Retail occupancy rates are on the rise Valley-wide, and vacant storefronts in the East Valley are filling up at an even faster pace.
About 549,000 square feet of retail space was absorbed across the East Valley in the first half of 2012, according to real estate brokerage CBRE. That’s about 43 percent of the roughly 1.2 million square feet that was newly leased across the Valley so far this year.
The Mesa/Chandler/Gilbert submarket saw the biggest jump in new stores, with 483,791 square feet absorbed this year. That’s an especially welcome development because that area’s 14.1 percent vacancy rate is among the highest in the Valley.
That area also had the largest new lease of the second quarter. Garden Ridge, a Texas-based home décor retailer, signed a lease for a roughly 154,000-square foot space at the northwest corner of Baseline and Greenfield roads in Mesa.
“They’re a very successful retailer,” said Todd Folger, a CBRE vice president. “It’s a good sign for our retail market that we’ve got a brand new retailer in town.”
The third-largest transaction across the Valley in the second quarter was in Chandler, where a Walmart Neighborhood Market signed a lease for about 44,000 square feet at the southwest corner of Chandler Boulevard and Kyrene Road.
The Tempe/Ahwatukee submarket gained 65,693 square feet of new retail so far this year, bringing its vacancy rate down to 8.1 percent.
The Valley’s vacancy rate now stands at 11.3 percent, down from 12.6 percent a year ago.
“From our standpoint, it was a good report with a continued recovery of the retail market,” Folger said. “I think the slow and steady recovery is good news for everybody involved.”
Folger said higher employment rates are critical to pushing vacancy rates down significantly. There is also potential from several retailers who don’t yet operate in Arizona but are exploring an entry to the market, he said.
Folger doesn’t anticipate any major disruptions in the retail scene from chains going out of business or scaling back dramatically, as was the case in recent years with Circuit City and Mervyn’s.
However, CBRE noted a glut of empty big box stores will continue to be a problem. While 22 big box leases were signed last quarter, 273 of those spaces remain available. Big box vacancies peaked last year, with 312 empty spaces. Big box stores are 10,000 square feet and larger.
Overall retail vacancy rates had been in the single digits before the Great Recession took its toll on national and local stores and restaurants. With the rise in Internet sales and changes in how retailers operate, Folger said it’s not clear how to decide when the market is back to normal.
“What is the new norm? That would be hard to say,” he said. “I think there’s a lot of new norms, whether it’s vacancy rates or lease rates or how big is a new shopping center.”