A number of major national companies, including Apple, Intel, and State Farm, are aggressively expanding in the market.

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As ICSC RECon approaches, Phoenix is emerging as a point of discussion for many retail professionals, and many are asking - what is driving this growth?

• Ongoing Investment Interest

Value-add retail product in Phoenix continues to be a hot target for opportunistic investment companies. As general retail activity shows improvement and the demand for value-add centers remains strong, pricing for these centers is driven higher. As a result, several new funds have emerged focusing on stabilized assets.

However, value-add product has not yet disappeared in the market. Big-box retail space, in particular, is likely to present future value-add opportunities for investors who understand the Phoenix market and spend adequate time performing the proper due diligence to ensure that they can turn around the property within a five year horizon, or pull out equity to pursue other assets.

To do this, local intelligence remains key. Investors who are not already immersed in the Phoenix market should seek out a company with expertise in Phoenix in order to determine which opportunities will truly deliver the value they are seeking.

• Resurgence of New Development

There is positive momentum on the new development front, with infill sites being acquired for future development and larger retail development opportunities slated for the perimeter communities.

Infill redevelopment, in particular, is on the rise, as pad tenants seek to fill holes in their market coverage and developers capitalize on underperforming assets in growing trade areas. Multi-family's strong performance over the last two years has increased density to a level where retailers and developers have taken advantage of Class C assets occupying Class A land. A perfect example of this trend is the activity in Phoenix along the Camelback corridor.

Voit's retail team is working with fast food chains and regional developers that have reassessed the Phoenix market, and are actively seeking new opportunities in the market.

While infill redevelopment remains the focus of many tenants and firms, perimeter development is also showing signs of life. Among some of the positive activity, De Rito Land Development LLC is planning a new 600,000-square-foot power center in the Southeast Valley, and Hines Interests Limited Partnership is planning a 25-acre mixed-use project in Chandler, AZ.

• Smart Moves By Mom & Pop Tenants

Local retail tenants are becoming increasingly sophisticated.

To survive the Great Recession, these tenants deepened their knowledge of their customer base, increased efficiencies and are willing to make the necessary decisions to keep their businesses thriving. Tenants that were able to survive the Great Recession have taken the opportunity to move from Class C centers to B and A centers. As a result of this trend, the assets with a strong anchor or those assets with premium visibility on major arterials have experienced a surge in activity and a dramatic decrease in vacancy.

While credit tenants and national brands have the flexibility to lease more expensive space and float stores that may not be performing, many smaller, local tenants have opted to lease the most cost effective space to remain flexible to market fluctuations.

This trend, in particular, is one that extends beyond Phoenix.

At Voit, we have assembled a retail team that spans six markets in the Western US, through which we share best practices and develop philosophies to better assist our clients. A major point of discussion within this group is often our local retail tenants, and how we can help them to further understand their demographics and select the space that best meets the needs of their customer base.

As each of these factors continues to drive the Phoenix retail market forward, retail will show positive trends in well situated centers with strong anchors and premium visibility. And as ICSC RECon approaches, commercial real estate professionals in Phoenix and throughout the Western US appear to be optimistic about what is to come.

Jason Gallelli is an EVP in Voit Real Estate Services' Sacramento office. Contact him at [email protected]. Matthew Ault is a senior associate in Voit Real Estate Services' Phoenix office. Contact him at [email protected]. The views expressed in this column are the author's own.