Q4 Phoenix Retail Market Report

Market Overview

Factors like population growth, a diverse economy, affordability, and business-friendly regulations strengthen Phoenix’s value proposition. Competitive advantages and growth drivers, including relative affordability and job prospects, continue to stimulate growth in the Valley. An increase in remote work has attracted residents from dense and expensive cities to relocate to Phoenix, bringing high-wage jobs with them. Phoenix attracts an average of 175 net new people each day. Maricopa County, where Phoenix is located, is the fastest-growing county in the country on an absolute basis. Tenant demand for retail space in Phoenix remains healthy due to this robust net migration, strong population growth, and rising incomes.

Market Performance

All of Phoenix’s major submarkets show rent growth rates that are more than double the U.S. average.

Phoenix remains one of the strongest rent growth markets in the country, with the average asking rent rising by 8.8% over the past 12 months to a current rate of $24.35. There was 4.0 million square feet of net absorption over the past 12 months, resulting in a record-low metro-wide vacancy rate of 4.4%. Smaller tenants, including quick-service restaurants, coffee shops, and beauty/wellness providers, are the most active, with about 85% of leases signed for spaces under 5,000 square feet. The current construction pipeline in Phoenix is limited, with 2.1 million square feet underway, representing 0.9% of existing inventory. The largest delivery of the year is the 700,000-square-foot Village at Prasada in Surprise, a $500 million outdoor mall. In the last 12 months, $1.7 billion in sales volume was recorded with an average sale price of $225 per square foot.