Phoenix officials are hatching a plan to breathe new life into vacant big box stores and other empty retailers and make a dent in the city’s housing shortage.
Phoenix has a lot of retail space — an average of 40.5 square feet of retail per capita, compared to 28 square feet nationwide.
Major retailers like Sears and Toys “R” Us no longer have physical stores, leaving huge retail spaces without tenants. The shift to online shopping only grew during the COVID-19 pandemic, which may lead to even more physical store closures.
“What this really means is that we have too much retail,” Phoenix Planning Director Alan Stephenson said.
At the same time, Phoenix does not have enough housing. A city analysis last year showed the city is short 163,067 units of housing. The lack of supply is driving up rents and home prices to record levels.
Phoenix leaders are hoping to help solve one problem with another by replacing vacant and underutilized retail spaces with new apartments and condos.
“Housing affordability is a huge issue in our city. It’s something pretty much every time I’m out in the community comes up,” Phoenix Mayor Kate Gallego said. “We could end up being a national model with some of our successes in commercial redevelopment.”
City pitches new options for retail space
City staff pitched several possibilities for retail redevelopment at a council meeting in late October. Replacing vacant retail with multifamily was only one idea — staff also suggested allowing other uses in retail spaces.
Staff said they want to assemble a vacant storefront program to reduce barriers for redevelopment and potentially offer incentives to developers.
Some ideas to promote redevelopment include:
- Increase the height and density allowed for residential redevelopment.
- Allow certain businesses like tattoo shops, massage therapy and self storage facilities, which currently need special permits to locate in commercial areas.
- Allow other types of uses that are currently not allowed without permission including microbreweries, distilleries and data centers.
- Reduce the minimum amount of parking spaces commercial properties must maintain.
The staff’s research is in the very early stages. They intend to conduct community outreach and come back to the council at a later date with a more specific plan.
Several council members voiced early support for the redevelopment program.
“We need to do something. I think we need to start addressing this vacant storefront. We see it all over the city, and I just don’t think it’s going to come back as commercial,” said Councilmember Debra Stark, a former Phoenix planning director.
Some redevelopment already occurring
There are already some examples of developers replacing empty big box stores and retail strips with apartments or condos, but those typically require special permissions from the council.
City staff’s new plan contemplates allowing for some multifamily redevelopment without any zoning changes, which would speed up development.
Stark conceded that some neighborhoods may object to replacing shopping centers with residential but said some areas in her district have asked for residential development because the empty strip mall brought vandalism and loitering.
“Their thoughts were if there was multifamily … that there would be more eyes around the neighborhood. It would be added protection,” she said.
Stark suggested staff work with the village planning committees to find areas where this type of redevelopment would be welcome.
Councilman Jim Waring said he supported at least two recent zoning cases that allowed developers to replace empty big boxes with residential projects.
One was a shuttered L.A. Fitness, the other a closed Harkins Theatres.
Waring said there was some initial pushback from neighbors on both projects. He said the main concern related to the height of the projects, but those worries were alleviated during the zoning hearing process and few neighbors voiced concerns when the project made it to the City Council.
He said he’s leery of blanket changes that would allow more density or height without the full public hearing process and said each redevelopment proposal should be decided on a case-by-case basis.
“Bottom line, this process kills projects that don’t really belong and gets the right resolution in most cases,” Waring said.
Expert: Focus on office instead
Judi Butterworth, senior vice president at Orion Investment Real Estate, said there’s not as much vacant retail space as people may think.
The retail vacancy rate is below 6% — lower than it was before the COVID-19 pandemic, she said.
While there may appear to be store closures and vacant buildings, there are new, nontraditional tenants like indoor tactical shooting ranges or charter schools moving into those spaces.
Butterworth also said its rare to find an entire strip mall or retail center vacant. Usually there are still some tenants.
“Retail is not the way to go. It’s too complicated, and there’s not enough available,” she said.
Butterworth instead suggested the city focus on antiquated office buildings, where vacancy rates will likely continue to grow as some companies switch to remote work.
She pointed to a former office building on the southeast corner of Central Avenue and Camelback Road that currently is being redeveloped into apartments as a good example of what Phoenix should encourage across the city.
Coverage of housing insecurity on azcentral.com and in The Arizona Republic is supported by a grant from the Arizona Community Foundation.
AUTHOR: Jessica Boehm
SOURCE: Arizona Republic