N. Scottsdale-Paradise Valley; North Phoenix
The N. Scottsdale-Paradise Valley submarket, located in the northeast metro area and including areas of north Phoenix, is the metro area’s chief upscale suburb and host to a large volume of quality retail. It has seen substantial investment and development in recent years.
No retail space was under construction in this submarket per the date of this report.
Net absorption in the community-neighborhood sector in first half 2012 was 106,000 square feet, 94,000 of which took place during the second quarter.
Second quarter vacancy was 11.4%, down 80 basis points from a quarter earlier, down 110 year-over-year.
Second quarter average asking and effective rents in this sector were $23.82 psf and $20.41 psf, up one and two cents, respectively, during the period following small losses the quarter before.
Scottsdale Quarter. Despite challenges, Glimcher Realty Trust’s $325 million Scottsdale Quarter mixed-use development “is bustling with a growing tenant base and steady influx of daytime shoppers and entertainment-seekers by nightfall,” the Phoenix Business Journal reported in July.
More. Scottsdale Quarter’s 1.2-million-square-foot shopping center closed second quarter with retail occupancy at 81.0%, up from 70.0% a year earlier. National retailer Restoration Hardware is scheduled to open a store on site in November.
Palisene lost. Land intended for Westcor/The Macerich Company’s 1- million-square-foot long-planned Palisene shopping center and the larger mixed-use development at Loop 101 and Scottsdale Road in north Phoenix has gone by the wayside. The 112-acre site “is going back to the Arizona State Land Department,” The Arizona Republic reported in June.
More. “We’re getting the piece back intact,” state Land Commissioner Maria Baier informed the source, “It’s ready for the next healthy market.” “The property can be auctioned again as the commercial real-estate market recovers,” adds the Republic.
One Scottsdale. DMB Associates’ 120-acre, One Scottsdale mixed-use “lifestyle community” at Scottsdale Road and Loop 101 remains on hold. The project was initially planned at 1.8 million square feet of “shopping, dining, and office space.” Westcor will develop the retail.
Update. Due to the “lagging” commercial real estate sector, DMB has opted to proceed first with a residential component at One Scottsdale, a 388-unit luxury apartment complex, the Phoenix Business Journal reported in July.
Outlook. Ongoing positive absorption over the remainder of second half of the year accompanied by no new supply should reduce the community-neighborhood sector vacancy rate to 10.8% by year-end. Minimal positive rent growth is projected. A moderately stronger performance is expected for 2013.
Southeast (East Valley); Mesa-Chandler-Gilbert
- Strong population growth and heated residential and business development in the Mesa-Chandler-Gilbert submarket over the years made for an active retail sector.
- Extraordinary volumes of retail space completed construction here in a number of regional-scale and other major projects in the period preceding the recession (and earlier).
- Re-use. “In the East Valley,” notes Marcus & Millichap, “a few owners will reconfigure layouts and offer smaller footprints to broaden their potential tenant roster, while others may redevelop the property into another commercial use.”
- Community-neighborhood shopping center space net absorption in Mesa-Chandler-Gilbert in the first half of 2012 was 43,000 square feet.
- Second quarter vacancy was 13.0%, unchanged for the period, down 90 basis points year-over-year.
- Second quarter average asking and effective rents were $17.12 psf and $14.89 psf, up 0.4% and 0.5% for the period following similar gains during the first quarter.
- Growing vacancies in the East Valley’s “countless and prominent shopping centers” resulted in “a glut of retail space,” East Valley Tribune reported in April.
- More. “As a recovery shows signs of gaining strength, those retail centers aren’t likely to come back to life at the same pace as the overall economy,” adds the report. “And some will never rebound.”
- Reis reports one project underway in this submarket per the date of this report: DeBartolo Development’s 550,000-square-foot Mountain Vista Marketplace power center at Highway 60 and S. Signal Butte Road in Mesa is expected to complete in September.
- More. A Target, which opened in 2011, is among the anchor tenants. The project is part of the 1.3-million-square-foot Mountain Vista Marketplace mixed-use development.
- Just beyond the submarket boundary, the 81,300-square-foot Queen Creek Commons neighborhood center is underway for completion in January 2013 at E. Ocotillo and N. Vineyard roads, Queen Creek.
- The largest project to reach the planning phase within submarket boundaries is the 508,600-square-foot Elliot Fiesta power center at Loop 202, Elliot and Ellsworth roads in Mesa, a part of a mixed-use development by the same name. DeRito Partners is the developer.
- More. “This Power Center will be the gateway to the new master planned community within the GM Proving Grounds (5,000 acres),” states DeRito.
Macerich Company announced plans last year to develop Fashion Outlets of
- Scottsdale with AWE Talisman Company at Loop 101 and Scottsdale Road, The Arizona Republic reported in March 2012.
- Outlook. Moderate positive absorption over the second half of the year should produce a year-end total of 60,000 square feet and a decline in the vacancy to 12.9%. Rent growth at 1.6% and 1.9%, asking and effective, is predicted. Additional progress should follow in 2013.
Southeast (East Valley); Tempe-South Phoenix
- Community-neighborhood shopping center construction has been virtually absent from the Tempe-South Phoenix submarket in recent years. No projects in this category have completed construction here since 2008.
- No community-neighborhood shopping center projects were underway per report date.
- Total first half 2012 community-neighborhood sector net absorption was 41,000 square feet.
- Second quarter vacancy was 9.8%, down 20 basis points for the period, down 80 year-over-year.
- Average asking and effective rents for the latest quarter were $19.37 psf and $16.44 psf, down 0.3% and 0.4% for the quarter, following similar declines the quarter before.
- A new project. One of two major outlet centers currently under construction metro-wide, the 360,000-square-foot first phase of Simon Property Group’s Phoenix Premium Outlets broke ground in late March at I-10 and Wild Horse Pass Boulevard, Chandler. A completion date was not cited.
- More. The project is located within the Gila River Indian Community’s Wild Horse Pass development. Approximately 90 stores are planned. Tenants will include a Saks Fifth Avenue OFF 5TH store.
- Outlook. Reis expects a small positive net absorption total over the remainder of 2012 to lower the vacancy rate to 9.6%. The minimal positive rent growth expected for the year’s second half will not be enough to prevent negative growth for both rates for the year. Respective declines of 0.5% and 0.6%, asking and effective, are forecast for 2012 all told.
- A better performance, including ongoing positive rent growth, is expected for 2013.
West Phoenix/Southwest Valley
- Recent heated growth in the West Valley led to real estate development in a variety of guises, including retail.
- The Alter Group and John F. Long Properties “will jointly develop three major business parks in West Phoenix totaling in excess of 1,500 acres… on both sides of the Loop 101 freeway,” Business Wire reported in March. Retail components are included.
- Total first half 2012 community-neighborhood sector net absorption was 29,000 square feet. The total for second quarter alone was 38,000 square feet.
- Second quarter vacancy was 11.3%, down 60 basis points for the period, up 40 year-over-year.
- Average asking and effective rents for the latest quarter were $14.29 psf and $11.99 psf, down 0.2% each for the period following gains of 1.1% and 1.3% the quarter before. Additional losses, however, are expected for the year-end count.
- The 99,500-square-foot Cotton Flower Marketplace neighborhood center is reported under construction at Cotton Lane and Yuma Road, Goodyear. The completion date has not been specified. Fresh & Easy, LA Fitness and a CVS pharmacy have signed on.
- A 14,800-square-foot freestanding Walgreens will complete at Estrella Parkway and Elliot Road in Goodyear this September.
- Another delay. The planned spring 2012 start of Macerich’s
- 1.2-million-square-foot Estrella Falls regional in the Estrella master planned community in Goodyear was canceled.
- More. “At best,” Macerich informed the city earlier this year, “the developer may break ground by the time its development agreement expires in 2016.”
- Outlook. A small positive absorption total along with no new supply over the remainder of 2012 should lower community-neighborhood vacancy to 10.9%. Rent growth in the vicinity of 1.0% is expected.
West Valley; Northwest Phoenix/Glendale
- This submarket plays host to the mixed-use Westgate City Center development in Glendale, home of professional sports facilities and other components and a significant magnet for development.
- Net absorption of community-neighborhood shopping center space during the first half of 2012, alongside 382,000 square feet of new supply (see below), was 393,000 square feet.
- Second quarter vacancy was 12.2%, down 40 basis points from the quarter before, down 60 year-over-year.
- Average asking and effective rents for the quarter were $17.04 psf and $14.36 psf, up 0.2% and 0.3% for the period following slightly higher growth rates in the first quarter.
- The 382,000-square-foot Lake Pleasant Pavilion community center from Kornwasser Shopping Center Properties, 2012’s sole delivery, completed in January at Happy Valley and N. Lake Pleasant roads, Peoria.
- Outlet center. Tanger Factory Outlet Centers Inc. broke ground March 14 for a 328,000-square-foot outlet center at Westgate City Center, Glendale, The Arizona Republic reported at the time. Plans call for 90 stores and a November opening.
- Prasada. Macerich/Westcor’s long-delayed 800,000-square-foot Prasada regional center in the $1.6 billion Prasada mixed-use development at Loop 303 and McDowell Road in Surprise “is still years from being built,” The Arizona Republic reported in May.
- More. Last year, the developer and the city of Surprise extended Prasada’s development agreement deadline to 2017. “That future depends on Estrella Falls, however, which must be open for two years before Macerich will build Prasada,” the Republic reported in August 2012.
- More. Walmart opened a store in April at a power center adjacent to Prasada, as reported by the Republic. Auto dealerships have taken root at the Prasada site.
- Outlook. With no additional space delivering this year, Reis expects absorption to exceed new supply for the year by some 60,000 square feet. Vacancy should close the year at 11.9%. Rent growth in the vicinity of 1.0% is expected for the year. 2013 should see a slightly stronger performance.
- Macerich, owner of Biltmore Fashion Park near 24th and Camelback, Phoenix (in the Central/N.E. Phoenix/S. Scottsdale submarket), “has launched an effort to put more focus on small, local retailers and offer customers a unique boutique experience,” the Associated Press reported in April.
- More. Accordingly, Macerich will open Union at the Biltmore in November. “We have about 18 (retail) spaces total, and we have 11 of the leases signed and the rest are in negotiation,” a Biltmore senior property manager informed the source.
- The 308,000-square-foot El Caro neighborhood center began construction last June at W. Northern Avenue and N. 19th Drive in central Phoenix. A completion date is not specified. The project is part of a residential-retail infill redevelopment of a former golf course. West Royal Development LLC is the developer.
- The Wells, a power center from Shea Properties in far south suburban Maricopa, reported by Reis at 520,000 square feet, is under construction for a September finish. Anchor Walmart opened in 2009. A space intended for Walgreens is vacant. Development of the project began in 2007.