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ArizonaMarket ReportsRetailWesternWestern Market Reports

Could Casa Grande Be the Next Tier II Retail Market in 2025 for Phoenix?

by John Nelson

— By John K. Jackson of Colliers Phoenix — Casa Grande, Ariz., stands at a pivotal juncture that could see it transition into a Tier II retail market this year. Phoenix’s Greater Metropolitan Area has been characterized by historically low retail vacancy rates, prompting retailers and developers to explore opportunities outside the urban core. Casa Grande’s strategic location less than 50 miles south of Phoenix Sky Harbor International Airport makes it well-positioned to capitalize on this migration. The Dynamics of Casa Grande’s Growth Casa Grande has experienced notable growth in recent years. It was the seventh fastest-growing U.S. city in 2021, experiencing a remarkable 24 percent population increase since 2016. This growth, paired with job creation across sectors, is attracting major employers, including Lucid, LG Energy Solution and Kohler. These three firms promise to collectively bring more than 6,400 jobs to the area. Such economic development lays a solid foundation for retail expansion. After all, a growing workforce typically leads to increased consumer demand.  The significant investments being made in the area further bolster Casa Grande’s potential as a retail hub. Lucid has recently expanded its manufacturing complex to 4 million square feet, with plans for additional land acquisition to support …

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ArizonaMarket ReportsRestaurantRetailWesternWestern Market Reports

Phoenix Retail Development Sees a Bright Future Ahead

by John Nelson

— Scott Hintze and Marti Weinstein of Diversified Partners Commercial Real Estate — Phoenix’s retail development market is seeing a surge in optimism as the city benefits from a growing economy and a shift in political leadership. With the new administration coming into power, the outlook for the Phoenix retail market has become increasingly positive, promising a wave of new projects and investment opportunities in the coming years. The city’s rapid population growth, expanding infrastructure and bustling job market have positioned Phoenix as one of the most attractive cities in the U.S. for retail development. The new administration has brought a renewed focus on urban development, job creation and business-friendly policies, which is expected to help stimulate both demand for retail spaces and the construction of new commercial properties. Government support, including incentives for developers and tax breaks for businesses, is anticipated to foster a thriving retail sector that will benefit both local residents and national retailers looking to expand into the area. Several projects we have been working on have seen unprecedented demand from tenants. We recently completed a 25,000-square-foot building across from Gilbert Mercy Hospital that includes a two-story Starbucks, the first in the market. In addition to …

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ArizonaMarket ReportsMultifamilyWesternWestern Market Reports

Phoenix Multifamily Remains Resilient Amid Record Growth

by John Nelson

— By Brett Polachek of Newmark — Phoenix’s multifamily market experienced dynamic shifts in 2024, driven by strong population growth, economic expansion and single-family cost of ownership. Phoenix remains a top relocation destination, with a population growth rate of 1.8 percent (+85,000 residents), nearly double the national average of 0.98 percent. This influx is supported by the addition of more than 52,000 jobs from October 2023 to October 2024. Phoenix also has the fifth healthiest rent-to-income ratio among 30 major U.S. markets that we sampled. Demand for multifamily housing reached record levels, with 14,528 units absorbed annually, marking the strongest performance since 1994. The supply experienced an annual increase of 6.4 percent as 19,835 units delivered last year. The far West Valley submarkets of Avondale, Goodyear and West Glendale led supply growth, adding 6,100 units to their inventory. The market showed resilience despite this historic supply wave. Occupancy rose 1 percent year over year to 93.7 percent, while Class B units clocked in a 94 percent occupancy rate. This was followed by Class A at 93.8 percent and Class C at 93.2 percent. These figures remain slightly below pre-pandemic levels, but they reflect a strong recovery trajectory. Asking rents in …

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ArizonaMarket ReportsRetailWesternWestern Market Reports

Phoenix Retail Landscape Evolves with Market Dynamics

by John Nelson

— By Patrick Dempsey, senior managing director of JLL Capital Markets — The Phoenix retail capital markets environment is showing signs of resilience in the face of current economic conditions. While the market has experienced a period of lower transaction volume, recent drops in interest rates have begun to bridge the gap between buyer and seller expectations, potentially paving the way for increased activity. Notably, Phoenix stands out with impressive positive rent growth, recording the highest rate at 7.4 percent among major metros and Sun Belt markets. Phoenix’s robust employment market, especially in the semiconductor sector, continues to be a major advantage. The city boasts a strong base of major employers, contributing to its ongoing economic vitality.  Investor demand remains concentrated on grocery-anchored properties and premium retail locations, highlighting the enduring value of strategically positioned assets. This trend is especially pronounced in high-growth submarkets. For example, the Southeast Valley is experiencing significant suburban and residential growth, driving the development of new grocery centers to serve the expanding population. Similarly, Northwest Phoenix with areas like Peoria and Glendale are seeing strategic investments from grocers anticipating future population growth.  Looking ahead, there’s increasing optimism for a stabilization of retail capital markets transactions …

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ArizonaMarket ReportsMultifamilyWesternWestern Market Reports

Rapid Population Growth Keeps Phoenix Apartment Developers, Investors Engaged

by John Nelson

— By Ryan Sarbinoff, first vice president and regional manager, Marcus & Millichap —  Phoenix ranks third among the major markets in terms of both total net in-migration and job creation since the end of 2019. The region has also posted one of the largest jumps in median household income. Combined, these factors underpin heightened demand for housing and support elevated multifamily development.  While total deliveries will rise for the fourth consecutive year in 2024 to a record high of 22,000 rentals, apartment absorption has notably kept pace through mid-year. As such, metro-wide vacancy is on track to dip to 7 percent by December. This would mark both a 30-basis-point decline from the 2023 peak, as well as an 18-month low. The improving alignment of supply and demand will encourage a return to rent growth, albeit slight. The average effective rent will end 2024 at $1,585 per month, up from the year before but down 5.3 percent from the peak set in 2021. Apartment completions over the past year (ending in June) were most prevalent in the Avondale-Goodyear-West Glendale submarket, where a collective 5,200 units opened. This represented a 23.8 percent boost to existing stock. Yet, the substantial wave of openings …

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ArizonaDevelopmentIndustrialMarket ReportsWesternWestern Market Reports

Mesa Becomes a Mecca for Industrial Development

by Jeff Shaw

Todd Ostransky, vice president of development at Indicap, knew Metro Phoenix was a market the firm wanted to enter for industrial development. Though the area is a hotbed of industrial activity, Indicap’s attention immediately set on Mesa, less than 20 miles east of Phoenix, for its inaugural project.  “We identified the East Valley as an area of growth, along with the need for space for mid-bay industrial spec product,” he says. Indicap and joint venture partner AECOM-Canyon Partners chose a 65-acre space within the mixed-use, master-planned community of Eastmark. The JV purchased the site for $48 million in April 2022 during a period of “aggressive expansion,” which saw Indicap kick off 10 developments involving more than 13 million square feet of Class A industrial space across key Arizona corridors. The inaugural Phoenix-area project was Eastmark Center of Industry, which completed Phase I construction in April. This phase brought 978,837 rentable square feet of Class A industrial space to Mesa’s Gateway Airport submarket. The space spans five mid-bay and cross-dock buildings. It features concrete slab on grade, tilt-up exterior walls, and a hybrid wood roof system, ensuring durability and flexibility. Power was also a major amenity for a project of this …

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ArizonaMarket ReportsOfficeWesternWestern Market Reports

Phoenix’s Office Sector is Fundamentally Sound

by Jeff Shaw

— By Kyle Seeger, Vice President, JLL — Like office markets across the U.S., Phoenix continues to navigate its post-pandemic “normal.” But with red-hot population growth, a comparatively low cost of doing business, a dynamic office inventory and a stellar quality of life, it also remains a prime contender for new office locations, relocations and expansions. Metro Phoenix’s overall office vacancy rate had ticked up slightly to 25.6 percent at the close of 2023. Average annual rent growth had decelerated moderately to 0.8 percent year over year, but remained positive. The overall direct asking rent had stabilized at just over $29 per square foot. Although negative absorption remained markedly high at more than 3.5 million square feet through 2023, there was less quarterly loss in the fourth quarter compared to the third quarter. Amid all of this, Phoenix’s cost and demographic advantages — along with its ample inventory — pushed leasing momentum forward. In some cases, it even created positive net absorption, such as in prime office corridors and in newer, highly amenitized Class A projects.  The Grove, a 180,000-square-foot, Class AA office building in the Camelback Corridor, is a prime example of this. Within 16 months of its mid-2021 …

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ArizonaMarket ReportsMultifamilyWesternWestern Market Reports

Phoenix Multifamily Remains Promising Amid Challenges

by Jeff Shaw

— By John Kobierowski, President/CEO, ABI Multifamily — Phoenix has experienced a surge in population due to its favorable climate, affordable cost of living and thriving job market. Since 2012, Phoenix has seen an average of 1.6 percent in population growth per year versus an annual U.S. average of 0.6 percent.  The city’s allure is particularly strong among young professionals drawn to its continued job growth and retirees seeking sunny skies.  This rising demand has translated into increased rental rates and occupancy levels over time, making the Phoenix market highly appealing to investors seeking stable and profitable ventures  To meet the rising demand for multifamily housing, developers have ramped up construction activities in Phoenix. There are 40,459 new construction projects planned for 50-plus-unit construction. The market has also witnessed an escalation in the number of new projects — 28,841, according to Yardi). These include luxury apartments, mixed-use developments and affordable housing options. These projects not only cater to professionals, but target Millennials and members of Generation Z, who are increasingly gravitating toward rental properties. However, ABI Multifamily outlook sees a substantial drop-off in completions starting at the end of 2024 through 2025 as a result of increased pricing in materials, …

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ArizonaIndustrialMarket ReportsWesternWestern Market Reports

The Infinite Potential of Nearshoring in Phoenix 

by Jeff Shaw

— By Anthony Lydon, Executive Managing Director, JLL — At $403 billion in annual gross domestic product, Arizona is now the nation’s 18th largest GDP economy, recently passing Minnesota and Indiana. With its expected growth over the next 24 months, the state is on track to become the nation’s 16th largest GDP economy, surpassing Tennessee and Maryland.  Like a shortlist of other fortunate U.S. markets, Arizona can credit a portion of this growth to its thriving logistics sector. The potential that industrial real estate offers for nearshoring — that commanding force with the power to rapidly diversify and expand a local economy. In Arizona alone, every $1 spent in the logistics industry has a $2 to $2.50 “multiplier effect” in the categories of earnings, revenue and jobs. The ability to capture that growth has been transformed in recent years by the CHIPS Act. This has provided, among other things, a 25 percent tax credit for investing in facilities that manufacture semiconductors or related manufacturing equipment. The Inflation Reduction Act has also provided more than $270 million in tax credits for clean energy projects involving solar, wind, hydrogen, carbon sequestration and EV charging. These programs played a role in attracting TSMC, …

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ArizonaIndustrialMarket ReportsWesternWestern Market Reports

What’s Hot in the Phoenix Industrial Market?

by Jeff Shaw

— By Rob Martensen, Vice Chair, Colliers International — What’s hot in Phoenix’s industrial market? This is a question we get asked a lot from developers and property owners looking to enter our region.  The topic of conversation is mostly centered around the amount of space under construction in the Phoenix MSA and what parts of town are seeing the most activity.  In the past, we had submarkets that would be more or less attractive, and we would steer clients in that direction. Today, however, the entire Phoenix metropolitan area is in play for tenants and owners. Greater Phoenix has been fortunate to land several “whales,” large corporations that bring multiple suppliers with them.  Naturally, the one most talked about is Taiwan Semiconductor Manufacturing Corporation (TSMC) in North Phoenix.  TSMC took down nearly 1,600 acres of land to build a $12 billion chip making factory.  The company has since announced it will immediately commence construction on Phase II of the project. Intel is another chip manufacturer that has had a presence in nearby Chandler, but is now under construction on a $20 billion expansion. Both of these undertakings will continue to feed companies that move to Phoenix and support not …

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