Colliers had some good news with its fourth-quarter reports on two sectors of the Phoenix commercial real estate market: retail and industrial. Vacancy rates for both property types are apparently decreasing.
On the retail front, Colliers says Phoenix retail vacancy rates dropped by 10 basis points during the quarter, leaving the market at a healthy 9.5 percent. There was 545,000 square feet of net absorption during the period, which turned out to be the best quarter of the year. Though asking rents slipped during the quarter, for the full year they increased 1.6 percent over 2015, meaning there was still plenty of improvement during 2016. The downside is that retail real estate transactions dropped year over year during the quarter by 13 percent, but that’s not unusual, considering trepidation about the election and interest-rate increases.
When it comes to industrial commercial real estate, vacancy rates are also decreasing, according to Colliers. During the fourth quarter, vacancy rates decreased by 60 basis points year over year, reaching 10.2 percent. This is good news based on the demand that the ports in Southern California will likely have, due to the rise of e-commerce and the improvement of dredging for larger vessels. Additionally, asking rents have increased by 3.6 percent, rising to 55 cents per square foot. This is another sign that there could be increased consumer confidence in spending, especially noting Amazon’s new fulfillment center in the Phoenix metro area.
It’s hard to forecast this year’s first quarter, but Phoenix, despite all of its housing issues during the recession, seems to have bounced back very well from the economic strife it once faced. There is a reason why vacancy rates are not increasing, and it shows that there is demand in the sixth-largest city in the United States.