Phoenix’s retail investment market stabilized in Q4 2025, posting flat quarter-over-quarter volumes and steady cap rates, according to MSCI and CBRE. However, the market is bifurcating: institutional capital targets necessity-driven, stabilized retail, while private buyers and non-core assets face liquidity constraints. This divergence shapes pricing and risk, underscoring how capital segmentation is influencing underwriting and transaction execution.

Institutional investors remained the primary force in Phoenix’s necessity-based and grocery-anchored retail centers during Q4. Transaction volumes for stabilized core assets held at Q3 levels, supported by persistent leasing demand from national chains. Cap rates for these assets hovered between 6.0% and 6.3%, mirroring the previous quarter (CBRE Q4 2025). In turn, this capital discipline has maintained liquidity for top-tier retail, even as broader market uncertainty persists.

By contrast, non-anchored strip centers and secondary retail corridors saw reduced leasing velocity and softer demand. Occupancy rates for grocery-anchored centers exceeded 94%, while strip centers lagged at 86% (CBRE). The gap in tenant demand has led to a two-speed investment market, with premium pricing and competition for essential retail, but wider bid-ask spreads elsewhere. “We’re seeing stable pricing for necessity retail, but less activity outside that lane,” noted a Phoenix retail broker in October. On balance, this segmentation is shaping both rent structures and exit strategies for owners.

Meanwhile, local operators and private capital sources have encountered tighter lending conditions and elevated asking rents. Debt costs remain a hurdle, particularly for smaller buyers underwriting non-core assets or repositioning plays. Several lenders have adjusted loan-to-value (LTV) thresholds and pricing spreads to reflect sector differentiation and risk perceptions (MSCI Real Assets, CBRE). This has constrained deal flow and left some assets in a holding pattern. In short, the financing environment is amplifying the two-speed market.

Looking ahead, Phoenix’s retail transaction liquidity and pricing will hinge on capital flows and credit conditions. If interest rates moderate or lenders recalibrate risk appetite, liquidity for non-core and value-add retail could improve. Conversely, persistent capital segmentation may reinforce the divide between institutional and private actors, especially as underwriting standards tighten. Construction planning and asset repositioning will depend on the interplay between tenant demand and lender discipline across the Sunbelt.

Liquidity isn’t uniform—it’s engineered by capital’s risk calculus.