PICOR Connect | Trends in Commercial Real Estate

Gains for Tucson Retail Market as Economy Reshapes

Posted on Fri, Oct 28, 2016

Anchored centers in Tucson continued their long-standing success, and well-positioned projects like Park Place Mall trade area’s Wilmot Plaza reported some of the strongest rents and lease-ups in recent years. Tucson's southwest submarket posted continued strong demand from retailers, entertainment venues, and restaurants.

Positive net absorption of 173,291 square feet (SF) in Q3 brought vacancy down 40 basis points to 6.0%, matching its strongest performance since 2008 and nearing an all-time low. With smaller lease signings prevalent, improvement was largely widespread and organic.

 

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Dominant demand for retail centers came from medical and service providers. For instance, the 14,000-SF pad under construction at Wilmot Plaza was pre-leased to Southern Arizona Urgent Care, Body Central Physical Therapy, Massage Envy, and Aspen Dental.

Former video and clothing spaces converted to TMCOne medical clinic space and urgent care uses.

New dining retailers to the market included signings with Black Bear Diner at the to-be-constructed Fashion Park (I-19 and Irvington) and 6095 E Broadway across from Park Place. Popeye’s opened its first Tucson unit in decades.

Tucson is internationally recognized as a city of gastronomy by UNESCO. Accordingly, local eateries surged with Truland at Ina/Oracle, Bird at Casas Adobes, Bisbee Breakfast Club at Swan/Sunrise and Broadway/  Country Club, and the downtown food scene finding its place in the market as well.

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Investment sales activity remained strong with investors chasing yield finding value in the Tucson market. Stable, healthy demand for net-leased property and a low cost of capital resulted in the top four sales of the quarter combining for $75.3 million in volume averaging $371.09 per SF.

ECONOMY

Greater Tucson was recently named the third fastest-growing metro area over 500,000 population by Bloomberg, with July year-over-year job growth of 4.2% in July, 2016 and total employment of 378,050.

The national housing recovery has improved Tucson’s prospects for population growth and is expected to spur construction.

Arizona was the only state in the U. S. to experience month-over-month construction job gains in July 2016, and was one of three states to report year-over-year growth. Nationally, September consumer confidence was at the highest level since 2007.

Outlook

Fall festivals and entertainment including Tucson Fashion Week, Tenwest, the new Film Fest Tucson, Roadrunner Professional Hockey, and others bring increased vibrancy to the city core. Tucsonans’ confidence is noticeably stronger with robust job growth and uncertainty over DMAFB missions in the rear view.

Looking ahead, collaboration between public and private sectors has facilitated numerous hiring decisions and recent employment announcements will add future, positive impact, with more expected. Future opportunities will arise from innovation and tech in the sharing economy, as well as wage growth’s positive impact on retail spending.

Topics: Tucson, Economy, Commercial real estate, Investment property, Leasing, Retail