77, reflecting a substantial growth of 23.9% by Q1 2024.

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