Tim Gallen/Phoenix Business Journal—After an up-and-down year, industry experts say retail will continue to recover in the Valley and statewide — but retailers themselves remain wary.
Retail began to thaw in 2013, with an outlet mall opening and existing shopping centers adding new stores. Pent-up demand from consumers broke early in the year, said retail analyst Jeff Green of Jeff Green & Partners in Phoenix.
“I think what we’re going to see is continued improvement, but at a turtle’s pace,” he said about retail in 2014. “We’re not going to see any significant bounce-back, but we certainly won’t see any downturn in this market.”
Michelle Ahlmer, executive director of the Arizona Retailers Association, said retail business owners remain guarded.
“There are still so many things in the economy that translate into consumer spending,” she said.
Through the holiday shopping season, retailers kept a sharp eye on inventory, Ahlmer said.
“That’s an indication that they aren’t going too heavy on purchasing until they know a little more about what’s going on,” she said. “We are cautiously optimistic and trying to be really wise about where we go in the future.”
Dysfunction in Washington dampened retail activity in the second half of 2013, Green said. Issues from sequestration and the government shutdown to health care reform’s stumble out of the gate made consumers anxious, and they pulled back.
“We want to spend,” he said. “We don’t want to be bogged down by issues.”
Even with that caution, Phoenix will see a steady absorption of vacant retail space, Green said, including some in distressed and fringe areas such as Surprise and Goodyear.
Retailers in a variety of sectors will scoop up those spaces, said Andy Kroot, a principal of Phoenix-based Velocity Retail Group — and restaurants will lead the charge.
“National fast food and fast-casual restaurants will continue to add units at a steady pace for the foreseeable future,” he said.
But they won’t be the only players in retail leasing this year, Kroot said, as big-box retailers, grocers, apparel, furniture, fitness and others will maintain a moderate expansion pace.
While restaurants nationwide have suffered from softening sales and traffic, Arizona’s restaurants have gone gangbusters in the past year, said Steve Chucri, president and CEO of the Arizona Restaurant Association.
Arizona eateries posted sales of about $10.6 billion this past year, up 6 percent from 2012.
Arizona restaurant owners have seen success with new concepts and openings, as well as values and deals such as happy hours.
“Restaurateurs by their very nature are innovative. They’re marketers,” Chucri said. “They’ve been able to, in a roundabout way, make lemonade out of lemons.”
He expects the sector to continue its growth as the state’s economy continues to recover.
He added that the state’s foodie culture has developed, demanding more variety and sophistication from the restaurant and food service industry.
“We’re becoming more of a foodie kind of state. Now we’re getting some cultural diversity,” Chucri said. ”We’ve got some great new chefs being born in the food service industry in Arizona. All those things help and feed and nurture revenue and sales we’ve seen here.”