Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/827208
J U N E 2 0 1 7 / S C T 43 has changed. "Now, the rooftops are coming," said John Jackson, an associate vice president with the Colliers Greater Phoenix retail advisory team. Last year the population of Maricopa County (dominated by the Phoenix metro) grew by some 82,000, the highest county increase in the country. "The new development occurring last year and into this year was the most since the Great Recession, yet we development have created opportunity for grocers. In the past year, six Fry's supermarkets and two Sprouts Farmers Market stores were built. Several other grocery stores are in the construction pipeline now. Other big users of space in expansion mode include the EOS Fitness, Mountainside Fitness and Planet Fitness gyms and Goodwill Industries, which completed several deals in the Southeast Valley last year. There has been a heady mix of entertainment and restaurant venues as well: Over the past few years Butterfly Wonderland, iFly and OdySea in the Desert have all opened here. The Main Event food-entertainment concept is seeking space in the area, as is Medieval Times Dinner & Tournament, according to Jackson, and Tavern+Bowl opened a site in Glendale's Westgate Entertainment District. BG Capital Group's Cowboys Saloon has taken over a vacated North Phoenix location. Meanwhile, another famous country singer is trying his luck: Dierks Bentley's Whiskey Row has opened in Gilbert. On top of all that, restaurant chains have been rushing in. Popeyes Louisiana Kitchen rolled out 15 new or remodeled restaurants across Arizona last year. The big push, though, is coming from the quick- service restaurant category: Among the expanding names here are MOD Pizza, Shake Shack, Starbucks and Tokyo Joe's, and there are many more besides. Expansion on this scale does tend to affect the local real estate market in surprising ways. "A lot of three-to-five- tenant buildings are being built in the range of 8,000 to 10,000 square feet," said Abbott. "We are seeing a lot of demand for that kind of space." n are not anywhere near prerecession construction numbers," said Greg Abbott, a Phoenix-based CBRE vice president. "There is definitely demand, and supply is meeting that demand, but since we are not at the prerecession level of development, we are not yet at a risk of overbuilding." The numbers seem to support that assertion. Phoenix began this year at a 9.3 percent vacancy rate, 10 basis points lower than the year before, according to Colliers. And CBRE reports that the Phoenix metro vacancy rate eased by 10 basis points quarter on quarter, to end the first quarter at 8.8 percent. Declining vacancy has helped push up rental rates, of course. CBRE reports that rents at the end of 2016 were at $17.16 per square foot. Colliers, using different metrics, says asking rents inched higher in the first quarter, to $13.98, up by 1.7 percent. Some new developments, however, are seeing rental rates at above $40 per square foot. The biggest boom has come from the Southeast Valley, home to the fast- growth cities of Chandler and Gilbert, and from Mesa, which is the 38th largest city in the U.S. and by itself boasts a population of some 470,000. The Southeast Valley posted one of the most significant year-over-year decreases in vacancy, off by 50 basis points, to 10.3 percent, Abbott says. The area got hit hard in the recession, and there remain many empty big boxes. But the Southeast Valley is where the new homes are getting built, and at year-end 2016, over half of the retail being built in Phoenix took place there too, according to Abbott. The expanding population and new