PHOENIX-Across the Valley, vacancy rates in retail properties have stopped increasing and rental rates have stopped falling, leading local experts to believe the market has finally stabilized.
“Owners are focused on tenant retention – they are spending a lot of time keeping their tenants happy so their centers will have stable occupancy in 2011,” says John Appelbe, executive vice president of Cassidy Turley/BRE Commercial. “We will not see any more significant downward pressure on rents this year – they’ve stabilized, as well. Everybody is pretty realistic on where rents are today.”
Since 2006, the marketwide vacancy rate here has more than doubled to 11.8%, and at the end of the fourth quarter 2010, total vacant space now exceeds 15.6 million square feet, according to Cassidy Turley/BRE Commercial’s Retail Market Snapshot report. Rental rates fell 10% to 15% during 2010 to end the year at an average of $16.26 per square foot.
Appelbe tells GlobeSt.com that demand for retail space in the Phoenix metro area remains anemic. During 2010, the market recorded 700,000 square feet of negative net absorption, a large number to be sure, but less than half of 2009’s record setting 2 million square feet of negative net absorption, according to Cassidy Turley’s report.
In particular, the market is suffering from a glut of vacant junior anchor space. “We have 150 plus vacancies of 20,000 square feet and above here in metro Phoenix,” Applebe notes. “One of our bigger challenges is to chip away at the sub-anchor spaces. We do not have enough users to fill them right now. But the glut will allow new concepts to move into the market. Phoenix is a market where new concepts can incubate.”
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