As another sign of the Valley’s economic recovery, retail vacancy rates for Metropolitan Phoenix have fallen into the single-digit range for the first time since 2008. That’s according to recent retail studies by commercial real estate firm CBRE’s Phoenix office. CBRE Vice President Greg Abbott will discuss the Valley’s 9.6 percent retail vacancy rate.
Ted Simons: Retail vacancy rates are in the single digits for the first time since 2008, according to recent studies by the Phoenix office of commercial real estate firm CBRE. Here to discuss the local retail vacancy rate and what it says for the valley economy, we have CBRE vice-president Greg Abbott. Latest retail vacancy rates, what are they?
Greg Abbott: 9.6% right now market wide.
Ted Simons: What does that say?
Greg Abbott: It's really a reflection of I think the general economy. It shows that we've gone through the downturn and I think we're on the back end of that now and gradually improving.
Ted Simons: It doesn't seem like there's much in the way of major retail development in the past few years or so. How does that impact these numbers?
Greg Abbott: It impacts it directly, you're right. Two factors, one is expansion of existing tenants and also new tenants into the market. Number two is the lack of new construction. Those two things together is creating kind of a double whammy and pushing vacancy rates down.
Ted Simons: Also in the sense that a lot of the existing retail space has got to be getting old and obsolete, isn't it?
Greg Abbott: Phoenix is still by and large a young city, but now we're starting to see more and more spaces that are functionally obsolete. Trickling in are words like reuse, repurpose, things like that.
Ted Simons: It also probably provides a pretty good rate for the few remaining high quality vacancy spots.
Greg Abbott: It does. The Type A properties are really in the highest demand, sort of the first to lease highest demand type space. As a result of this improvement in the market we're starting to see rents trickling up now.
Ted Simons: I'll bet. Difference between Type A and type B.
Greg Abbott: Type A properties are generally newer type centers, possibly grocery anchored, Wal-Marts, things like that, nicer, near. Type B would be maybe smaller, not quite the strength and the co-tenants and older.
Ted Simons:I think a lot of folks recognize intersections that were once vibrant. Now a major grocery store or a Walgreens that has left and there's nothing there still. What's going on with that market?
Greg Abbott: Case by case examples, a lot of those are getting repurposed and reused like we talked about a second ago. For example, Arizona Avenue and Warner in Chandler, that was the center of the Southeast Valley retail market for years. As the freeways have come in, a lot of retail has moved to the freeways and leaves intersections like Arizona-Warner as kind of an afterthought or an opportunity for repurpose. The old East Valley mall, a project that we're working on a portion of it, is going to be repurposed into a variety of different things. There's a charter school that's a great reuse. The piece that used to be the anchor store, there's another anchor store there, nicer multifamily apartments, great for the neighborhood. And the target on the North side is going to be in the near term a ministorage. That's an example where there's a multitude of new uses.
Ted Simons: Folks who maybe once had a grocery store or a drugstore and that thing has been closed for a while, are he they going to see those spaces stay the same? Or are they going to be cut up, divided up?
Greg Abbott: We're seeing a lot of cutting up of the old boxes. And besides the grocery stores, as well, and a lot of retailers are shrinking because of internet. A lot of these boxes, 50,000 feet or larger are getting split up. 43rd and Bell is a good example. It was an Albertsons at one point and now it's subdivide into three spaces and leased now.
Ted Simons: That would make sense, certainly the way to go.
Greg Abbott: Yeah.
Ted Simons: New retailers moving in, that's happening, as well. What does that say for the overall Phoenix economy? Things are slow and steady, we've had enough economists on the show to say that. But still, a little bit of brightness here?
Greg Abbott: I think it is. At least with the retail space we're working on I would say it's a little more positive than the market indicates. The fact that we're now under 10% with rental rates for the better product moving up, you know, it's fairly good.
Ted Simons: Any reason to think that's going to change anytime soon?
Greg Abbott: Probably not. As more and more tenants come in and as we since we haven't built a lot of space over the you know, since 2008 we'll see demand for new construction. So the big question would be now moving forward, are we going repeat our mistakes of the past.
Ted Simons: I guess we're all waiting to see that. Good to have you here, thanks for joining us.
Greg Abbott: Good to be here.
Ted Simons: Thursday on "Arizona Horizon" hear about a dramatic fossil find that sets back the date of human origins by 30 or 40 years. That's on the next "Arizona Horizon." For now I'm Ted Simons, thanks for joining us, you have a great evening.
Greg Abbott:Vice President, CBRE Phoenix;