2018 retail space absorption up 10% over 2017

(Editor’s note: News releases are published unedited, unless they contain factual errors.)

Tenant Growth and Limited Construction Stimulate Drop in Retail Vacancy

Phoenix,  July 25, 2018 –  Net absorption of retail space in Greater Phoenix surpassed 500,000 square feet for the second quarter in a row, which signaled continued improvement for the market.  Limited construction of new space and tightening vacancy forced rental rates up during the last three months.

2018 Q2 Greater Phoenix Retail Report Colliers

“The limited addition of new space means that new and expanding retailers are backfilling vacant space,” says Pete O’Neil, research director with Colliers International in Greater Phoenix.  “This trend is helping the market recover from recent closings of national retailers as that space is re-purposed.”

The total net absorption for the first half of 2018 is up nearly 10 percent over the absorption posted during the first six months of 2017.

The retail vacancy rate dipped to 7.6 percent in the second quarter, which is 130 basis points below mid-year 2017.  The rate has been trending lower for the past 18 months and is now at its lowest point since mid-2008.   Some of the strongest vacancy improvements have been experienced in the East Valley and Scottsdale submarkets.

Rental rates rose to $14.99 per square foot in the second quarter, which marks a three percent rise in the past 12 months.  Asking rents in the East Valley rose to above $15 per square foot for the first time since 2010.  These rates are up 4.6 percent from one year ago.

Investment activity softened a bit during the past three months with fewer properties trading hands and the median price dipping by almost 25 percent from the first quarter.  Second quarter brought sales of more expensive properties in the $5 million and higher range. As the market sells these larger properties, cap rates are generally lower. The median price year to date is $160 per square foot, up from 2017, while the average cap rate is approximately 7.3 percent.

The strong first half of 2018 signals what Colliers believes will be a robust remainder of the year.  Traditionally, Phoenix posts its strongest retail performance during the second half of the year.  As the economy strengthens and the health of the local housing market continues, consumer spending is expected to rise and support local retail real estate.  Investor demand and transaction volume of shopping center sales are expected to be steady since cap rates have remained relatively flat in the environment of rising interest rates.

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About Colliers International Group Inc.

Colliers International Group Inc. (NASDAQ: CIGI) (TSX: CIGI) is a top tier global real estate services and investment management company operating in 69 countries with a workforce of more than 12,000 professionals. Colliers is the fastest-growing publicly listed global real estate services and investment management company, with 2017 corporate revenues of $2.3 billion ($2.7 billion including affiliates). With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide, and through its investment management services platform, has more than $20 billion of assets under management from the world’s most respected institutional real estate investors.

Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services firm. Colliers is ranked the number one property manager in the world by Commercial Property Executive for two years in a row.

Colliers is led by an experienced leadership team with a proven record of delivering more than 20% annualized returns for shareholders, over more than 20 years.

For the latest news from Colliers, visit Colliers.com or follow us on Twitter: @Colliers and LinkedIn.

Colliers International in Greater Phoenix has served clients locally and globally for more than 35 years.

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