Once the poster child for national population growth and housing starts, Arizona, like other states historically reliant on construction, took a beating in the downturn, and the well-publicized forecast points to a long road to recovery.
In an August 16, 2011 article entitled “Phoenix housing recovery might take until 2016,” Phoenix Business Journal (PBJ) reporter Mike Sunnucks presents the case for Phoenix’s residential comeback. Drawing heavily on a quality research presentation by economist Elliot Pollack, PBJ focuses on a 2015 or 2016 return to health for the Valley’s housing market, with commercial seeing full recovery in 2014 or 2015.
Pollack deftly points out that Arizona closely mirrors U.S. employment trends, and we see Tucson following suit. How does this relate to the Tucson multifamily market?
- 9 Sales from Jan 1 to July 31 in 2010, 15 sales from Jan 1 to July 31 in 2011 (20 units and up)
- Investor demand has returned for smaller apartment properties
- Cash is at a premium in the marketplace, especially with lenders looking for quick exits on struggling properties (Short Sales and REO)
- Lenders have been more willing to listen and finance smaller properties then last year
- Rates remain relatively attractive for new loans
- The gap is starting to narrow between buyer and seller expectations
- Concessions are down from last year
- Vacancy has risen for the first two quarters, currently at an average of 10.57% (Apartment Insights)
- Average rent is $627 a decrease from previous quarter (Apartment Insights)
- 530 units under construction in four different projects
The Tucson multifamily market should continue to see very slow progress for the next few years. A considerable number of distressed properties remain in the pipeline and will gradually be brought to market as short sales or REO.
Allan Mendelsberg, a Denver native, launched his commercial real estate brokerage career in Tucson in 2004. Previously with Marcus & Millichap, Allan joined PICOR to specialize in manufactured housing parks in the southwestern U.S., where he also brokers apartment complexes in greater Tucson for private investors as well as REITs.
Photo credit: Gary Rumack Photography