Industrial sales are not the only product type posting historical statistics these days. As of mid-November 2022, retail property sales are greater than any year, both in volume at $1.55 billion as well as price per square foot at $205 PSF.
Previous high points in volume were in 2006 at $1.54 billion, 2021 at $1.34 billion, and 2016 at $1.23 billion, and only exceeding $1 billion two other years, 2012 and 2018. The previous per square foot high points were in 2019 at $185 PSF, and 2008 at $169 PSF. The volume of sales is also outstanding, with 119 year-to-date. In 2021 there were 130 sales – a historical high point. Other years that exceeded 100 sales were 2006 at 111 sales, 2016 and 2018 at 109, 2014 at 107, and 2012 at 101 sales.
Why are retail property sales so strong this year? Are you surprised?
Looking behind the numbers, consider the following:
- Vacancy is only 6.2% as of 3Q 2022
- Rental rates continue to climb each quarter: up 8.3% year-over-year, and the 24th consecutive quarter of rent growth
- Development of retail is at minimal levels, and based upon demand. Of the 1.6 million square feet under development as of mid-November 2022, more than 94% will be leased upon delivery
Digging deeper, consider more of the following:
- Many sales during the recent past were of broken properties that were redeveloped into other uses, away from retail
- Buyers of those properties took advantage of the high-quality locations that retail sites tend to be
- Retail properties tend to provide high traffic intersections, excellent visibility and signage, easy access to and from the site, and convenience for customers to park and walk into the suites
- While gift shops and clothing boutiques vacate these locations, it has enabled other businesses to take advantage of the fundamental benefit of these properties
- Restaurants, personal services, medical and dental services, other professional services, fitness venues, and other medium-sized national merchandisers have filled the valley’s retail centers, and are meeting the needs of their surrounding communities
- Retail centers are so much more than locations for merchandisers – they are community centers to serve the demands of the communities they support
- Inflation drives costs to rise, including construction of new retail properties, thus requiring increases in rental rates
- Higher rents in new centers also drive-up rents across existing properties
- This won’t happen immediately, but it will happen over time – since a low point in 2Q 2013, retail rents have grown 35%
- Investing in tangible assets allows the investor to avoid the devaluation of currency due to inflation
We have a call for offers for this Tuesday, November 15th of Crossroads Plaza. This retail property is a perfect example of the above-mentioned reasons retail centers are filling up and staying full. We have four new tenants comprised of three restaurants and a Martial Arts Studio; and five tenants have recently renewed, two of which expanded. And its rent roll is at rental rates that are more than 22% below market on the average. We welcome the opportunity to discuss this with you if you are in the market to take advantage of owning retail properties in greater Phoenix. You can reach me at +1 602 222 5005 or email@example.com.