Positive retail growth in Apache Junction brightened an otherwise mostly dismal first quarter for commercial real estate in the East Valley, according to commercial real estate brokerage CB Richard Ellis.
Valleywide, nine of the 12 submarkets saw reduced retail occupancy, with Mesa/Chandler/Gilbert losing 159,419 square feet. Apache Junction, however, was one of only three submarkets that experienced retail growth.
Apache Junction saw 63,519 square feet in new retail occupancy.
“Hobby Lobby and Dollar Tree opened up on the northwest corner of Signal Butte Road and Southern Avenue, and you just haven’t seen anything fall out yet there,” said Rick Murphy, a senior vice president with the brokerage. “I think we’ll see probably a rise in vacancy out there. As the market softens, you’ll see vacancy and negative (new occupancy) go on out there also.”
The Valley retail vacancy rate ended the first quarter at 9.7 percent, up from 6.5 percent a year ago. The vacancy rate in Mesa/Chandler/Gilbert was 10.5 percent.
Construction of new retail centers continued to decline, with only 1.6 million square feet of new retail space added during the first quarter, compared with 2.2 million square feet at the end of first-quarter 2008.
“We’ll see a softening throughout this year as more and more retailers fall out, and unfortunately you’ll see vacancies rise even higher than they are now,” Murphy said. “The economy is really struggling and people are struggling, and the retailers are really getting hit the hardest throughout the whole thing because people are saving more and not spending as much, and it’s really going to be survival of the fittest.”
As for office, the vacancy rate increased for the seventh consecutive quarter to 22.8 percent Valleywide, up 1.4 percent from the fourth quarter and a 5.3 percent jump from a year ago. The south East Valley posted a 28.8 percent office vacancy rate.
The increase in vacancy can be attributed to the continued downturn in the economy and the delivery of an additional 425,765 square feet of new space to the Valley market, according to CB Richard Ellis.
“Obviously there’s been continued layoffs, so companies that have moved into new space have generally downsized, or companies have closed their doors and that space has been given back to landlords and put back on the market,” said David Carder, a senior vice president with the brokerage. “We’re expecting the balance of 2009 to be challenging with optimism that at the beginning of 2010 there will be some signs of some bottoming and some flattening in the market.”
Industrial fared no better, with the vacancy rate for that segment climbing to 14.5 percent in the first quarter for the Valley, 1 percent above the fourth quarter and more than 4.5 percent higher than a year ago. The vacancy rate was 13.4 percent in the south East Valley.
Industrial construction has dropped to less than 3 million square feet, a level not seen since year-end 2003. Only 2.9 million square feet was under construction at the end of the first quarter, compared with 9.3 million square feet a year ago.