By Suzanne Heyn | Phoenix
PHOENIX-Small tenants appear to be making a comeback in retail, office and industrial space, a positive sign that the markets are coming back to life, experts tell Globe St. “You don’t read about this. It’s not super sexy talking about a 5,000-square-foot office,” says David Krumwiede, executive vice president of Lincoln Property Company. “You conglomerate those people and it’s big news.” These tenants take up space, but they also collectively hire a significant number of employees, Krumwiede adds. Small businesses employed nearly half of all private-sector Arizona workers in 2010, according to the most recent Arizona Small Business Association statistics available.
“Having those small businesses, whether they’re local or regional, being active, that drives job growth, which is obviously the key No. 1 factor in our economy,” Krumwiede says. In fact, job growth in the food services industry-a big driver in retail absorption-has replaced all t
he jobs lost during the recession, says Lee McPheters, a research professor at Arizona State University’s W.P. Carey School of Business. For comparison, construction has replaced just 15% of jobs and retail has regained 25%. McPheters doesn’t track the number of new restaurants opening. In new office spaces, demand is picking up for users seeking up to 10,000 square feet, and in industrial, up to 25,000 square feet, Krumwiede says. Companies in the office market include mortgage and title companies, insurance agents, and professional service providers, such as lawyers and accountants. Businesses in the market for industrial space include air conditioning, tile and roofing companies.
In retail, fast-casual restaurants are showing interest, with additional activity coming from businesses such as coffee shops, nail and hair salons. They seek space ranging from 1,200 square feet to 4,800, brokers say. “Over the last probably 120 days, we’ve seen a big increase in retail activity,” says Chris Hollenbeck, vice president of retail for Cassidy Turley. “Not all of it’s turning into leases yet, but we’re seeing a little an uptick in tenants looking around for new spaces.” Traci Russell, vice president of retail services at CBRE, says she’s also seen an increase in activity, especially among fast-casual restaurants, but also with boutiques and coffee shops. “They’re definitely doing their homework. They’re really studying the sales of the other tenants in the shopping centers and in the trade area,” Russell says. Fixturized restaurants also continue to be a draw, especially for mom-and-pop businesses. Though vacancy in Class B, C and D complexes remains high, Class A availability has tightened.
“Even the mom and pops are cautious still, but now there’s more confidence,” Russell says. “I’m working with a couple tenants that are getting the SBA loans. It’s becoming easier for them and they’re more confident.” During the recession, Russell adds, “most of ‘em just kind of ran and scattered, and now they’re starting to come back, which is a good sign. They know that people are coming and they’re shopping.”
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