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By Melissa Swader & Rommie Mojahed

EMPLOYMENT GROWTH, POPULATION EXPANSION FUELS DEMAND FOR NEW RETAIL DEVELOPMENT IN ARIZONA

Innovation in all area of development has caused investors to consider the benefits of Phoenix when it comes to their commercial real estate needs. 

Investors from across the country continue to gravitate to Arizona for development opportunities. SVN Desert Commercial Advisors currently represents almost 200 active listings spread across the metropolitan area. The southeast valley is very  unique. There is a tremendous amount of activity with technology and distribution groups looking to relocate to the southeast valley. There are large economic drivers, such as the Mesa-Phoenix Gateway Airport, ASU Poly and SR24 Freeway. The Price Road, Rivulon and Elliot Tech corridors provide jobs fueling this market.

The southeast valley is seeing housing affordability, great education and, most importantly, business opportunity. The Greater Phoenix retail market recorded a strong performance during the third quarter, setting the stage for a productive end to complete the year. What really shook the real estate industry around the country this year was the impact the Amazon Effect had on consumerism. Will e-commerce create issues for retail developers? Investors will have to re-evaluate their investments to ensure their businesses are organically sustainable. However, the Amazon/Whole Foods acquisition also revolutionized the value of job growth opportunities, creating 6,000 jobs for Whole Foods nationwide, in addition to the 100,000 jobs that Amazon announced in early January 2017.

Average cap rates for 2017 for shopping center have returned to the mid-7 percentage range. Land development in the southeast valley is a thriving market, with areas like Gilbert, Chandler, Mesa, Queen Creek, and San Tan Valley touting their own distinct flavor. Chandler is recognized of one of the valley’s upcoming high-tech areas. Proposed site plans for Ironwood & Ocotillo in San Tan Valley will be composed of anchors and shop space that will sit adjacent to a newly planned Safeway Center, as as Pinal County’s newest and largest community. Queen Creek may have the feel of a small-town community, but the growth is steady due to opportunities like the Queen Creek Station situated across the street from a major residential community by Fulton Homes.

With up to 50,000 square feet available off Ellsworth Loop and Rittenhouse roads, national tenants and unique eatery concepts should be moving into this rapidly growing area. Grocery-anchored retail centers show favorable signs to any new tenant looking to lease space in the valley.  International grocers are also investing in the U.S. market. Dollar General plans to add a number of locations moving forward. These retailers will benefit from this competition as new tenants inspire the revitalization of assets, including the Dollar Tree/Family Dollar anchored shopping plaza in Central Phoenix. The owners have re-purposed the 70-year old historic shopping center and added upgrades to attract more area residents.

With the local retail climate improving, there are strong underlying property fundamentals that should support additional shopping center investments going forward. Investors area also paving the way to attract consumers altogether by developing retail and entertainment attractions purely on originality and unique architectural concepts. Park Central will be transforming Arizona’s oldest mall into creative work spaces, more restaurants and shops. The retrofit plan will be an effort to draw the same crowds as it used to, while providing space for creative tenants in the software development, software design and web design industries.

The valley will also soon be home to the first micro-marketplace containing re-purposed shipping containers. The Churchill development will contain 14,000 square feet and 19 shipping containers in Downtown Phoenix, creating a community-driven shopping experience. If it does not anymore original than that, the west valley has plans to build its first 40-foot clear-height industrial building, which will fit perfectly for end-users like Amazon or other companies with major warehouse, distribution and e-commerce operations.

Pay close attention to the southeast valley in 2018. Land opportunity in these areas will be a hot commodity. The southeast valley is experiencing huge growth in all sectors, and investments will be stronger over the long term. Phoenix is fueled by the metro’s business-friendly environment, while the lower cost of living will continue to attract tech companies looking to build. That, coupled with retail, unique restaurant concepts, and entertainment venues, will continue to favor the expanding economy. In short, Arizona continues to remain above the national benchmark and will be a market to watch in 2018!

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