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Home Furnishing Store Expansions Signal Improvement in Housing
Phoenix, October , 2017– Greater Phoenix posted a very strong third quarter in the retail real estate sector, with highest net absorption in several years and vacancy dropping to its lowest level in nearly a decade. Access the full report by Colliers International in Greater Phoenix by clicking Here.
Net absorption during third quarter 2017 totaled more than 680,000 square feet, marking the strongest quarter in four years. This brings the year-to-date net absorption figure to more than 1.6 million square feet and Colliers anticipates the year will finish on pace with more than two million square feet of retail net absorption in Greater Phoenix. After holding steady during the first half, vacancy dipped this past three months to 8.9 percent. This is the lowest vacancy rate in eight years. Home furnishing stores have stimulated net absorption in the market. American Freight has committed to its first four stores in Arizona this year. The growth of home furnishing retailers is a good signal of a stronger housing industry and growing population.
Asking rental rates dropped slightly in third quarter, but are generally higher than previous quarters in recent history. Asking rental rates are up 3.2 percent to $14.53 per square foot for the past 12 months. Scottsdale continues to post some of the strongest rental rates. North Scottsdale rates have risen more than six percent this year and are approaching $20 per square foot.
Sales of shopping centers slowed by 40 percent during the third quarter. While sales activity cooled, the median price rose more than 20 percent last quarter to $146 per square foot. The bulk of properties sold during third quarter were $10 million and less. Median price for retail centers sold in all of 2017 is $118 per square foot, which mirrors the level in 2016. Cap rates have averaged 7.5 percent this year, up 50 basis points from the 2016 average.
As 2018 approaches, retail experts will keep a close eye on struggling retailers that might close underperforming stores after the busy holiday season. Toys R Us, which has already announced its bankruptcy, has 10 sizable locations in Greater Phoenix totaling more than 250,000 square feet.
The outlook remains good for Greater Phoenix and its retail market. The city is one of the nation’s leading areas for employment and population growth, which fuels retail activity. Fourth quarter tends to be the strongest in the retail real estate sector, so the city should finish 2017 in great shape.
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About Colliers International Group
Colliers International Group Inc. (NASDAQ and TSX: CIGI) is an industry leading global real estate services company with 15,000 skilled professionals operating in 68 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting.
Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice that helps clients accelerate their success. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 12 consecutive years, more than any other real estate services firm. Colliers also has been ranked the top property manager in the world by Commercial Property Executive for two years in a row.
Colliers International in Greater Phoenix has served clients locally and globally for more than 35 years.