The Phoenix Retail Market has over 300 vacant big boxes in the Phoenix metropolitan area totaling just under 9 million square feet. This is up from about 200 vacant boxes totaling over 5.5 million square feet just two years ago. With the bankruptcies of Mervyn’s, Circuit City, Linens ‘N Things, Borders, and some grocery store fall-out, the amount of vacant boxes has created challenges not only for Landlords but for shop tenants who now find they are located in an un-anchored center.
While this increase in vacant boxes might seem alarming, it has also created opportunity. Much of the newly vacant boxes are in desirable locations, which should continue to garner activity from retailers wanting to expand. Velocity Retail is seeing an increase in big-box tenant activity from not only existing retailers, but more importantly, new entrants into the market. These new entrants are creating some new activity with Landlords as these tenants are able to help solve co-tenancy failures in some of their centers and bring an income stream from a former vacant box. Just this past year alone, Velocity Retail has had their hand in leasing almost half a million square feet of the vacant boxes in the Phoenix area.
“At Velocity Retail Group, We know our way in, around and out of any box. Our senior team has recently leased almost a half million square feet of big boxes including new deals with Old Navy, Mega Furniture, Mountainside Fitness, Toys ‘R Us, and La-Z-Boy, just to name a few.”
Retailers are turning to Velocity Retail in the market to help them reposition stores in key trade areas, negotiate favorable deals, and grow their brand identity with additional stores. “At Velocity Retail we have been hired by several retailers who want to take advantage of this window of lower pricing to ensure that their new locations are going to be profitable performers for years to come,” said Dave Cheatham, Managing Principal at Velocity Retail. “Typically a retailer has more than one location to choose from in a particular trade area, and they want evidence to help their executive team decide which location will be better for the next decade and beyond. It’s not always about the rent per square foot,” he added.
Existing retailers have been able to reposition existing stores within the same trade area to give them better co-tenancy, improved economics, and a newly designed store. Old Navy was one tenant who has had a top-performing store in the Arrowhead trade area for over 15 years. Dave Cheatham at Velocity Retail negotiated the original lease on the store that was at the southeast corner of Bell Road and 75th Avenue in Peoria, Arizona. In early 2011, the team at Velocity was able to relocate the Old Navy across the street to the southwest corner of the same intersection in the Arrowhead Crossings shopping center. This allowed Old Navy to “right-size” their store to their new prototype and remain in a highly successful trade area with no down-time during the relocation.
La-Z-Boy is another retailer who has a top-performing store in the Arrowhead trade area and chose this time to open a sister concept to their current offerings. A new 14,350 square foot bedroom and dining room store will open adjacent to their existing location at 6950 W. Bell Road. This concept is new to Arizona and expands the La-Z-Boy brand in our area.
Hobby Lobby is also represented by the Velocity team, and they have been able to expand throughout Phoenix at a rapid pace. This tenant has negotiated five transactions for new stores in the Phoenix area since the recession started and has done their share of alleviating vacant boxes in the market with their prototypical size of 55,000 – 60,000 square feet. Without the lower rental rates caused by the high vacancies in the market, this rate of expansion would not have been possible.
With some additional active retailers just now entering our market, we believe that the glut of big box space will eventually be reduced to a healthier level.
Stay tuned for more news in the future on retailers expanding. You can sign up for our newsletter to stay informed.