Marcus & Millichap

Phoenix Retail Market Report

Phoenix, Third Quarter 2017

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Jobs Boost Spending, Driving Retailers And Restaurants to Expand

Demand ramps up for retailers across the spectrum. Rising employment numbers and strong demographic trends place the Phoenix retail sector on firm footing through the rest of the year. Young, highly educated professionals are flocking to the area to fill positions in the expanding tech and insurance fields. This migration is contributing to household formation for the year that is anticipated to pass 40,000 households. As the local economy continues to grow, retail sales are forecast to outpace the national rate, marking a 5.3 percent rise in 2017. The need for goods and services is particularly strong in the East Valley and Scottsdale areas, where housing stock has risen substantially. To meet demand, more than 1 million square feet of retail space is completing this year and the next across these submarkets.

Retailers eye a greater Phoenix footprint. Grocery stores are rising across the Valley, leading deliveries this year. The three largest projects are a Walmart Supercenter and two Fry’s Marketplaces. Discounters and restaurants also make up a substantial amount of new space, contributing to the most square feet opening since 2009 this year. With construction at a new high for the cycle, vacancy will hold stable as demand has been robust, supporting the strongest rent growth in a decade.

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