Phoenix retail market report

Q3 2023

Three key market themes:


Total vacancy rate (%)

Vacancy rates for Phoenix retail continue their downward trajectory across all Phoenix submarkets – with the total vacancy rate in the greater Phoenix area seeing a drop of 20 basis points from 5.3% in Q2 to 5.1% in Q3 – the Valley’s lowest vacancy rate on record.

The post-pandemic period has seen a significant uptick in tenant demand, primarily from establishments that were once considered high-risk to keep open during Covid – most notably grocery stores and fitness centers. After giving up significant space during the pandemic, these same tenants are now actively filling up the larger voids in malls and new mixed-use developments at rates higher than pre-pandemic levels.


Net absorption (sf)

Phoenix retail recorded 373,525 sf of positive net absorption during the third quarter –marking the 12th consecutive quarter of positive absorption.

Though remaining positive, net absorption has slowed down over the past several periods due to supply-side pressure slowing down leasing activity. The Q3 record-low vacancy rate and decade-low available space indicate strong demand. However, the lack of available space has created significant competition for retail in the Valley.


Transaction volume (by $)

The third quarter transaction volume reached $429.6m, bringing the total transaction volume in the year to $1.2B. 2023 has seen a significant decrease in investment sales activity when compared to the previous two years, as Phoenix retail had recorded 8 consecutive quarters with over $500m transacted and over $3.1B in both 2021 and 2022.

The slowdown in investment activity can primarily be attributed to a near-doubling of comprehensive borrowing costs during 2023 – leading buyers to push for higher cap rates from sellers to offset the increased borrowing costs. However, sellers have been reluctant to make concessions, as most have opted to retain their assets, as record-low vacancy rates have led to increased cash flow for landlords across the Valley.

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