Valley shopping centers performed better in 2021 than 2019 – and things look good for 2022
Shoppers might have switched from going to the store to shopping online during the beginning of the Covid-19 pandemic, but people returned to Valley shopping centers in droves in 2021, surpassing not only 2020’s traffic numbers, but also 2019’s. The Business Journal spoke to a prominent Phoenix-area shopping center owner to see what’s expected to play out this year.
Vestar, a Phoenix-based shopping center owner and developer whose properties include Desert Ridge
Marketplace, Tempe Marketplace and San Tan Village Marketplace, reported that total customer traffic across its portfolio was up 32% compared to 2020 and 5% compared to 2019.
This news comes after a study conducted by Mastercard that holiday spending in the U.S. was up 8.5% compared to last year.
David Larcher, Vestar’s president, said that not only did consumers come back to brick-and-mortar shopping centers, but the very act of shopping is one of the things that is popular today.
“People are looking for an experience more than ever today. The good thing for us is that includes shopping as part of that experience,” Larcher told the Business Journal. “It’s not just entertainment or food and beverage, but actually going shopping is the experience.”
Vestar tries to help drive traffic to its centers by holding events, exhibits and experiences on its properties, but Larcher said that a lot of retailers have started creating experiences within their stores
that bring people in and creates an environment where consumers want to buy things.
At the same time, Larcher said Vestar has had to create spaces at all of its properties for curbside pickup because retailers are trying to be convenient for shoppers who do hybrid online/brick-and-mortar shopping.
Retail rents, labor With increased shoppers and people in retail plazas, demand from retailers has gone up and rental rates have increased too.
“It is unprecedented demand for space in our centers across the portfolio,” Larcher said. “As we were getting very, very high occupancy in the centers, it precipitated rent increases basically across the board.”
While fourth quarter numbers aren’t in yet, research from Colliers International showed that at the end of Q3 this year the average rent per square foot in the Phoenix area was $14.97 for retail properties. That accounts for a 2.4% increase from the same quarter in 2020.
Landlords, developers and retailers continue to get a better understanding of what drives people to shopping centers, Larcher said. Vestar has a list of six principles it uses when trying to make its centers the most attractive to consumers: value, variety, convenience, experience, entertainment and connection to community where they are located.
“Every community is different from a demographic and customer profile standpoint and knowing the local community and having a connection with those people in your trade area is critically important,” Larcher said.
Going forward, Larcher said he expects similar trends that ended in 2021 to continue in 2022, with high demand from consumers and from retailers looking to be tenants. The biggest issue he said that his tenants will face is a continued labor shortage. The feeling is that many of these businesses could do even more business, because of high demand from consumers, if they were able to completely staff up.
Vestar is also expanding its footprint and that is where it gets trickier than maintaining existing centers, according to Larcher.
Supply chain, labor and cost issues are bound to come up with the three ground up developments Vestar is currently constructing in the Valley.
It has been a while since major retail developments have been built in the Valley, but Larcher said because of the population growth it seems like the right time to do it, but he still questions how long the window for new retail developments will last.