INSIDE TUCSON BUSINESS
May 3, 2013
With the first three months of 2013 in the books, commercial real estate firms are starting to assess the situation in the Tucson market. Picor Commercial Real Estate Services is the first in with a report that shows some positive trends:
• Retail: Vacancy rates remained at 8.2 percent, the same as at the end of 2012. Net absorption for the quarter totaled 102,088 square feet, while not enough change the vacancy rate, sustained positive absorption should start move rents up in about a year. Developers are starting to loosen up the purse strings for tenant improvements for long-term tenants.
• Office: Lease activity continued at an active pace with concessions tightening at better properties, though secondary and tertiary properties are still struggling for attention by offering lower rates and deep concessions. Vacancy rates ended the quarter at 11.9 percent, down from 12 percent at the end of 2012 but up from 11.7 percent at the end of the first quarter of 2012. Medical office space is leading the demand. Geographically, the Catalina Foothills has the scarcest supply, which could trigger construction. Added to the mix could be the outright sale of school sites closed by the Tucson Unified School District.
• Industrial: For the first time in two full years, there was positive absorption for two consecutive quarters, signaling a firm of fundamentals. First quarter absorption totaled 166,778 square feet as contractions gave way to more business relocations and some expansions. Except in the competitive size range of 15,000 to 20,000 square feet, availabilities began to narrow, creating some urgency for firms biding time on making a move. Vacancy rates ended the quarter at 11.6 percent, down from 11.9 percent at the end of the year and down from 11.7 percent at the end of the first quarter 2012. The market remains tipped in favor of tenants but that is beginning to change.
• Multifamily units: Vacancy rates, average rents and unit absorption all move moved in positive directions for the real estate market, but not with any great velocity or was it across the board. Higher grade class “A” units ended the quarter with a 7.7 percent vacancy rate while class “C” properties ended the quarter at 13 percent vacancy. Investor interest, which has been strong of late, is growing especially in the first and second tier markets.