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Tucson CRE Market Heats Up

The Casas Adobes apartment complex recently sold for $11.8M. The multifamily market has been the star of the Commercial Real Estate market in Tucson this year. Courtesy of Cushman & Wakefield

By Gabriela Rico Arizona Daily Star

Activity in Tucson’s Commercial Real Estate market was a mixed bag in the first half of the year, with some sectors performing better than expected and others struggling.

Overall, commercial brokers are expressing optimism that the local economy is stabilizing as Tucson gets attention from investors looking for opportunities in markets that aren’t saturated.

The multifamily market has been the star of the show so far this year, attracting big investors and record sales. And the arrival of national retailers to Tucson has resulted in demolition of old shops and the rise of modern shops in the city’s core.

Multifamily

“The apartment market in Tucson and the entire West Coast is on fire,” said Kami Taylor, sales manager for CBRE’s Tucson office. “It’s a safe investment; you’re not looking at big dips in income stream.”

Tucson has a good supply of workforce housing with rents that match the salaries in the area.

“Many investors want those,” she said. “Markets of our size have been flooded with investors in apartments, and Tucson is a rare gem with product available for purchase. It’s one of the benefits of being a secondary market.”

Student housing will also continue to attract investors, Taylor said.

Retail

Since the beginning of the year, wrecking balls have been swinging away at old, outdated retail buildings in midtown.

“Urban infill is still where the action is,” said Pat Darcy, retail head for Tucson Realty & Trust. “This trend will continue, as the central area of Tucson has an overabundance of these older properties.”

The current vacancy rate for retail space is about 6.9 percent, and many new buildings are coming online.

Darcy predicts nontraditional shopping center tenants will increase, such as health clubs, charter schools, thrift stores and medical/dental care centers.

Industrial

“There is definitely renewed interest from a diverse number of industries,” CBRE’s Taylor said. “Several out-of-state companies are looking to Tucson for growth and expansion, and nearly half are in industries which are new to our community.”

Again, Tucson is benefiting from being a secondary market because the primary markets are full and expensive.

She said interest is coming from “home health, repair, distribution and manufacturing organizations with both regional and national footprints.”

Tucson’s geography, transportation planning and supportive government is paying off, she said.

The vacancy rate is below 10 percent for the first time since 2006.

There are 71 industrial buildings larger than 1,000 square feet for sale, with 41 sold since the beginning of the year, said Chuck Blacher, industrial specialist with Tucson Realty & Trust.

Read more at Arizona Daily Star

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