Phoenix retail market report

Phoenix's retail vacancy rates are remarkably low, both historically and on a national scale. In Q1, direct vacancy hit a record low of 4.9%. While Q2 saw a slight increase to 5.3% due to 1.4 million square feet of new deliveries, this uptick underscores the competitiveness of the retail market and the pressing need for more space to meet the high demand.

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.

Asking rents for Phoenix retail continue to rise, driven by a tight market where demand for space significantly outpaces supply. Over the past decade, rent growth has been consistent. Since Q2 2020, rents have increased by 23%, reaching an average of $24.97 per square foot for all retail space types by the end of Q2 2024.