Big-box stores – the oft-referenced poster child for the struggling retail market – are experiencing an uptick in the East Valley as grocers and non-traditional users aggressively expand in the market.
Half of the 14 big-box completions in metro Phoenix in the last 12 months are in the East Valley, including two of the largest facilities on the list, according to CBRE’s Phoenix Retail Big Box Report for Q2 2017.
“It just goes to show us that retail isn’t dying; it is adapting,” said Jami Savage, CBRE first vice president.
The Fry’s Marketplaces at Mulberry Market in Mesa and Artesian Marketplace in Chandler each total 123,000 square feet. Fry’s has been especially active across the Valley, accounting for six of 14 completions on the list.
The Southeast Valley leads all East Valley submarkets with 40 big-box spaces totaling 1,338,833 square feet.
“When we look at it as a whole, retail follows rooftops. There is a ton of activity and growth with residential expansion in Southeast Valley,” Savage said.
Growth in the East Valley marketplace largely has been driven by grocers and non-traditional users – such as entertainment venues and fitness centers – that face less online competition than traditional retailers.
Main Event Entertainment has been especially active in the East Valley and opened its third location near SanTan Village shopping center in Gilbert. The new building is just over 50,000 square feet.
The Main Event, a build-to-suit location, is a rarity in the market.
Leasing and sales of existing space accounted for roughly 90 percent of the nearly 500,000 square feet of big-box space absorbed in the second quarter, while new build-to-suit projects accounted for only 10 percent, according to the CBRE report.
Alamo Drafthouse, the Austin, Texas-based movie theater chain, is another entertainment brand active in the market. It opened its first Arizona location at the end of 2016 in a 35,467-square-foot space at the revived Chandler Crossings center at Arizona Avenue and Chandler Heights Boulevard.
Alamo’s second Arizona location will anchor the The Collective, a mixed-use project set to open in early 2018 at the northwest corner of Baseline Road and Lakeshore Drive in Tempe.
Chandler Crossings is the site of another non-traditional user, BASIS Chandler. The charter school occupies a 69,533-square-foot space at the center.
Discount stores are other users that have been active in the market over the past 12 months. Goodwill opened three new 25,000-square-foot locations in the Valley over that period, including stores at Artesian Marketplace in Gilbert and Heritage Square in Queen Creek.
Despite accounting for a relatively small area, the Ahwatukee/Tempe submarket also supports a strong big-box market, with 10 spaces totaling 373,100 square feet. The enclave’s proximity to the high-traffic Interstate 10 is a contributing factor to that.
“Because (Ahwatukee) is a smaller area, you have everything in two intersections and along an interstate,” Savage said. “Having a big-box presence along that interstate (allows retailers) to reach their consumers.”
Savage also pointed to the strong housing market and above-average incomes in Ahwatukee as factors driving big-box absorption in the area.
Ahwatukee boasted two of the largest big-box completions in the second quarter of 2017 in the forthcoming Mountainside Fitness and Burlington Coat Factory. Both sites are approximately 42,000 square feet at the intersection of Ray Road and 48th Street.
Savage expects the high level of big-box activity to continue in the near future.
“Downtown Chandler, Downtown Gilbert, and the San Tan area is particular will bring new retail out in that area,” she said. “That is going to be the exciting area in the Southeast Valley to watch in the next quarter.”
There is also the possibility of increased big-box development in east Mesa as the Eastmark community continues to grow. Safeway recently announced it will open a 62,000-square-foot store to anchor the first retail development in the community.
– Reach Wayne Schutsky at 480-898-6533 or email@example.com