Middle Market Digest: This Week in Southwest

The Phoenix market continues to grow, attracting strong investor attention. This week, a new report from Colliers International showed that the retail market is “unusually strong,” with nearly 600,000 square feet of net absorption. Thanks to the strong stats, investors picked up more retail opportunities, including the Bell Park Plaza and the Tropicana Marketplace. Additionally, the market saw strong employment activity as well. Of course, Phoenix isn’t the only market posting strong activity in the Southwest. Los Angeles, Orange County and San Diego also had an active week. Here’s a look at this week’s trends, announcements and deals that you may have missed in Southern California, Utah, Arizona and Nevada.

BY THE NUMBERS

PHOENIX—The Greater Phoenix retail market posted an unusually strong first quarter. The past three months marked the strongest first quarter performance since 2008 as retailers ramped up activity in response to continued economic growth and an accelerating housing industry. Toys R Us announced its demise, which will impact the Greater Phoenix market. Most of the store closures will take place early in second quarter, impacting statistics for the next report. Net absorption for the first quarter totaled more than 593,000 square feet. Vacancy in the metro area dipped 20 basis points in the first quarter of 2018, falling to 8.1 percent. The vacancy rate has declined five of the past six quarters and now sits at 110 basis points below one year ago. Vacancy in the East Valley fell to a 10-year low, 7.8% during first quarter Rent growth has varied, but generally is rising. Asking rents have risen 4.3% year-over-year and reached $14.65 per square foot. Asking rents in North Scottsdale rose more than 14% year over year, surging to $22 per square foot during first quarter. Investment sales of retail centers slowed during the first quarter, lagging behind the pace posted during the same period of 2017. While sales were curtailed, prices spiked and cap rates averaged in the low seven-percent range. The slowdown in sales was felt most significantly in product ranging between $5 and $10 million. The pace of transactions remained steady in smaller properties commanding between $1 million and $5 million. The Greater Phoenix retail climate is improving and shopping centers are becoming more popular as an asset class. The median price rose to $193 per square foot in the first quarter, which is more than a 60% increase from the median price of 2017.