One of the notable trends in Greater Phoenix commercial real estate is an insatiable demand for well-located pad sites—specifically hard-corner signalized intersections. Whether gas stations, credit unions and other financial institutions, education users, quick service restaurants (QSRs), or coffee shops, everyone is making the flight to quality. Developers are willing to pay high per-square-foot prices while tenants are willing to pay high rates to secure prime locations.
R.O.I. Properties clients are still staying disciplined, focusing on vehicles per day, site access, and end-user demand. Developers, users, and investors are looking for pad sites that check all of those boxes. Even in a lower-income area, the exposure from high traffic counts can be sufficient to command a premium. On a geographical level, general activity is strong throughout the Valley, although markets such as Surprise, Arrowhead, the West Valley, and newer developments in the East Valley are particularly active. Notable developments include Simon CRE’s new phases of Prasada (Surprise), Vestar’s Laveen Town Center (South Phoenix/Laveen), and Medina Station (Mesa). Class A new developments are achieving record lease rates and occupancy.
Flight to Quality Trend Extends Beyond Phoenix
Reuben Nach, Vice President of R.O.I. Properties’ Commercial Division, notes that the activity extends beyond the Valley into tertiary markets as well. “We are currently working on single-tenant stabilized assets, value-add retail, and retail development land in markets like Sedona and Cottonwood, and the activity has been solid, with many offers for each site,” he says.
The overall growth of the Greater Phoenix area continues to be a magnet for regional and national tenants that are willing to pay high lease rates. Two notable examples include:
- 7-Eleven is both acquiring and leasing new sites in West Phoenix and Downtown, adding to the existing 140 7-Eleven stores across Arizona (primarily located in Phoenix and Tucson).
- Several local and regional credit unions are making a push into the market, including Tulsa, Oklahoma-based BOK Financial. In recent months, BOK Financial has closed deals in the Arrowhead and Mesa markets.
“On the investment sales side, there’s still a lot of money on the sidelines in search of high-quality net lease, stabilized strip center, and value-add strip center assets,” Nach says. “Our team has multiple gas stations that have received more than 10 offers on each, and QSR sites such as one in Surprise that’s getting a lot of great activity. Additionally, we are selling many value-add strip center deals. Investor appetite is strong for these assets!”
While some observers believe the retail segment is becoming a bit frothy, prices are staying high at the premium end of the market. It’s important to note that other points on the spectrum are not part of the trend. Mom-and-pop and class B leasing activity is average and slowing down, while class C is underperforming.
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