At least Tucson escaped — some analysts say only temporarily — Circuit City’s 155 store closure that didn’t include either of its two locations in Tucson.
Tucson’s vacancy rate grew in the third quarter to 8.4 percent, but market forces have created something of an anomaly in the area, according to data from CB Richard Ellis.
  
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Although large developments such as the Tucson Spectrum on the southeast side have added new businesses to the area, it has not offset the vacancy rate as one might think.
“The vacancy rate is largely determined by properties that are already up and occupied,” Ahee said. “It doesn’t get as dramatically affected as when people build new buildings.”
Having new retailers come online does improve the absorption rate though, in large part due to developments like Tucson Spectrum and Oro Valley Marketplace adding occupied retail space.
“You’d think if that many big tenants moved into the market in one period, the vacancy rate would go down a lot, but it doesn’t,” Ahee said. “The market overall is really OK because we had positive absorption.”
Absorption occurs when open spaces get filled from period to period.
The third quarter numbers represent a total square footage of nearly 20 million throughout the Tucson area.
Before the recent uptick, Ahee said the vacancy rate had been on the decline the past several years. He expects the vacancy rate to flatten out in the 8 percent range, but can’t say for sure.
“Because it’s an anomaly it generally doesn’t tend to trend,” he said.
Shopping centers hanging on
It’s not hard to see when a retail center has open space.
The Dove Mountain Shopping Centre, at the corner of Tangerine Road and Dove Mountain Boulevard, recently saw a series of closings this year, including three stores in a span of several weeks in June.
But all is not bad news at the Marana-area shopping center, the Dove Mountain Grill is currently under construction and is set to open in December.
“Even though the economy is the way it is, we think there still money to be made there,” said executive chef Bruce Yim, adding that a lack of a restaurant in the complex is an opportunity for the new venture.
Malls also saw a spate of store closings this year.
In a report released last month by the International Council on Shopping Centers, more than 4,600 retail stores have already closed through September.
Based on announced store closings, the ICSC estimates the number of announced closings will rise to 6,100 by the end of 2008.
Mervyns and Linen’s ‘N Things were among the high-profile companies to announce store closings in the third quarter.
The intersection of Broadway and Craycroft Road was a first-hand witness to the trend, with the recently announced closings of Mervyns, Shoe Pavilion and the Whitehall Jewelers at the Park Place Mall nearby.
Of course, closing a free-standing Mervyn’s will have a much different effect on the surrounding area than closing one that is an anchor store in a mall.
“You’ve got two different animals there,” said Don Reinhart, a University of Arizona retail lecturer who specializes in shopping centers. “There’s no doubt about it, psychologically when a store “goes dark” it has an effect on shoppers.”
Reinhart estimated the vacancy rate in malls to be somewhere around 8 percent, but was quick to add that with the current economic climate, it is difficult to say what will come next.
One thing is for sure to the UA lecturer, the shopping centers that succeed are the ones that do their homework.
“For the malls that are staying up with the trends, they’ll probably shape up pretty well,” he said, adding that malls have had success nationwide by adding office and entertainment space or converting into themed “lifestyle centers.”
Traditionally, residential real estate has driven commercial growth. Shopping centers and developments often follow rooftops.
But since the housing construction is at a standstill, new commercial developments have been delayed indefinitely.
As far as types of businesses, restaurants seem to be faring well, said Stephen Grimm, a developer at Arizona Pavilions at Interstate 10 and Cortaro Road, a location that grew from its association with the nearby Continental Ranch housing development.
Grimm is working on opening a Boston Pizza in the location.
“Your furniture guys are having a real hard time,” Grimm said.
The complex recently saw the closure of Tres Amigos and a Patio Pools that catered to outdoor furniture. Furniture store American Home filed for Chapter 11 bankruptcy protection Nov. 3 and a day later said it would close all of its Arizona stores.
Grimm said although stores are closing, he’s seen other retailers move into the space after about six to eight months.
Developer Greg Wexler said economic conditions have forced him to hold off on developing 300,000 square feet of retail space in Arizona Pavilions.
National companies, like those for cell phones or jewelry, are successful, Wexler said, but he’s noticed a pattern of smaller businesses closing that are undercapitalized or don’t have a workable idea.
“All of the restaurants seem to be doing very well, if you have an ill-conceived plan, like if you’re going to sell snowballs in Alaska, you’re going to have a problem,” Wexler said.
Contact reporter Nicholas Smith at nsmith@azbiz.com or at (520) 295-4238.
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