By Colliers International
The retail real estate market was arguably hit hard by the COVID-19 pandemic, but Metro Phoenix endured the challenges more successfully than most markets. The metropolitan area posted positive net absorption in 2020 and rental rates remained healthy during the difficult year.
During 2020, Metro Phoenix experienced incredible population growth and job growth that helped shore up the retail marketplace.
Multiple national company closures and bankruptcies caused significant vacancies in Metro Phoenix. Fourth quarter 2020 ended with 64KSF of negative net absorption, yet posted positive net absorption of 215.7KSF during the entire year. The East Valley and West Valley submarkets led fourth quarter with positive net absorption of 93.7KSF and 70.8KSF, respectively.
Vacancy of retail space increased 20 basis points over the quarter and 60 basis points year-over-year to a current rate of 7.9 percent. Leasing activity gained momentum during fourth quarter 2020, with the number of new deals increasing 11.9 percent. The West Valley submarket delivered more than 200KSF of new product in 2020 and had the largest decline of vacancy year-over-year of 70 basis points since 2019. The Metro Phoenix area added 1.1MSF of retail during 2020. Thirty new properties boasted an incredibly low vacancy rate of less than 6.5 percent.
Despite increased vacancy rates, rental rates for retail held steady in Metro Phoenix. Rates increased 0.68 percent year-over-year and 0.82 percent over-the-quarter ending at $14.73. This demonstrates a slight improvement over third quarter 2020.
Investment Sales volume of properties larger than 10KSF gained more confidence in fourth quarter 2020. Volume increased 49.1 percent from the third quarter to $273M in sales, marking the best quarter of 2020. Fourth quarter in 2020 was far outpaced by the final quarter of 2019, declining 46.2 percent year-over-year. (Source)