Arizona, specifically the metropolitan Phoenix market, is among the strongest commercial real estate markets in the United States and is quickly rising as one of the most resilient markets to recover since the onset of the recent recession. While overall, multifamily, office and industrial property values have posted positive net absorption numbers in recent quarters, it is the retail market that is finally stabilizing and showing promise of improvement.
The retail market, consisting of neighborhood centers, power centers, grocery-anchored centers and regional malls around the Valley, has been hit the hardest in this recent cycle.
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Big-box vacancies proved challenging to repurpose, causing local and regional co-tenants within these projects to terminate their leases and flock to more well-occupied centers to stay in business.
Landlords had to get creative in order to attract new users to revitalize these centers, and lenders learned to be more patient to work with existing owners to restructure debt to provide more flexibility when renegotiating leases with occupants.
This current real estate cycle has forced tenants and landlords to work more closely together than ever before to ensure mutual success. By doing so, the market has seen more lease transactions in recent quarters than it’s seen since early 2011.
What does this all mean? It means that the retail sector is strong and now is the time to take advantage of reasonable rental rates and move-in concessions. Although landlords are doing more due diligence with each tenant, collecting vital business and personal data from each prospect to craft the best lease deal possible, tenants can be assured that there are still great deals to be made.
Once elusive class “A” retail space is now in reach as rental rates have continued to trend downward; however, as leasing activity increases these rates are stabilizing and are on the rise.
Tenant improvement allowances are available for creditworthy tenants, and lease terms are increasing, proving that retailers too are confident in our economic outlook.
With consumer confidence on the rise, we are sure to see rental rates continue to increase and move-in concessions decrease. As demand for space improves and the residential real estate market continues to thrive, we will see more retail construction projects being developed.
Ahwatukee has always had its own place in the market and has historically been a highly sought after submarket for retailers. Our median household income rivals that of Scottsdale and Paradise Valley, making it one of the most attractive places to live, work and do business. Retailers continue to be attracted to Ahwatukee’s high net worth, family-oriented and business minded communities and it is among the top submarkets to rebound quickly in this last real estate cycle.
While speculative development proved ahead of its time in 2008 and 2009, Ahwatukee is starting to see retail spaces occupied with local and regional users, and we are seeing national retailers taking on more space and back-filling “shadow” space in our neighborhoods. The Foothills market still has challenges finding retailers to occupy space to the western most part of our village; however, as more visible space closer to Interstate 10 is occupied, we will start to see retail in the Foothills improve.
If you are contemplating opening a new retail business or relocating an existing storefront or are just looking to improve your current lease situation, now is the time to speak with a professional. We can talk about your options and cater a solution specific to your circumstance.
As the retail market gets stronger and continues to gain momentum, your options become more limited with each passing day. You will want a broker to work with you and negotiate the best lease transaction for you and help you navigate through this volatile and unpredictable market.
With all the nuances of a lease and steady changes happening in the market, having a commercial real estate expert on your team improves your chances of making the right decision, at the right time, for your business.
• D & D Commercial Real Estate Services, LLC (DDCRE) was established in 2008, Devida Pi’ilani Lewis is the owner and designated broker of DDCRE with more than 16 years of commercial real estate leasing experience. DDCRE specializes in office and retail tenant representation and is based in Tempe, Arizona. Lewis is president of the Ahwatukee Foothills Chamber Toastmasters and serves as a Chamber Ambassador.