July 14, 2009—Tucson apt. vacancies near 10%

By Dale Quinn

ARIZONA DAILY STAR

July 14, 2009

The climbing number of apartment vacancies in Tucson outpaced the nation during the second quarter of this year, data from a New York-based real estate research firm shows.

Fueled by job losses, the vacancy rate in Tucson reached 9.9 percent, a 1.5 percent jump from a year earlier, according to the real estate research firm Reis Inc.

Nationwide, vacancies climbed to 7.5 percent from 6.1 percent, the research firm said Wednesday.

That’s the highest the vacancy rate has been in the United States in 22 years.

But Humberto Lopez, president of Tucson-based HSL Properties, which has about 7,500 apartment units, thinks the local vacancy figure is too low.

“We’re running between 85 and 87 percent (occupied), and that doesn’t include the concessions we’re having to give up,” Lopez said.

Taking into account those concessions, which include a month of free rent or a $99 move-in rate, HSL Properties is running about an 80 percent occupancy rate, Lopez said.

Basically, Lopez said he doesn’t consider an apartment occupied if someone is staying there for free.

Commercial real estate brokers from Tucson and Phoenix who track the apartment market also said — based on the data they use — the number of vacancies here is higher.

Like the rest of the nation, Tucson is seeing historically high vacancy rates.

“Right now it appears to be the highest we have seen,” said Mike Chapman, the first vice president of investment properties for CB Richard Ellis.

Vacancies at the end of the first quarter were about 11.7 percent, a nearly 3.5 percent jump from the previous year, said Bob Kaplan, a principal with PICOR Commercial Real Estate Services.

Kaplan said his information comes from Phoenix-based RealData Inc., which has not yet released second quarter numbers.

RealData covers apartment complexes with more than 40 units — including about 400 in Tucson, Chapman said. Both Chapman and Kaplan correlated the high vacancy rate with soaring unemployment.

“It has everything to do with job losses and competition from the ‘shadow market,’ or the rental housing market,” Chapman said. “Those are the two factors that are giving us stress right now.”

Rent prices have remained fairly flat, with RealData showing an average $636 per unit per month for the first quarter of this year, Kaplan said. That’s down $1 from the previous year.

But actual rents are lower when taking into consideration the concessions apartment owners are willing to offer those who move into their property, said Courtney LeVinus, president of Phoenix-based Capitol Consulting.

Those concessions can be as much two months free for renters who sign a yearlong lease, LeVinus said.
There’s mixed feelings among property owners about whether the market will start to improve, LeVinus said.

“Some feel we’re bumping along the bottom and don’t anticipate higher vacancies or a decline in rental rates,” she said. But others still have doubts.

And different parts of Tucson are feeling the impact to varying degrees.

The southwest side has seen high vacancy rates, Chapman said. So has the Flowing Wells area on the northwest side of Tucson, which has lots of complexes and many empty apartments.

Higher-end apartments in the Foothills haven’t suffered as much while lower-cost housing has been affected disproportionately, Kaplan said.

Apartments that target University of Arizona students also have fared better, Chapman said. At the end of the first quarter the RealData numbers showed those buildings, where students rent one room in an apartment shared with others, had 8.6 percent vacancy, Chapman said.

But many Tucson residents are struggling to pay the rent, which affects those vacancy rates, said commercial property owner Lopez.

“It’s tough times for everybody.”

Bloomberg News contributed to this report. Contact Dale Quinn at 573-4197 or [email protected]